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We’ve heard a lot about investment schemes and scams. While you may be sure you couldn’t fall victim, you should not be so sure. You need to take steps to assure where you invest your hard earned cash is legitimate.
The key to avoiding such schemes is verifying you investment. For example, for real estate check the tax records for the properties you are investing into. Verify the closing documents, the escrow arrangements, and the title of the assets you are buying. For mutual funds, check and ensure the stocks included are really owned.
Look beyond the surface on the financial facts. If the investor takes these steps their vulnerability goes down. Best of all the steps to test the veracity of these items is really not very difficult. In most cases, the intimidation factor of having to check is worse than the actual event.
If you are the principal, some similar items also apply. Ensure you know who your investors are. Find out what their reputations are. Insist on valid tax ID. Check references and financials. Check soft references. Be certain no strange requests will impact the cash such as making wires to foreign lands or checks to cash that aren’t clearly defined.
Receiving returns is no guarantee that your investment is above board and valid. Keep in mind that the scam may not be to take your cash. Instead, the scam may be on another company or individual from who the investment cash is being taken and an attempt being made to launder it on the way to the thief.
In general common sense is a great place to go to ensure that the investment you are making is legitimate. Verify company contact information. Check the backgrounds on principals. Take a look at the credit history of the company and of the principals. Verify the reality of the project, products, or services your are investing. Look for news reports, check out sales contracts, check with lenders, verify bank account holdings, ask for disclosure on financial information and additional personal information.
There will always be a new scheme, but for the average investor if the return is too good to be true well then it is true good to be true. You may be taking to great of risks or you may be involved in somthing that isn’t real. After all if smells like a fish, if it looks like a fish, then the probability is that it is a fish.
If you have a lot of bad credit because of consumer debt like credit cards or personal loans, you’ll want to try to eliminate or reduce this debt before you apply for any real estate financing, since it will affect your ability to qualify for a home mortgage and to make the estimated monthly payment. When you’re buying a home, getting a home loan and the best mortgage rate is the most important step in the whole process; you’ll need to understand the basics about real estate, loans, mortgages, current mortgage rates, and points to get your real estate financing in place.
The first step, even before you start looking for your dream house, is to ask yourself what you can afford to spend each month on a house payment. Find out if there is a mortgage broker or lender mortgage network in your area or check online.
Keep in mind that whether you’re financing or refinancing that most people move or refinance within seven years. And insiders know that the advertised mortgage rates you usually find are not always what you’ll actually get from the lender. Market fluctuations, economic news or any other of a dozen reasons can influence interest rates throughout the day.
One of the advantages of adjustable rate mortgages includes lower costs. They are usually priced lower than fixed-rate mortgages so you can increase your buying power and lower your initial monthly payments. If the interest rates go down, you’ll have lower payments. However an ARM is usually not the best choice.
One of the disadvantages of an adjustable rate mortgage is the possibility of the monthly payments increasing if interest rates go up. Make sure to keep in mind that adjustable rate mortgages are best for homeowners who are not planning to stay with a property for a long time.
Note that any money that you receive from any lending institution will appear on your credit report and your monthly payments will factor into your debt-to-income ratio. Now if you’re working with a local builder in a sub-division or housing development and only making the carpeting, lighting and appliance selections for your brand new home, you’ll probably be able to get a standard mortgage loan. But if you’re hiring contractors, electricians, plumbers, and painters for example, you’ll probably need a construction loan, which provides funds so you can pay the subcontractors as the work goes along.
Most of all you’ll need to determine what you can afford to buy. A mortgage application can be resubmitted more than once. If you’re having a problem getting a home mortgage and the seller still owes money on the home you can check with your lender and see if you can get a wraparound mortgage on it. Although they are not legal in all states, it’ll allow you to pay the monthly payment on the existing mortgage and an additional payment to pay the difference. But make sure that the wraparound mortgage won’t trigger a due-on-sale clause.
The disadvantages of a fixed-rate mortgage include a usually higher cost than other types such as an adjustable-rate mortgage. If you borrow any money for a down payment it must be disclosed to the lender or if any of the money for your down payment was a gift, you’ll need to provide proof. You’ll also need to consider the closing costs and the escrow account for taxes and insurance.
The property taxes may be deductible. Check with your CPA or other tax advisor for the newest tax information. The advantages of a fixed-rate mortgage include consistent principal and interest payments making the loan stable so your rate won’t change. This is a good choice if you think you’ll stay in the house for many years. The interest rate for an adjustable rate mortgage may be adjusted up or down at preset times so the monthly payment will increase or decrease based on this.
When financing real estate it’s also important to know that a low FICO credit score doesn’t mean you won’t qualify for a home loan or home mortgage.
Before you complete any real estate financing read over every real estate contract or home mortgage contract carefully before you sign on the dotted line. Look for anything vague and don’t be afraid to ask questions about anything you don’t understand.
Whatever you do don’t get yourself into a situation where you can’t make the home mortgage payments; think ahead. You have to be careful not to assume that you can cut back on your expenses and stretch yourself into a house payment; you don’t want to be cutting into healthy eating habits by eating fast food for a house that you may not be well enough to live in for a long time. There is much to think about when you first start out searching for the best real estate financing.
There is a way to own more and pay less for it. Once you are familiar with the real estate market, you will be able to keep from paying extra financing fees. When you learn how to pick the right area to focus on regarding your investment, you will see how you can keep from paying extra charges while paying less.
The first thing that you can do is make a budget, stick to it, and pay your loan in a timely manner. If you don’t pay by the due date then mortgage companies will charge you extra finance fees. If you do this quite often it can add up to you paying hundreds of dollars more for your investment over time. By paying on or before your due date you can help keep your costs lower.
Another important thing to do before you make a purchase is to understand your loan options and pick the best option for your situation. Know before hand how much house you can afford and don’t get talked into something that is more expensive than you can afford. Make sure that you will be able to pay your loan along with your current bills before you sign and if you see that you can’t afford the payments then look into another financing plan.
Each plan you look at will affect the overall and monthly payments of your mortgage. There is more that comes into play than finances when you are trying to avoid expensive costs and fees. The property value will make a big difference in your investment options.
When studying your real estate investment you should be looking for a home that will increase in value over time and has a low price at the time of the purchase. You need to have a set price that you will pay and stick to it. While paying on your home over time you will be building equity in your investment. With a good return on your investment you will be able to buy a more expensive property later.
You can use real estate financing to your advantage if you understand it correctly. By learning how every part of your loan, home, and your specific situation all come together and influence one another you will be able to make an educated deal. The home you buy today will give you financial security, over time, that will be of great benefit to you.
I am a dreamer, but the regular nightmare I experience is student loan debt. When asked how to deal with the growing cost of tuition, I push for a radical approach.
As a professor who personally deals with student loan and hears the multitude of issues from students, how do I make a case for the benefits of college as U.S. tuition rises in ways that do not add up to the basic rates of inflation?
I propose that education be incentivized with home ownership. If millions of students must pay back student loans that are equivalent of mortgage debt, than we should repurpose or repackage these loans into real estate equity.
I know I am a dreamer. Dream with me.
Two major financial bubbles still troubling the economy are housing and student loans.
Cities and towns across the country have pockets of their metropolises that are literally or almost ghost towns. These municipalities are more than likely experiencing fiscal issues too, and find trouble recovering when a portion of tax paying home owners have decreased. Simultaneously, the current job market offers few jobs with salaries that can accommodate millions of students who graduate with bachelor degrees and $30k to $80k of student loan debt.
My proposition centers the idea of re-incentivizing a college degree with a tangible outcome that links educated people to community. At the same time, this initiative helps grow struggling parts of the country.
Owning a home in the U.S. is the core of stability and even to a large degree, a large part of civic participation; however, many college graduates live in insecurity. This is why I call for graduates to be implanted in communities with real estate attached to their diplomas.
Here is how it works. College and university graduates must apply to a program in which they are gifted a home. But, not just any home. They will be presented with an abandoned or foreclosed home (or land) in cities and towns with high numbers of empty houses. Each awardee is given three to five years to rebuild or build on their land.
In a city like Newark, New Jersey, where I live, there are hundreds of empty, dilapidated homes that are taxing the city. Some blocks are 50% abandoned. With this program, college students from neighboring Rutgers University-Newark can immerse themselves into a community from more than the experience of a student. This brings layers of value between graduates and citizens.
The program includes a yearlong certificate where graduates take hands-on courses that assist in their success of reconstructing a home and building relationships in the community. The yearlong program will be like a credential program or training-certificated program that trains students in areas that many traditional majors at colleges fail to do. The main areas are the following:
Once they successfully complete the program, graduates gain access to discounted (government approved) local services, trades persons and materials. If graduates finish building in the time allotted then they receive a dramatic reduction or complete forgiveness of their loan. If they do not finish on time, they must take on an affordable mortgage that aligns with their income.
By saving a house and establishing a part in a community, graduates have increased the value of the district in which they live, and reduced the leakage of money that goes into maintaining empty homes.
This blog is about the two key exponential technologies converging to eliminate the middle-man (i.e. the real estate broker) and the headache of shopping for a home.
If you’ve ever shopped for a new house or an apartment, you know the nightmare: dealing with salesy real estate agents, desperately searching to find the right places for the right prices, just missing open house hours, competing with the aggressive couple that got there 10 minutes before you, wasted Sunday afternoons…
Let me give you a glimpse of the future.
Here’s one future of real-estate shopping…
In essence, these VR real estate platforms will allow you to explore any home for sale, do the remodel, and determine if it truly is the house of your dreams. You can even get an estimated bid and delivery time from a contractor to implement your vision.
Falling Behind Mortgage Payments
A borrower facing foreclosure should not simply walk away from the property. The lender might agree to modify the loan. Often, the lender’s first notice to the defaulting borrower includes information about possible modification or repayment arrangements. That is why it is important for the borrower who stopped making mortgage payments to still open mail from the lender. In the past, it was difficult to get lenders to make many concessions with borrowers who got behind on their mortgages, but in this sluggish real estate economy, lenders are more willing to bargain. The lender might recover very little for the property or have to hold onto it for a long time, costing money for taxes, upkeep, and insurance.
A Short Sale
Sometimes the lender will agree to a short sale. This is a sale of the property for less than the mortgage amount, after which the lender forgives any loan balance not covered by the sale price. Lenders will agree to this arrangement because it saves them the cost of selling the property and maintaining it until it is sold. Borrowers benefit because they avoid a deficiency judgment. This will not usually work if the borrower has a second mortgage, but even then, it’s worth asking the lender to agree to a short sale.
A Deed in lieu of Foreclosure
The borrower might consider signing over the deed to the lender. The lender saves the cost of foreclosing on the property. The borrower avoids a deficiency judgment.
Impact on Your Credit Rating
Sometimes borrowers wonder if a deed in lieu of foreclosure or a short sale will affect their credit score differently from a foreclosure. For most purposes, all methods have similar effects on the defaulting borrower’s credit. However, choosing an option other than foreclosure ends the process sooner. This may offer you an advantage later, because over time the credit score will get better assuming the foreclosure is the last negative entry.
Some have blamed tighter lending conditions. Others have blamed a difficult job market, underemployment, and/or stubbornly low wages. Another theory is that, having seen the real estate crash of the late 2000s lay waste to lifetimes of hard work and financial discipline for so many, some millennials are gun-shy about making the jump into home ownership.
And yet another theory being offered by developers is that there has been a paradigm shift and that millennials are simply looking for something different out of life.
Billionaire real estate mogul Jeff Greene has been quoted by The Real Deal, a South Florida real estate news publication, as saying that “millennials are much more interested in experiences than things — they would rather climb a mountain than buy five extra pairs of jeans.”
And according to a press release from his company, Josh Delk, vice president of Transwestern Development Co. in Austin, Texas, says the result is that millennials are leading a “growing demand for more efficient, affordable living space that is close to numerous amenities.” Despite earning wages that aren’t keeping pace with rising rents, Delk says that younger generations still “want to live in the middle of restaurants, bars and entertainment areas.” And to lead this type of lifestyle, they are willing to sacrifice space, and often, ownership. For now, they are supposedly choosing social time over the traditional American dream of owning a home.
Greene has responded by proposing a 12-story mixed use project in West Palm Beach featuring 400 “micro” units, each only about 450 square feet in size. Greene’s project will offer people the chance to enjoy a new building with the latest and greatest amenities, the convenience of downtown living, and the lifestyle flexibility resulting from substantially smaller rent payments. And Greene isn’t alone.
The Miami Herald recently reported that moving-company and arts mogul Moishe Mana isformally proposing putting up a building consisting entirely of what’s been dubbed “micro-units” — compact, hyper-efficient and affordable apartments meant for young singles who want to live in dense urban neighborhoods and get around primarily on foot and public transit.
A similar development being exclusively marketed by my team, The Jack Coden Group of Keller Williams Realty — Miami, is called The Wave and has been approved for Shorecrest in Miami’s Upper East Side. The Wave is slated to be a mixed-use development, featuring ground-level commercial space and over 400 smaller rental units aimed at younger professionals seeking an affordable, chic, urban living space that has walkable work and play opportunities.
Another impressive new development is planned for downtown Miami called MiamiCentral. The development will feature 800 rental units aimed at young entrepreneurs and business professionals. MiamiCentral will be amenity-laden and have 180,000 square feet of commercial space, with plans for restaurants, nightlife, fresh markets and more. It is unclear how many of the units will be of the “micro” variety, but the project is clearly targeting this young adult shelter shift.
My agents work with millennials on a daily basis. Many of these millennials are, in fact, looking to rent instead of buy. However, our renter clients are usually looking to rent simply because they cannot buy. Whether it’s not having enough money for a down payment, insufficient credit or some other factor preventing them from getting a loan, our renter clients are usually renting because it’s their only option.
We do not often encounter someone who tells us that they want to rent so that they can have more money to eat, drink and play. That said, when we do hear it, we’re likely hearing it from a millennial.
We also find our agents interacting with a disproportionate number of millennials who could buy but that appear “afraid to pull the trigger” on buying a home. These millennials are active online, attempting to monitor the market as closely as they can from their computers and smartphones, often appearing to be somewhat frozen in inaction due to information overload. And they sometimes wind up staying in rentals partially due to a fear of making the wrong decision as they try to time a market that simply cannot be timed.
We know that millennials, generally speaking, aren’t marrying, having kids or buying homes. Human nature says that this will likely change at some point.
But until then, whatever the reason, the bottom line is that we are seeing a very real increase in demand for rentals, especially for smaller and more affordable rentals. Expect to see this trend continue at least in the near term and for developers to continue positioning themselves to capitalize on the shifting paradigm.
The number of properties with a foreclosure filing, which includes default notices, scheduled auctions and bank repossessions, jumped 27 percent in October compared with September, according to a new report from Attom Data Solutions. The volume is still down 8 percent from a year ago, but annual drops had been in the double digits all year, until now. Government-insured FHA loans are fueling much of the jump.
“While some states are still slogging through the remnants of the last housing crisis, the foreclosure activity increases in states such as Arizona, Colorado and Georgia are more heavily tied to loans originated since 2009 — after most of the risky lending fueling the last housing boom had stopped,” said Daren Blomquist, senior vice president at Attom Data Solutions.
“The increase in October isn’t enough evidence to indicate a new foreclosure crisis emerging in these states, but it certainly demonstrates that this housing recovery is not completely devoid of risk.”
The spike, the biggest monthly jump since August 2007, may be due to a dynamic in the recovery itself: When the mortgage market crashed, and private capital fled entirely, the government stepped in. Government-insured FHA loans jumped from about 3 percent of mortgage originations in 2005 to as high as 18 percent in 2010, according to Inside Mortgage Finance.
These loans, which require just a 3.5 percent down payment, are by definition more risky. Not only do borrowers have far less of a cushion in prices, but the credit score minimum is lower. Borrowers who use FHA loans, which require mortgage insurance, are likely doing so because don’t have the income to afford a higher down payment.
“In digging into the numbers among loans that were originated in the seven years from 2009 to 2015, FHA and VA loans account for 49 percent of all active loans in foreclosure. By comparison, among loans in that were originated in the previous seven years from 2002 to 2008, FHA and VA loans account for just 12 percent of all active loans in foreclosure. Most of the risk during that time was subprime, which were exotic loan products outside of the FHA and VA credit box,” said Blomquist.
While most stark in October, another new report shows trouble with FHA loans starting already this summer. Although the total percentage of new foreclosures started in the third quarter of this year dropped to the lowest rate since 2000 and even below the historical average, new FHA foreclosures moved higher by 6 basis points, according to the Mortgage Bankers Association. FHA foreclosure activity is still below average, but the turnaround is troubling.
As to why this is suddenly happening in October, that is more curious. It could be due to weaker employment numbers last spring.
New foreclosure filings generally take more than four months to happen after the actual delinquency. The May jobs report was particularly weak, and jobs correlate strongly to mortgage delinquencies. One month does not a trend make, so there may be other factors at play.
“We looked back at historicals over the last three years, and at least in the last three years we have seen an uptick in the third quarter. I think there could be a pattern there, but you’re also talking about such small percentages that if we have one new servicer [in the data], that could make the difference,” said Marina Walsh, MBA’s vice president of industry analysis.
Counter to the national trend, 28 states and the District of Columbia posted year-over-year increases in overall foreclosure activity in October, including New York (up 10 percent), Pennsylvania (up 20 percent), Ohio (up 4 percent), Georgia (up 22 percent), Virginia (up 15 percent), Massachusetts (up 11 percent), Arizona (up 17 percent), Indiana (up 3 percent), Wisconsin (up 3 percent) and Colorado (up 64 percent). Most of these states no longer have big backlogs from the foreclosure crisis.
Many investors and investor groups only invest locally. Perhaps more important, many investors only invest with principals are local. At the same time there are many firms that are very successful and that work on a national basis. While that is true, the practical reasons for investing locally are strong ones and should be considered carefully.
Investing locally provides the opportunity to understand the fine nuances of your community or city. In fact, I overheard one investor say to another about investing in a major Eastern Seaboard city that he looked at properties on a street by street basis because sometimes a good street could be only a block or two from a bad one.
For the investor knowing how to choose the property in the right location had everything with whether you could succeed in his market or not. While these points may not be true in your market and are perhaps overstated or can be construed as overstated, the fact is local investors who know their markets very well often perform much better than the out of towner who zooms in with capital and resources only to find his or her investment stalled out later.
Markets are made or broken by a variety of very subtle influences. Investing locally allows you to understand where the school district boundaries break. You know which schools have good test results and which do not. You learn where the best access to employment is. After a time, you know almost innately how development plans are laid out and how they will evolve overtime relative to the property locations you may be considering for acquisition or the areas you focus on for project targets.
As an operator, years of work in a market provides you inside knowledge on the least expensive way to complete new construction, fix the plumbing, repair the electrical system, repaint a unit, install new carpet, put in new windows, hang doors, and so many other items. For the out of towner using in town management, often the manager feels they can slide a few items past the owners and investors. The opportunity for abuse can be great.
For smaller investors that don’t have the time, resources, or capital to institutionalize processes, gain scale for operations or supplies and services, and other needs, investing locally overcomes many of these shortcomings providing you the investment opportunity that only much more significant capital might otherwise achieve.
There are many ways to learn the real estate market and how to begin investing, but you should start with just a few of them. Say, begin with 5 and then master them, once you have learned the first 5 steps, you may begin to further your education and learn all of the steps. Always start out with the basics and advance your knowledge slowly, but thoroughly.First of all… start educating yourself by way of reading, you can utilize your local library, the internet and check for any free or low cost seminars in your area. Before getting started, you will want to think about what it is you would like to achieve from your new venture and then list everything down. Think about what you already know about investing in real estate and start from there. Usually we know more than we think about a topic and that makes it easier to take the first step. Always be open to advice from friends, acquaintances and even experts you may come in contact with.
This would also be the time to consider any partners that maybe interested in beginning a new endeavor with you. It is always good to have hand in hand support; it makes any business decision a lot more comfortable to deal with. In addition, having someone to learn with is always easier, especially when you or your partners have the same goals in mind. The first steps you may want to begin with are listed as follows:
1. Begin by finding a Tail seminar: This is where an expert begins to gather updated or even historical information and methods on the real estate market. The usually gather this information from other experts, either new in the market or seasoned. Once they have the experts of interest, they set up seminars, to allow new up and incoming agents to listen in. Even if you are not an agent, you can attend the seminars and begin your education.
2. Find an expert for advising: Try to find an expert who is willing to be your mentor. With a mentor, you will build up the confidence and education that is needed to begin your new trade. Remember that an expert may have a lot of knowledge, but they too began at the bottom and they will usually train you based on that.
3. Follow a well-known system: There are many systems out there for real estate investing and some maybe very helpful in getting you started. I am not saying to go spend a lot of money on some real estate kit for beginners, but at least check out what the systems have to offer and if it would be easier for you to purchase a kit, then do so.
4. Take advantage of the current economy: Normally this would not be listed as one of the top ways to learn real estate investing, but due to these economical times; it has become one of the main ways to invest. Research the foreclosure market; you will be amazed how many properties have been foreclosed on and repoed. These properties are usually placed back on the market at amazingly low rates and can even be obtained through auctioning.
5. Understand the market through locality: No what areas are hot and which areas are not. This means property value is not always based on the structure itself, but also on the area; which the structure is located. If the structure in near an ocean or a lake, you will have higher property value. Most people love beautiful scenery and if a property provides that, most people will find some way to afford it. You will even have people that purchase properties based on schools in the area or even entertainment.
Always remember there are always different ways to begin investing, but you have to start small and be smart about what you are learning and how to apply what you have learned.