Archive for May, 2011
May 24th, 2011 -- Posted in Real Estate Financing |
Commercial property loans are used by many sectors of the business world to finance future investments and expansion efforts to grow a business.
With the recent collapse of the U.S. sub-prime mortgage market, credit is increasingly difficult for consumers to come by. Lenders are reducing their exposure to high-risk ventures. Lingering uncertainty about the credit market as well as the stability of the international money market causes widespread reluctance to finance ventures.
Fortunately for investors seeking commercial real estate financing, the commercial sector is not directly affected by these developments. Although riskier ventures will still be more difficult to finance with credit, the current economic climate has not stalled lenders.
With the recent developments in both the U.S., and across the international credit market, debt is becoming a well known concept.
While economic uncertainty would demand that all investors be prudent about entering into debt, most Organization for Economic Co-operation and Development countries are not in recession. In fact, they have actually experienced record growth and prosperity over the past decade. This lends some robustness to the major western economies.
Most business expansion is financed using commercial loans, so provided debt is entered into for purposes of investment, building, and expansion of the business (rather than a fundamental cash-flow problem). Debt is not in itself a negative thing. It is the return on that debt that is the problem.
Commercial real estate financing can be secured to fund the purchase of land for infrastructure and services development. Power plants, streets, utilities, shopping complexes, office or apartment buildings, parking facilities, parks, resorts, and golf courses, and even medical clinics or private hospitals are just a few such real estate investments.
Frequently, commercial property loans are sought as a means of refinancing existing debt to increase the total value of the investment. It is possible for private investors and companies to make a career in the reiterative process of reinvestment. Financing the cost of expansion against the projected profits of the venture can be quite lucrative.
It is true that there is still some volatility and uncertainty about the stability of the western economies. Consequently, investors should be as vigilant as ever about entering into unprofitable arrangements. Such factors influencing profitability include cost blowouts, too little potential return, or inherently risky ventures.
Investment consultants have made a market for themselves in advising smaller scale investors on commercial real estate financing, and providing them with the means of determining which projects are worth entering into, based on the available information. This includes taking into account the possible blowouts, and considering what might go wrong with any given project.
By applying basic rules of thumb, and not investing beyond certain thresholds, investors can increase their chances of sticking to projects that are within their means.
With the use of specialized software, this process can be further streamlined, allowing financiers to quickly weed out which projects are potentially unprofitable. Based on the available data and taking into account uncertainties and potential threats to the project, financiers can make smarter lending decisions.
Incoming search terms:
- how did the real estate business grown in the past decade
- real estate financing
- financing commercial property
- financing real estate investors
- real estate refinancing uncertainty
May 21st, 2011 -- Posted in Real Estate Investment |
The real estate investment market is on a roll, going way beyond the common notion that it simply implies the buying and selling of properties. However, this industry is also one of trial and error. In spite of the stakes being so high, there are some common risks many big and small time players take, subsequently adding to their ‘bad’ experiences. The industry also has solutions to the outcomes of these errors, but it is important to first understand how to successfully eliminate risk in real estate investment.
The real estate investment market has consistently provided investors worldwide with regular cash flow and numerous tax benefits. The investment opportunities in this industry, like in any other, make a major impact on the lives of investors and those involved in the peripheral. The industry, like any other, also has complex involvement that follows the current market trends. However, it is essential to understand that if the implications are not properly weighed, the experience is bound to be a bad one.
Inability to address priorities: The money involved and the subsequent appreciation and tax benefits need to be on the top of the priority list, at the very onset. It is very essential to carefully evaluate the individual business needs.
Insufficient credit checks: It is very essential that as an investor, tall claims do not lead you on. To survive the industry, you must double check on payment history, expenses, deposits, taxes and the possible changes within the industry, and on a more personal basis, every individual investment.
Ignoring business essentials: It helps to probe into evictions and re-investments. Another much ignores aspect of the business is that of effective time management.
Capital drain: There are a number of online and offline resources to help you to deal with constant appreciation or otherwise, especially if you are an inexperienced investor. The help thus received would enable you to identify worthwhile investments and those that would only culminate in definite loss.
Overlooking essentials: It pays to hire the services of an experienced and professional inspector. These professionals re trained to identify pest problems and structural damage. You cannot afford to be negligent when you have so much at stake with every investment.
Inadequate Insurance coverage: Insurance of the various aspects within any investment in this industry is a must, especially since they are all so expensive. Insurance is the best way of securing your hard earned assets.
Insufficient confirmation of documents: The list of documents involved with every deal could be a bit too much to handle for any investor. Nevertheless, it is very essential for every investor to probe into the nuances of building permits and zoning laws, as well as rental and lease applications.
Unfair cost evaluations: To remain a long-term investor in this industry, it is very essential the rents charged are fair to both, you as an investor and most importantly, the tenants who re-invest in you primary investment.
Eliminating the risk factor in any real estate investment deal is very crucial to the bearing of the investment on your individual business. Hence, you should exercise caution with every deal.
May 17th, 2011 -- Posted in Real Estate Investment |
The recent economic uncertainty sparked by the meltdown of the US sub-prime mortgage market has created a rare set of financial conditions in North America. Much of the developed world (and even more so in some developing nations) has enjoyed one of the longest periods of sustained economic growth. While this has led to an ever-growing gap between rich and poor, the total number of relatively wealthy people has also risen.
Such changes in financial status have put many Americans in a position of affluence, with the freedom to wisely use their wealth to wield greater influence over their future. Some of them choose to pursue a careful acquisition of residential investment property.
The so-called “credit crisis” has sparked some fears of a coming recession within the US. Naturally, no economy wants a recession. The major corporations, government, financial institutions, and private investment consortiums are doing their best to prevent an economic slow down. These entities, of course, are engaged in protecting their own interests though they are working to prevent a fiscal slump.
Most economists are agreeing that a recession is still possible, though not immediately likely. Instead, you will probably see a slowing of the rate of growth as markets compensate for what has been billed a recalibration, rather than the sort of economic collapse that usually precedes recessions.
For Americans fully invested in paying off their first mortgage, this is an uncomfortable position to be in, but not desperate. You are, however, much safer if you’ve managed to capitalize on the decade of relative prosperity, and you’re in a position to start thinking about purchasing residential investment property.
First, banks and other lenders can reasonably see you as a safe risk when considering an investment property loan. Such positive consideration plays a part in ensuring your access to credit at favorable rates. Because credit has, to some extent, dried up for riskier loans, the housing market has stalled, and there are some fears that it may even collapse, leading to plummeting prices in some areas. This is a bleak scenario, but like recession, not very likely according to many analysts.
Those who have failed to invest, or are themselves busy paying off their first house, can be forgiven if they don’t look favorably on the stalling market. Many buyers see a family home as one of the biggest investments they can make.
If you’re a savvy investor and can secure credit on favorable terms, however, current conditions present a rare opportunity. By applying the oldest rule of investment, “Buy low, sell high”, you can take advantage of your economically sound position and capitalize on the sluggish housing market. Applying investment property loans to new residential investment property drastically increases the value of your venture.
This could expose you to some risk in the unlikely event that the markets take a turn for the worse, and inflation and interest rates climb, while the housing market collapses. If you already own your own home, however, your additional residential investment property should serve as the collateral on new loans, to ensure that you do not extend yourself beyond your means.
This can be a tricky balance, especially if the cost of failure is your hard-earned family home, so novice investors would be well-advised to heed the advice of finance professionals.
May 14th, 2011 -- Posted in Real Estate |
If you hope to have a smooth experience that results in the real estate purchase you are looking for, it is important to take the time to select the best agent for your needs. Although all agents are capable of helping you complete your purchase, there are certain agents that are better suited for certain types of purchases. Similarly, there are a few signs to watch for that will indicate whether or not you have a quality real estate agent at your side.
Consider Your Purpose
When selecting the agent for you, it is important to consider the type of property you intend to purchase. For example, if you are interested in purchasing an apartment complex as an investment purchase, it is generally better to work with an agent that specializes in selling these types of properties. Of course, you can use a real estate agent that deals mostly with selling homes, but one that specializes in the type of property you are looking for is more likely to have the types of connections you need to purchase the type of property you are looking for.
Consider Qualifications
While it is fine to work with a real estate agent, you should look for someone that is a real estate broker or a licensed Realtor. An agent that is a member of the National Association of Realtors will have a displayed REALTOR logo that will let you know that he or she is a member. It is important to look for someone that is certified by the National Association of Realtors because this means the agent has pledged to follow a Code of Ethics that holds them to a higher standard than what is required by law.
Consider Referrals
Of course, it doesn’t matter how many great qualifications the real estate agent has if he or she does not work hard for clients. Therefore, it is always a good idea to listen to referrals from other people. If someone you know had a good experience with a particular real estate agent, the chances are pretty good that you will have a good experience with that agent as well. Remember, good real estate agents stay in business because they have satisfied clients – give your business to someone with a proven track record.
Do Your Research
If you don’t know someone that can refer a great agent to you, you are going to have to do a bit of research. A good place to start your research is on the Internet. Visit the web sites of various agents and get an idea of the types of services they provide. Look up the profiles of the real estate agents in order to get a better idea of their qualifications and experience. A site that contains customer testimonials is a good start as well – read the testimonials in order to get an idea of what other people are saying about the agent before making your final decision.
May 11th, 2011 -- Posted in Real Estate |
Nowadays, anyone who wants to buy a house needs to get mortgage. With property prices shooting through the roof, it is not surprising that we have no means to by a house other than by taking a loan. Given this situation, we are lucky that the markets for mortgages are flourishing. That is the reason why it is so much more convenient to avail of mortgages to finance our house buying dreams.
However, things may not always be hunky-dory. The burden of a mortgage can be a heavy one. In case of a short term financial crisis, paying off the mortgage can be quite a tough task.
What do we do if we find ourselves in a major cash crunch? This could adversely affect the ease with which we had been paying off our mortgage dues. As we all know, in the case of a mortgage deal, the lender has the option of repossessing the property in case the borrower cannot repay the loan on time.
In most cases, borrowers are able to deal with the large installments that need to be repaid. But occasional borrowers run into financial difficulties that make things a lot more difficult. Things may even come to such a head that they face the prospect of eviction from their current home.
Mortgages do go wrong sometimes. So what does one do to stop repossession and get out of a debt trap? If possible, one could try and manage a quick house sale to get out of debt. By selling the house at prevailing market prices, one could get back enough to pay back the mortgage amount as well as manage to afford another house, even if it is a temporary situation. It is a good idea to get in touch with a broker to help you sell your house.
When speed is the greatest necessity, you cannot sit around waiting for a buyer to just come along on his own time. Thus, an agent or broker may be the best idea.
Another option that we may have in such a situation is to go in for sell and rent back. Some financial institutions offer such an option. They help you sell your house quickly and even give you the option of renting it out. You also have the choice of buying back the same house once again when your monetary situation stabilizes somewhat. In case of a short term financial crisis, the sell and rent back idea works very well. At least you can continue living in the same house till you can buy it back.
The thought of getting evicted is bound to frighten the best of us. And in times of financial crisis, our need for a place to call our own is great. Thus, we should make a conscious effort to stop the lending institution from repossessing our property if we find it difficult to meet the monthly installments. There are several ways and means of coping with a large burden of debt.
Stopping repossession is no longer rocket science. We just need to find the right financial consultant to help us get through our financial troubles. Sometimes, all that we need to clear our debt is a quick house sale.
May 9th, 2011 -- Posted in Real Estate Marketing |
Reports abound about there being too many real estate agents for too few buyers and sellers, but I still believe that no matter how crowded the field is a focused agent can succeed, with the right combination of knowledge, tools and strategies.
Not surprisingly, some of the lowest paid agents are first year agents. The median income for people who had been in the field for two years or less in 2004 was only $13,000.
Does this describe you?
If so, don’t despair…yet. With a good plan you can catapult your career to another level of professionalism and financial prosperity.
One way to do so is through the gift of giving. Here’s what I mean.
Giving Leads to Increased Business
An amazing thing happens when you give away stuff – it attracts people to you. And what do real estate agents need more than anything else? People.
People are leads. Without them you have no business and no potential to make money – period. So, the more you give away the more leads you’ll develop.
Some agents don’t give because they think that it means they have to buy something in order to give it away. But that’s not necessarily so.
An alternative to buying stuff is to search the Internet for information that might be of Interest to buyers and sellers that you can turn around and give away. There is plenty of stuff to be found – you just have to have the patience to find it.
Here’s a s specific idea; go online, search for article directories, and look for real estate articles that you can reprint.
You’ll have to agree to leave the resource box on them when you use them showing who the authors are, but that’s a fair exchange given that they’ve saved you the time and effort of having to write them.
Group them together as special reports for buyers, sellers and investors and find ways to give as many away as you can; via email, direct mail, advertise them by flyers that you place on cars parked in shopping centers and grocery store parking lots, etc.
I’m not talking about giving them the way you ration out cards, I’m talking about giving them away as if your career depended on it – and it does. I’m talking about giving out hundreds to thousands of them.
Create an avalanche of new business opportunities by pushing your self to find a conduit to give like you’ve never done before. If you have 100 hundred homes in your neighborhood give them to 100 homes. Or, if you live in an apartment complex give them to all of the residents in the complex.
The point is that there’s no limit to the number of people you can give to and the manner in which you give.
Make sure to include your personal information in them when you compile them so that the recipients will know who to contact for more information.
Summarily, giving can be profitable – plus it feels good to put the knowledge you have within reach of potential prospects.
The more you give away the faster you’ll create a brand for yourself that identifies to all that you’re an active licensed real estate agent open for business.
So, go ahead and give, give…give your way to increased earnings.
May 5th, 2011 -- Posted in Real Estate |
There are a lot of things to consider before getting started. One of the most important is finding the right kind of property to flip. You have to really research a house before making an offer. One thing you need to know are the comps of the neighborhood. Find out what the other houses in the neighborhood are selling for. Also check for the most recently sold and how much they sold for. You then need to compare other features of the houses such as square footage, land square footage, condition of the house, etc.
Another beginning step is to figure out how you will pay for it. This needs to be decided before you make an offer. You hear a lot about no money down deals and creative financing but those methods will not work in all cases, so you need to be prepared with alternatives.
One of the methods of financing is getting a mortgage loan for the property. This can be long and drawn out and you will need to have good credit and show your ability to handle the note until you can sell the house. You will also have to have enough money to make any necessary repairs.
Another way to finance a real estate deal is to get a HELOC on the house you are living in. A HELOC is a home equity line of credit that you get approved for. You don’t have to use the money, but it is there if you need it. For example, you get a HELOC for $100,000.00 (you can only get a HELOC for a percentage of the value of your house). This money will just sit there available until you want to use it. If you want to buy some investment property for $70,000.00 and need another $10,000.00 for repairs, then you could withdraw $80,000.00 from your HELOC. Using this method you can have a quick closing and be able to offer cash for the property. You can sometimes get it cheaper if you pay cash. Some HELOCs require interest only payments to pay back the amount you used.
If you intend to flip the house in a short length of time, you could just pay the interest only (if this is the way your HELOC is set up) and when the investment property sells you would then pay off your HELOC. A HELOC can be very useful but remember that it is a second mortgage against your home so use it wisely. Talk to your mortgage company or banker to find out about HELOCs and if it is advisable for you to get one.
You can also get a hard money loan. These are privately financed loans that have a higher interest rate than a mortgage loan, usually 12% to 18%, and they are short term, usually 6 months to a year. One advantage of these loans is that you can have an early closing, sometimes two weeks. If you get the right property for the right price you can sometimes finance the cost of the property and the repairs. In some cases you will have no out of pocket expenses. You really have to look for the right deal for these to be beneficial to you. Research these loans as they can come in very handy. Your local real estate investment club is a good place to talk to and about hard money lenders.
These were just a few ways you can find and finance a good real estate property to flip. As in anything to do with real estate you need to research, talk to mortgage companies, real estate agents, and other investors. The best thing a beginner can do is join a real estate investment club where you can get good advice and maybe even get your first real estate flip.
Real estate investing is a good business to be in but there is a lot of studying and learning involved before you take on your first house flip. Think smart and be diligent in your efforts to learn as much as you can about investing in real estate before you take that first plunge.
May 2nd, 2011 -- Posted in Real Estate |
Having been involved in real estate investing for little while now, I’ve become very familiar with various marketing strategies. And along the way, I also found out which methods generated leads, and which ones didn’t.
One thing to note is that everyone will experience different results with their respective marketing campaign. Two different people in the same market could be doing the same exact thing and get very different results.
And two different individuals, in two different markets can get similar results. That’s just the nature of the beast.
But there is a secret to this; there is no secret! You have to test each strategy in your particular market to find out which one works for you. And when I say test, I mean test.
For example, don’t send out 5,000 letters to a mailing list that you’ve never tried. That defies all common sense. In that example, I would send out 200 letters and see what the results are before diving in headfirst.
I recommend that you apply this methodology across all the strategies below until you find the one that works the best for you.
So, in my opinion, the following are the top 5 real estate marketing strategies (in order of effectiveness and quality of leads):
1. Apparel/Human Advertising
2. Direct Mail
3. Cold Calling
4. Bandit Signs
5. Newspaper/Yellow Page Ads
Apparel/Human Advertising
This is my favorite way to generate leads. Why? Simple. Because leads come to me, instead of me chasing them. Let me first explain what “apparel/human advertising” is. I define it as “wearing your business,” meaning that you display and promote your services on your apparel and clothing.
I simply put on a shirt that markets my services whenever I go out — to the mall, grocery store, post office, doctor’s office, etc. — and people come up to me to talk about real estate and their specific situation. It will surprise you how many people will approach you.
And the quality of leads is also high. You know why? Because people instantly and clearly know that you are a real estate investor and will only approach you if they are serious.
For example, I wore my “Private Lender” t-shirt the last time I visited my doctor. Once he read my shirt, he couldn’t stop talking about real estate and how he has been looking for places to invest his money. Bingo, now he has the answer, and I secured another private lender to my stable.
And guess what? He has other friends who are doctors, dentists, and lawyers who have money to invest. Now you can see why I like this strategy so much.
-Most inexpensive method
-Instant, direct way of telling people what you do; face to face contact
-Only works if you wear the apparel
-Only works where you are
Direct Mail
There are several ways to employ a direct mail campaign. I’ve attended several seminars run by real estate “gurus,” and each guru will swear by their own program. So, being the pragmatist that I am, I tried a majority of them.
I’ve ran marketing campaigns using postcards, handwritten letters, professional letters, and even USPS priority mail. Out of all the campaigns, handwritten letters generated the most leads.
On a good campaign, I received 25% response, which is astronomical. Don’t expect this high of a response rate every time. My average response rate hovers around 10%.
-Direct mail isn’t cheap. It is the most expensive strategy.
-You must choose your mailing list wisely and get it from a credible source
-Depending on the list, you will receive letters that could not be delivered
-Most homeowners will respond only after multiple mailings (experts say 7 contacts is the magic number).
Cold Calling
How many people can truly say that cold calling strangers is something that excites them? Probably not many, because most people inherently avoid unfamiliar territory. It’s time to get past that fear and get out of that mindset, because cold calling is by far one of the most effective strategies out there, especially if you are going after the preforeclosure market.
First, you need to get a list of individuals to call. If you are marketing to preforeclosures, there are several services that will provide phone numbers of homeowners facing foreclosure. Second, you need to practice your call script. Know what you want to say and how to respond to objections. And practice this over and over until it is second nature–and then practice once more. You get the point.
Being able to respond intelligently to the homeowner’s concerns will build credibility and rapport. Those are the two most important things to construct during a cold call. Remember, you are a stranger who they know nothing about.
Thirdly, be able to prescreen each caller efficiently and effectively. Gain a true understanding of their situation, and obtain enough information to analyze the property to see if it fits your criteria. And finally, if the property meets your criteria, be able to close, whether it means getting an appointment to view the property or actually agree to sales terms.
-Very effective — when you get in contact with homeowner
-Targeted to only those you want to market to
-Easy way to build rapport with homeowner due to personal contact
-Calling strangers asking to buy their house is not on the top of most people’s list
-Can be time consuming and can only market to people you actually talk to
Bandit Signs
If you’re not familiar, bandit signs are those PVC signs you might see plastered around town, reading “I Buy Houses, Any Condition, Any Price.” They are usually attached to wooden posts near busy intersections.
Before you go putting these signs up, check with your city’s rules and regulations because bandit signs are illegal in many cities. You can be fined heavily if caught.
The effectiveness of bandit signs is up for debate. A few years ago, I would have said that bandit signs worked great. But now they are everywhere and commonplace, people might be numb to them. Nevertheless, if you are the only sign posted, people will notice.
And if you pepper your farm area heavily, you will generate leads from bandit signs. Bandit signs are relatively inexpensive, roughly $2/sign, and you can hire people to post them. But you might have to have to put the signs up every 2-4 weeks, depending on how fast the “sign police” in your market do their clean sweep of the area.
-Inexpensive strategy
-Can reach a broad audience if you want
-Not targeted; “shotgun” approach
-May be illegal in your city
-Frowned-upon by some individuals as “eyesores”
Newspaper/Phone Book Ads
Like all service providers, placing an advertisement in the newspaper or phone book is always an option. But let me stop you here. This type of marketing has been by far the least effective method for me. It is expensive, sometimes prohibitively costly depending on your market, and is not targeted.
Sure, it can reach a broad audience, but is not worth the cost of the ad for me. And like all other ads, you will be clumped together with all other companies that provide similar services. So it’s hard for you to stand out, relative to the other marketing strategies already covered.
Like I said, I’ve had very bad results from placing these type of ads. So bad, that for one of my phone book ads, I only received 2 calls over the course of a year. And one of them asked me if I buy mobile homes! That might be an opportunity for some investors, but that doesn’t float my boat.
-Can reach a broad audience
-Very costly
-Not targeted
-Doesn’t generate quality leads (for real estate investor purposes)
Now that I’ve covered the top 5 marketing strategies, I hope that you have a better understanding of what you want to employ in your business. But remember to test more than one strategy in your market to see what gets you the best results. This is the only way that you will find what works in your market. Go out there and make it happen!