The March 2013 edition of The Profit Newsletter is now ready for download as a High Quality PDF or Low Res PDF format. The Profit is the official newsletter of the Atlanta Real Estate Investors Alliance and is a digitally delivered, interactive newsletter for real estate investors delivered as an Adobe PDF file to read on your PC, Mac, Smart Phone, iPad or other mobile ready devices with a PDF reader. Many of the articles and ads in The Profit contain many hyperlinks you can click or tap to visit websites, watch videos, listen to audios, download content, send emails, comment on articles, share socially and much more! And yes, The Profit is “print ready” for those who still like a paper newsletter. Be sure to Subscribe to The Profit Here so you don’t miss a single monthly issue.

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“The right tool for the job” ~ slogan for True Temper Tools

Congratulations – you made it through the winter and spring is on its way!  I think spring is a perfect time to take an inventory of your real estate investment “tools.” And if you’ve been sitting on the sidelines, wondering if real estate investing is for you, spring is also a great time to dive in! Either way, it’s a good time to get back to basics. Today, let’s focus on one of my favorite investment techniques: “subject to” mortgages.

Most of you know that when you buy a house, you usually receive a warranty deed, which gives ownership of a piece of property.  If you’re paying all cash for a property, you just exchange the cash for the warranty deed.  So far so good.

But if you don’t have all the cash, you have to borrow the money.  Most of you know how the typical mortgage loan works: Buddy Banker says, “Sure, just sign this promissory note that says you’ll pay it all back.”  In return, you get a security instrument that says if you don’t pay the promissory note, the bank gets the property.  In most states, that security instrument is the mortgage (In Georgia, we use security deeds). That mortgage, when it’s recorded, creates a lien on the property.  In other words, the bank puts everyone on public notice that if the owner sells or transfers the property, the bank has to be paid off first. 

A “subject-to” transaction is a little different.  When you buy a house this way, you’ll take over payments on the original mortgage. You’ll bring the house up to date on the mortgage and back taxes and then continue to make mortgage payments, subject to the existing financing. The seller gives you a warranty deed, which conveys ownership to you.  That means you get the tax benefits and the profits, but you also get the headaches and costs.  Read More→

WGC Commercial Lending is a National full service commercial finance company, providing all types of commercial real estate and business financing to real estate investors and small/medium size businesses. WGC provides financing across four major categories which are; commercial real estate, general small business loans/lines of credit, equipment leasing and asset based lending.  The company has the ability to provide financing for transactions that range from as small as $500 to over $500M depending on the type of transaction.

WGC is led by managing partner Charles Williams. Charles has 15 years of strategy and finance experience working with small businesses up to Fortune 500 companies. He has assisted organizations in developing and implementing business and financing strategies to grow their top-line as well as their bottom line. Charles is a graduate of West Point and has a MBA from Kellogg (Northwestern University).

Financing Programs for Real Estate Investors

Specifically for commercial real estate investors, WGC Commercial Lending provides several financing programs such, but not limited to, construction loans, conventional financing, refinancing, cash-out refinancing, SBA, and bridge/hard money loans. The company just launched a new financing program offering credit lines for real estate investors ranging from $50K-$150K. These credit lines are unsecured and can be used for residential and commercial real estate investing. Read More→

To Deed…Or NOT To Deed? THAT Is the Question
(When Buying Real Estate)

Welcome back again! If you’ve been keeping up with my last 2 articles, you’ll remember that we’ve been discussing one of the best strategies for doing deals in 2013 & beyond – Wholesaling Pretty Houses!

This type of deal is most advantageous for you, the investor, to do when you’ve come across a house that’s overleveraged or has very little to no equity. Rather than walk away from the deal because you believe there’s no money to be made, you simply get an agreement from the seller to find a qualified tenant buyer to occupy the property on a rent-to-own basis (aka lease purchase) & have the tenant-buyer make the mortgage payments until such time as they’re able to buy the house outright with a new loan and there’s enough equity in the house to justify them doing so. You would collect your money from the tenant buyer as an assignment fee for getting them in to this house buying opportunity that you’ve negotiated. Make sense?

Naturally, you would then be completely OUT of the deal from that point on. Why would you want to stay in? There’s no more money to be made, so it’s best that you collect your money (usually $5k+) and get out quickly.

So let’s take a moment to look at some types of deals where you WOULD want to stay in & why. Read More→

FDIC Insured

All un-invested cash in your self directed IRA is FDIC insured.

As a note, FDIC insurance only covers cash balances, not once you make a purchase of a non-traditional asset. All credit card transactions are safe — American IRA is certified by Security Metrics. All accounting is processed through a top-rated trust accounting system. We maintain professional insurance coverage, including crime shield policy and errors and omissions policy.

Asset Vesting with Your Self Directed IRA

All assets are vested in the client’s name at the time of purchase… “American IRA, LLC for the Benefit of Client’s Name IRA”.

Investing with Your Self Directed IRA

Investing within a self directed IRA is completely within the investor’s control. Is it safe? Yes, to the extent that the investor controls it. Here’s something that’s overlooked many times when we’re talking about safety between the securities industry, and let’s say in this case we’re talking about the real estate industry. Each investment has its own characteristics as to safety. Read More→

Kim and I are teaching a financial calculator course later this month (February 23, 2013).  Yesterday, an investor called to ask whether he really needed to take the course.  I explained that a contractor’s most important tool is a hammer, a NASCAR driver’s most important tool is a racecar, and a real estate investor’s most important tool is a financial calculator. 

After a bit of discussion, the investor said he’d pass on the course because it would be a waste of time.  Out of curiosity, I asked how many real estate investing seminars he attended each year.  His answer wasn’t surprising: NONE!

Here’s the funny thing: Even though I teach a financial calculator course, want to guess where Kim and I are this weekend?  We’re in Vegas attending Gary Johnston’s Money Not Math seminar – it’s a three-day intensive financial calculator course.

I already can make a financial calculator sing and dance.  For years, I’ve taught folks how to use them.  So why do I “waste my time” taking financial calculator classes?  Seriously, I want you to answer this question! Read More→

Throughout the late 1990s and early 2000s, we experienced an unprecedented housing boom.  Easy credit flooded the marketplace and home ownership surged to unheard of levels.  Along with inflating an unsustainable bubble, the housing boom created a rich climate for mortgage fraud.

The bust that followed changed the nature of the crime, but it has also provided continued opportunities for mortgage fraud.  Fortunately for homeowners, there is a new wave of investigative agencies emerging that are trying to figure out just how widespread and insidious the mortgage fraud epidemic is.  Investigators hope the increased awareness will help to educate the general public about the threat that these crimes present.

The scary fact is that fraud continues at astounding levels.  The allure of mortgage fraud is clear – it can generate amazing profits with a relatively low risk of discovery.  After all, there is a byzantine mess of laws and regulations that govern the finance industry and keep all but the most ardent investigators from figuring out exactly what fraudsters are doing and how they can be prosecuted. Read More→

“The generous soul will be made rich, And he who waters will also be watered himself.” (Proverbs 11:25-26)

Have you ever asked yourself the question, “how much should I give to my church or synagogue?” This has always been a touchy subject, with many different views. Of course, the answer is always personal and depends on the person’s relation with God; as well as their involvement with the activities of their local church or religious organization. The responses and personal opinions of many successful business people are as varied as the individuals themselves.

However, the Bible has much to say about this subject. The reality of the matter is the same with all of our material possessions. God allows us to control, manage, and enjoy our earthly belongings for a finite period of time. After that, another person will get them and be given the opportunity to do the same. You see, every material or visible asset that we say… “I own ___”; will either be consumed, traded, given away, taken away, or left behind for someone else when we die. Consequently, since these assets are temporarily under our control, it is vitally important to consider to whom and to what cause we contribute them. Read More→

If you are sending out a good amount of offers for yourself or for clients, you know that it feels as if though the selling agent has “Please send your highest and best…” as an auto reply. Once you think about it you will realize that offering on MLS properties has become somewhat of an auction. The worse part about this is that you do not know where your offer stands in comparison as you do when you are actually participating at an auction. Who knows if there are even other offers on the table other than yours.

For this reason, auctions have become more attractive for many investors. Auctions favor investor because in order to bid on properties you must have cash on hand or financing in place. Plenty of the properties at auctions are foreclosed properties in need of major renovations which traditional financing will usually not finance. Therefore, this eliminates the over paying owner occupants that auctions attract. This leaves the cash buying owner occupants but they usually do not buy homes cash passed 80K. If you have ever prepared for an auction, you know that it takes lots of time and man power to properly prepare for one. You must inspect and have a title search done for each property you plan on bidding on. Read More→

We should start with defining what a pretty house really is. It’s not the price that makes the definition. The house could be high-priced, but most people in the pretty house business work in a range from $70-$200,000. If you’re in a high-priced market such as San Francisco where a $200,000 house is rare, your range will be higher.

The point is, pretty houses start at the bottom end and go up. It’s not just expensive houses. My definition of a pretty house is any house requiring less than $5,000 in work to get it in a good, saleable condition. An ugly house is one that needs a rehab or a lot of repairs.

I’d want you to work both sides of the business and become a transaction engineer who can recognize a deal when you see it, whether it’s pretty or ugly. Don’t fall into the trap of trying to get so specialized that you turn your back on lots of other profits. There’s gold in both the ugly and the pretty house business. Besides… Read More→

Last month I mentioned that there has been a turn in the market. A recent Creative Loafing article confirmed the information that I gave you—that the market is looking different than it has in a long while. Many people are afraid of another bubble. And in the last few articles, I’ve asked you to plan, to have a strategy, to do your research. And maybe you’ve made that plan. Maybe you’ve done that research.

But here is the nature of our business: just when you think you have it figured out, it changes. So we have to ask ourselves anew: How can I continue to make money? How can I get in on the current market and live well? The answer is that you need to know what is ahead.

But if you’ve not encountered this kind of change, then you can’t make an informed guess. One opportunity for success is to become David. You can go it alone which is very risky. Or you can work smart: get a mentor. Work with someone like me who has survived battles with Goliath before. Read More→

Recently, I was asked to describe the options and procedures that lenders may take when a borrower defaults on their real estate loan.  Understanding this process is vital to real estate professionals whether they are lenders, borrowers, agents or investors attempting to buy or manage property during the default process.

When a borrower defaults on his loan, most often by failing to make the monthly payments, the lender has several options.  Although not exhaustive nor mutually exclusive, these options include foreclosure, filing suit, self-help repossession or requesting that the court appoint a receiver to manage the property. 

The two most popular options differ in their order:  lenders can foreclose first or file a lawsuit first.  Therefore, the lender gets to choose its remedy: (1) foreclose first and then sue, or (2) sue first and then foreclose.  The order is important and it is significant to remember that the second step in either option is at the lender’s discretion.  This article only addresses the first and most popular option.  Next month, the second option will be discussed. 

1. Foreclose First and Then Sue

The first and most popular option by lenders is what I have entitled the foreclose-confirm-sue process.  The name describes the exact steps a lender takes. 

For example, Becky borrows $100,000 to buy her house.  Afterwards, the market declines leaving her house valued at $60,000.  Becky is unable to make her payments.  So, the bank begins the foreclosure process.  In order to do this, the bank sends Becky all the required notices and advertises in the newspaper for four consecutive weeks.  On the first Tuesday of the month after the advertisement has run, Becky’s house is sold on the courthouse steps for $60,000 – its market value.  Most real estate professionals understand this process.  However, many may not understand what can happen next.  In other words, what happens to the $40,000 deficiency? 

If the lender desires, it can pursue the $40,000 deficiency.  In order to do so, the lender must follow a two step process: confirm and sue.  First, the lender must apply to the court to confirm the foreclosure sale.  This confirmation hearing must be requested within 30 days of the foreclosure sale.  The purpose of this judicial hearing is to determine the fair market value of the property and both the lender and borrower are allowed to present evidence.  Once the court has determined the fair market value, it issues an order of confirmation.  This then allows the lender to, secondly, sue Becky for the $40,000 deficiency.

Because of this double judicial procedure and the likelihood that many judgments of this nature are uncollectable, lenders rarely pursue a deficiency action against residential borrowers.  Commercial borrowers are another story.  In today’s market, commercial lenders are pursuing deficiency actions with vigor. 

This article only addresses the most popular option: foreclose first.  Next month, I will address the second option: suing first and then foreclosing.  The second option is becoming increasingly popular in commercial loan defaults; the first is almost universally the choice of residential lenders.

Disclaimer: The information contained in this article is for informational purposes only and is not legal advice or a substitute for legal counsel.  It does not constitute advertising or solicitation. The information in this article may or may not reflect the most current legal developments; accordingly, this article is not guaranteed to be complete, and should not be considered an indication of future results.