Real Estate Investing Blog - DiscountedProperties.com

If you are in the real estate investing business and looking for financing for your next real estate deal, you may have a difficult time, given the current state of the credit market.

However, all is not lost, as you may want to consider securing a hard money loan. Hard money lenders are financing companies that use real estate as collateral. In other words, the real estate you plan to purchase for your investment property will back the loan. Most hard money loans are secured for non-owner occupied properties.

Hard Money Lenders 101

Hard money loans are short-term loans, backed by private investors, who charge a much higher interest rate than traditional loans because they do not conform to traditional banking standards. Soft money loans, on the other hand, are those traditional loans that are secured through a traditional lending institution.

Hard money loans serve a very useful purpose, particularly for real estate investors who are looking for a short-term loan to finance their investment properties. Although the interest rates on hard money loans are much more than traditional, soft money loans, this typically does not affect the investor, as he or she carries the loan for a very short period of time.

How Hard Money Lenders Calculate the Loan

Hard money lenders typically calculate the according to the ARV (after repair value) of the property. Most hard money lenders will loan an investor about 70 percent of the ARV. This protects the lender in case the borrower defaults on the loan and the lender must foreclose on the property and resell.

Interest rates vary between hard money lenders, but they typically range between 12 and 20 percent, depending on the investor’s credit score and real estate investing experience. Most hard money loans last anywhere from a few months to several years, depending on the investor’s needs.

Benefits of Hard Money Loans

* Hard money lenders may provide you with the loan quickly, which is important for investors that must move rapidly on a real estate deal.

* Hard money loans are ideal for beginner investors who may not have much capital.

* Hard money loans are often used by investors with poor credit that may have difficulty securing traditional loans, as they are equity-based and no asset or credit-based.

* Hard money loans can be used to refinance a default personal mortgage loan.

* Hard money loans are ideal for today’s investors that cannot secure a traditional mortgage loan due to more stringent lending guidelines.

If you are looking for ways to finance your next real estate investment, consider looking into hard money lenders to help you turn your property into profit.

Does the idea of flipping houses sound exciting and lucrative? For many individuals, the thought of flipping a home and making a mammoth profit for only a few months’ worth of work sounds too tempting. The problem is that if you don’t know what you are doing, you could easily lose in the house flipping game.

Regardless of what late-night infomercials want you to believe, there is no secret to house flipping, and it takes great skill to flip a house to make a tremendous profit. Flipping real estate takes time, patience and a great deal of knowledge about the business.

The first step to successfully flipping houses is to understand how much time, energy and money is involved. Once you have a firm grasp of what is needed for flipping real estate, you will want to know what NOT to do when flipping houses.

The following lists details the top five things to avoid when flipping houses:

1. Do not purchase a property if you haven’t first researched the neighborhood. It is important to remember that all neighborhoods are not created equal. In other words, just because a nearby community has seen an increase in property values doesn’t mean that the community in question has as well. You must research the neighborhood’s property values and its real estate market and trends, just to name a few, before flipping real estate there.

2. Do not purchase a property without having a budget in mind. Your budget will revolve around the financing you receive to purchase the property. Because of the recent real estate bust and credit crunch, do not expect to secure financing without a healthy down payment. Remember: the bigger the down payment, the lower your interest rate will be.

3. If you are new to flipping real estate, avoid homes that need extensive, structural repairs, as this can often get you in quickly over your head. Leave the major rehabs to the seasoned real estate flippers and instead look for homes that require cosmetic makeovers.

4. Don’t get emotional when flipping houses. One of the biggest mistakes real estate investors can make is not separating their emotions from their flips. Remember: at the end of the day, flipping real estate is just business!

5. Don’t expect the process to always go smoothly. Having high expectation when flipping houses will not prepare you to handle problems, chaos and budget overages, which frequently happen when flipping real estate.

Flipping real estate can be a lucrative endeavor, but it takes excellent business acumen, hard work, and excellent financial management.

You may be familiar with the term “wholesale real estate,” which is used to describe distressed properties that are bought, rehabbed and then sold. However, what exactly is wholesale real estate, and how can you find these properties?

Wholesale Real Estate 101

Wholesale real estate is a general term used to define real estate that is owned by motivated sellers looking to unload their properties. A wholesale property may need extensive repairs, may have a notice of default, or may be REO or bank-owned.

Examples of wholesale property include:

* The homeowner misses several mortgage payments and wants to sell quickly before the bank sends him a notice of default.

* The property is in a state of disrepair, and the seller wants to move without performing any of the repairs.

* The homeowner is motivated to sell because of a move or job transfer.

As a real estate wholesaler, your job would be to locate these wholesale properties via various networking tools. If you want to wholesale real estate, you will likely need to become involved in real estate investing clubs and online sources, just to name a few.

Wholesale real estate may provide a great opportunity for many investors in today’s tough housing market, provided they have a good working knowledge of real estate laws, trends and finances, and can successfully market and sell wholesale property.

Important Elements of Wholesale Real Estate to Understand

However, before you can successfully find, purchase, and sell wholesale property, it is important to keep the following in mind:

* You will need to understand the local and regional markets and be willing to spend the time searching for properties with motivated or distressed sellers.

* You will need to be able to negotiate deals with sellers that are looking to move quickly but still want a fair price for their home.

* You will want to assemble a list of investors willing to purchase wholesale property from you (there are many investors interested in purchasing wholesale real estate but do not want to take the time looking for the properties – this may prove to be very lucrative to you!).

* You will want to network and work together with other wholesalers. This is often the key to wholesaling real estate, as the larger the network of buyers and sellers, the better off you will be when it comes time to selling your wholesale property.

Now may be the ideal time to take advantage of the wholesale real estate market. It is important, however, to educate yourself on how to wholesale property before embarking upon this real estate investing journey.

Bank-owned homes, also known as real-estate-owned or REO properties, are homes which are owned by banks as a result of the foreclosure process. With the glum state of the nation’s real estate market, there are certainly plenty of opportunities for both investors and homeowners seeking REO properties.

Because most lenders have far too many of these REO properties on their books, they are anxious to sell them, often for below fair market value. Bank owned homes could be a prime opportunity for both investors and homeowners, so it is up to you to educate yourself on the many facets of REO properties!

What is the Difference between REO Properties and Foreclosures?

REO properties are properties that are returned to the lender if a foreclosure auction is unsuccessful. If the property does not sell for what is owed to the lender at the foreclosure auction, the property is then returned to the bank, where it becomes a bank-owned property.
A lender will seek to sell the bank owned property to recover their expenses after it is returned to them, including the unpaid loan amount. The lender will also clear the title and perform any necessary repairs before selling the home.

Are Bank-Owned Homes a Good Investment?

Many buyers assume that REO properties are great values, and therefore get caught up in a bidding war and end up paying too much. Take into consideration the condition of the home and the home values of the neighborhood before bidding on bank-owned properties.
How do you Purchase REO Properties?

Bank-owned properties are sold in a similar manner as traditional homes, except that you are making an offer to a bank, not a home seller. Once again, keep in mind that you won’t usually get a “steal” when it comes to REO properties, as the bank is looking to recoup its expenses and the home’s unpaid loan amount.

Many banks have REO departments that handle bank-owned homes. Once you have submitted an offer to the bank, they will likely submit a counter offer. Your final offer will likely be reviewed and approved by several members of the REO department.

Can I Negotiate Home Repairs with the Lender?

Most lenders look to sell bank-owned homes “as-is.” In other words, you will likely have very little room to negotiate repair costs with the lender. However, most lenders will allow you to have inspections on REO properties so you know what repair costs you may face.

It is therefore important to stipulate in the offer that you have the option of cancelling the contract if you find extensive repair costs that the bank won’t cover.

Bank owned homes can be an excellent investment, especially if you purchase one that does not require extensive repairs. However, make sure you analyze bank owned homes as you would any other property – with rationality and practicality.

In today’s economy, many real estate investors have found that there is lucrative money to be made on government tax foreclosure properties.

Government tax foreclosure properties are essentially properties that have a tax lien against them. Tax liens, which take priority over any other types of liens, are usually a result of a homeowner not paying his or her property taxes. When this happens, a lien is levied by the county, and the tax foreclosure properties are sold in an effort to collect the taxes owed.

How Do Investors Make Money on Government Tax Foreclosures?

Frequently, the government will sell these government tax foreclosures to investors, who are essentially looking to buy the tax lien certificate from the county.

In other words, if you purchase liens on tax foreclosure properties, you are essentially paying for the lien and collecting the state-mandated interest rate on the amount for which you originally purchase the lien. Depending on the state, the state mandated tax can be anywhere from 8 to 50 percent on tax foreclosure properties! This means that you can get a tremendous bargain on a real estate property, or you enjoy collecting the taxes and interest rate on government tax foreclosures.

The Benefits of Purchasing Tax Lien Certificates for Tax Foreclosure Properties

The best part of this situation is that tax liens on government tax foreclosures are one of the safest investments because you either (a) collect the money for the lien, plus the state-mandated interest charges or (b) take the property. In other words, government tax foreclosures create a win-win situation. You either collect the money or sell the property – either way, you make out profitably on the deal.
Because counties rely on property taxes for the majority of their revenue, they are happy to sell the liens to investors and get out from underneath the properties, of which they have no interest, other than to collect the owed taxes.

Counties often sell the tax liens from tax foreclosure properties because it may take months for the property owner to finally pay on the lien – which often never happens. On the other hand, if an investor purchases the liens for their government tax foreclosures, then they essentially collect their taxes and pass the liens onto someone else.

The liens on government tax foreclosures give homeowners a predetermined amount of time to pay the taxes. During that time, interest accrues. If the taxes are not paid during the predetermined amount of time, then the homeowners lose their properties. The time during which the county has given the homeowners of the tax foreclosure properties to pay their taxes is the time that you, the investor, can make money from the accrued interest.

Because of the downturn in the economy, government tax foreclosures have made a resurgence, which therefore means that many investors can stand to make a great return.

For many homeowners facing foreclosure, a short sale may be a viable way to stop foreclosure. To understand the premise of a short sale, it is important to first analyze the circumstances under which so many homeowners essentially owe more on their mortgages than what their homes are worth.

Why Homeowners are Underwater in Their Mortgages
During the real estate boom a few years ago, home values across most of the country skyrocketed. Many home buyers purchased homes during this time, often with adjustable rate mortgages. Most homeowners were under the assumption that once the adjustable rate mortgage adjusted, they could refinance or sell the home for more than they paid.

Unfortunately, the mortgage bubble burst and so did home values. Homeowners looking to refinance or sell their homes then found themselves in a position where they owed more on their home than what it was worth. They were, essentially, “upside down” or underwater in their mortgage.

This left homeowners with adjustable rate mortgages that they couldn’t afford and who simply had no way out. With so many homeowners facing foreclosure, and so many lenders forced to begin the foreclosure process, many homeowners looked to selling their homes via short sales to stop foreclosure.

How a Short Sale Works

A short sale occurs when homeowners sell their homes for less than what they owe in their mortgage in an effort to stop foreclosure. Short sales, which must be approved by the lender, are a way for the lender to avoid the costly process of foreclosure. A short sale is also a way for homeowners to avoid a hit on their credit that a foreclosure would create.

Although the lender essentially loses money on a short sale, they often agree to this type of sale to stop foreclosure, which has a lengthy and costly process. There are some important facts you should know about using a short sale to stop foreclosure.

* To sell your home via a short sale, you must convince your lender that it is in their best interest to stop foreclosure and sell the home now, instead of going through the foreclosure process.

* You may be able to refinance your current loan to avoid a short sale and stop foreclosure.

* The difference between the money you receive for your home in a short sale and the money still owed to the lender (in other words, any amount of debt that is forgiven by the lender) must be taxed as income by the Internal Revenue Service.

* Short sales are most commonly seen during buyer’s markets because of the lack of competition and lower home prices.

* Often times the lender will agree to a short sale only if the homeowner signs a promissory note to pay the difference between the original loan and the sales price of the home from the short sale.

Using the short sale strategy has become a very widespread phenomenon with homeowners across the country who want to stop foreclosure – and protect their credit scores.

The mantra for rehabbing houses in today’s tough housing market may be “buy and hold.”  In other words, it may benefit you to buy a home at a good price and hold onto the property until the market shows signs of rebounding.

The bottom line is that there is money to be made rehabbing houses in today’s real estate market if you follow the rule of “buy low and sell high.”  With that said, home rehabbing, even in the glum housing market, is possible, and can even be quite lucrative, if you follow certain rules:

* Buy the “right” house at the “right” price. Understand that buying the “right” house at the “right”   price always involves conducting research and spending only what the market can bear to fix it up and get it back on the market. In other words, the amount of money you spent rehabbing houses has nothing to do with how you can realistically price the homes.  Focus on fixing up areas that have the highest cost-benefit ratio.

* Consider all of the costs of home rehabbing, including the buying, repairing, carrying, holding and selling costs. Forgetting to include one of these factors in your home rehabbing project could cost you dramatically, especially in today’s tough housing market.

* Find a realtor who specializes in foreclosures. The right realtor can be your key contact point when searching for rehabbing houses.

* Focus on one niche area. Make it your mission to become educated on one, particular area so that you can scout out the best property for your home rehabbing project. Researching a particular area can help you better understand the local real estate market, the average costs of homes in the area, and the real estate values and trends.  In home rehabbing, it always pays to be your area’s specialist.

* Look for the “easy” fixes. Many home rehabbing experts focus on the homes that need only cosmetic work, instead of the homes that need gutted and rebuilt, from the inside out. This may be the best first step when rehabbing houses in today’s shaky housing market, as it will eliminate the need to make a large investment into any one property.

* Keep your finances healthy. With financing options tight due to the current credit crisis, it is vital to maintain a sparkling credit score so that you can get the best financing possible for your home rehabbing projects. In other words, don’t lose your precious profit margin from rehabbing houses by paying more in interest fees and charges!

* It may make more sense to live in the home you are rehabbing, for many reasons. First, it will eliminate the time pressure to get the house sold in a pre-determined amount of time. Secondly, it will allow you to wait for the right moment to sell the house, instead of selling it while the market is still in a slump.  In addition, it will save you from all of the holding costs associated with rehabbing houses.  Lastly, should you live in the home rehabbing project for at least two years, then you can sell the home at a profit – and not have to pay capital gains taxes!

Savvy home rehabbing experts can make money in any market.  In a shaky real estate market, however, you simply need to ensure that you are making smart, practical, and cost-effective decisions in rehabbing houses for a profit.

There are many ways to stop foreclosure, and by learning about the strategies you can implement to keep your home, you can avoid becoming yet another victim of a home foreclosure process.

Throughout the foreclosure process, it is important to remember that your lender is not your enemy! In fact, the vast majority of lenders want to stop foreclosure as much as you do; the costs for foreclosure from a bank’s perspective are very high, which does not bode well for strengthening their bottom line.  Keep the lines of communication open and explore all of your possibilities with your lender to stop foreclosure.

1. Educate yourself on the foreclosure laws in your state. Remember: foreclosure process laws range widely from state to state, and it is important to understand the laws so that you can best protect your home from the foreclosure process.  Some states have expedited foreclosure processes that may leave you homeless in 30 days, while others outline a foreclosure process that could take up to one year to complete.

2. Contact your lender as soon as you experience trouble. Chances are that you and your lender can work out an agreement to stop foreclosure on your home, especially with the stimulus packages that have been passed by Obama’s administration.  However, if you wait until you are in over your head, then your options to stop foreclosure will likely be very limited.

3. Never, ever miss a mortgage payment! Missing a mortgage payment starts a dangerous snowball effect that is difficult – if not impossible – from which to recover.  Do everything in your power to make your mortgage payments while you work with your lender so that your credit remains intact and your relationship with your lender remains strong.  Should you expect that you may miss an upcoming mortgage payment, contact your lender as soon as possible to discuss the situation.  It is always better to keep your lender informed than in the dark, especially if you want to stop foreclosure in the future.

4. Do not deny that you may be in trouble. Facing your problems and dealing with them before they become uncontrollable is arguably the most important thing you can do to stop foreclosure. Talking with your lender and your spouse and preparing for the future is the smartest way to remain in charge of the foreclosure process and in control of your financial situation.

5. File for Chapter 13 bankruptcy to stop the foreclosure process in its tracks. If you desperately need to stop foreclosure and cannot negotiate an option with your lender, then consider filing for Chapter 13.  Make sure you learn about the ramifications of filing for bankruptcy and how it will impact your credit for years to come.  It is also important to file your Chapter 13 filings on time and to make the payments on time.

With the spike in home foreclosures seen all across the country, many lenders are reaching out to homeowners and doing what they can to stop foreclosure. It is important to use this to your advantage and to set up repayment or loan restructuring plans with your lender before your mortgage debt gets out of hand. Remember: the lender is not always the enemy in this situation! It pays to keep the lines of communication open so that you can stop the foreclosure process and keep your home.

Don’t let the stagnant housing market stop you from considering real estate investing. By incorporating timeless real estate investing secrets, there is always money to be made in the real estate market.

Real estate investing secrets are tried and true rules by which the most successful real estate investors live. It is possible to invest in real estate in today’s market, and it is certainly possible to make money in today’s real estate market; you simply must do your homework, incorporate real estate investing secrets, and educate yourself on the process before jumping in with both feet.

Top Ten Real Estate Investing Secrets:

1. Watch the market and pay attention to trends and shifts. Real estate investing secrets do not focus on knowing what others do not. Instead, it’s simply about paying attention to the changes in the real estate market and becoming aware of what the changes mean. The most successful real estate investors constantly have a realistic pulse on the market’s supply and demand trends.

2. Don’t rely on your real estate agent’s research alone. Use the available public records and real estate transactions to scope out potential properties and determine their value based on other similar properties in the neighborhood. Your own judgment as an investor is invaluable. The most successful investors will admit that their real estate investing secrets focus on trusting their own sensibilities.

3. Don’t underestimate the power of being straightforward with home sellers. Many home sellers in today’s tough housing market are simply looking to get out from under their home debt. Instead of dancing around offers and counter offers, simply ask the sellers what they need to walk away from the property.

4. Understand the difference between investing and gambling. There is always a risk when it comes to real estate investing, but decisions should be based on solid evidence, research and trends, not on a guess that property values will continue to rise or rebound in the near future.

5. Don’t consider real estate investing until you first purchase your own home. There is no better education regarding real estate investing secrets than owning a home. Owning your home will give you a crash course on the sheer cost of maintaining a home, and how changing market conditions can affect the value of your home.

6. Obtain an education on real estate investing. Don’t assume you know already the ins and outs of real estate investing secrets and fundamentals. Take a course, read the books and talk to other individuals who have been successful in the real estate investing market. Your best real estate investing secrets are often found by talking to others in the industry!

7. Learn about your particular investment market. Every single market has its own dynamics. Don’t assume that because a nearby market is thriving that your market is too. There are countless variables to consider when determining if your market is viable for real estate investing, and looking at other markets isn’t one of them. One of the most powerful real estate investing secrets is focusing on your own niche market and becoming an absolute specialist in your area.

8. Don’t act before you are ready. Many real estate investors worry so much about passing up a good opportunity that they move forward without first understanding the risks involved with the purchase. One of the most practical real estate investing secrets is to not allow the excitement of other buyers and bidders prompt you to make a rash, quick decision that is not carefully analyzed.

9. Remain educated about real estate tax laws and how they will affect you. If you don’t feel like you have the time to stay on top of the tax law changes, then it is probably a wise decision to hire a tax law attorney.

10. Don’t ever overlook the importance of common sense. Don’t let the trends dictate your decisions when it comes to real estate investing. Instead, your common sense should always be your guide.

The most important theme amongst all real estate investing secrets is that you must remain level-headed and practical at all times. Greed and excitement should never play a role in your decisions; rather, cold hard facts and your rational intuition should guide your judgment regarding a good real estate investing decision.

Good luck!

When you’re trying to buy and sell as many properties as you can get your hands on, sooner or later you’re going to be faced with the reality that without additional cash, your real estate investing career is going to come crashing to a halt. A good hard money note buyer can put much needed cash in your hands today so you can get on with the business of buying more properties.

If you’re carrying the financing on one or more of your investment properties, you’re all too aware that buyers aren’t always as committed to making on-time payments as you thought they would be when you signed on the dotted line. Instead of waiting for payments to trickle in when they buyer is ready to make them, you can cash out of your contract by selling to a hard money note buyer. A hard money note buyer will pay less than is owed on the contract, but you’ll have cash in your hand you can use for other investment opportunities.

As a real estate investor, you know the importance of leverage in securing additional property. By taking advantage of the fast cash that can come your way from a hard money note buyer, you can use the influx of cash to secure much more real estate that can help you capitalize on the profit potential available in today’s exciting real estate market.

A hard money note buyer can make it happen today.