WIAcademy EducateBlog

A credit score is basically a numerical representation of your credit history. It reflects your history of making payments, and is used to predict your ability to make future payments toward debt. Credit scores range from 300-850.

In today’s economic climate, a few lenders have lowered their minimum credit score requirements in an attempt to bring in new business. However, the majority of lenders have actually developed stricter lending practices in an effort to ensure that they are working only with those borrowers who are least likely to default. Therefore, by and large, credit scores are becoming more important in evaluating the qualifications of potential borrowers. Other factors that are considered include a person’s income, job history, current debts and current assets (including checking and savings accounts), any property that he or she may own, and other investments.

Your credit score not only affects your ability to qualify for loans, but it also determines the amount for which you may qualify, the interest rate you will receive, and the terms of the loan. For the same loan, a person with a credit score of 525 ends up with an interest rate nearly twice as high as the rate offered to a person with a score of 780. Your credit score can also affect the premiums you pay for car insurance, as well as your ability to rent a home or vehicle, obtain a job, and get into college.

How to Check Your Score
It is a good idea to check your credit rating once a year for several reasons: it can help you recognize and report incidences of identify thefts as early as possible, you can potentially identify and dispute any discrepancies that may be present before your credit score is used by a potential lender, and it can be used as a valuable tool to track your credit health in general.

The Fair Credit Reporting Act (FCRA) requires each of the three nationwide consumer reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request, once every 12 months. All three of these companies’ databases can be accessed by phone at 1-877-322-8228, or online at a central website, annualcreditreport.com, which should provide you with immediate access to your free credit report. You credit score, however, will probably not be included, but will be made available for an additional fee. If you choose to request that your report be mailed to you, it will be mailed out in approximately 15 days.

Simple Steps to Improve Your Credit and Your Financial Health

While many Americans are baffled by the subject of consumer credit and find the process of obtaining and improving their credit score to be overwhelming, there are actually several simple steps that one can take in order to raise his or her score:

1. Spend less money than you make.
Although this may sound like—and is—common sense, the sad truth of the matter is that an average family spends more than 100 percent of their earned income; simply put, they spend more than they make. Bringing your standard of living in line with your income can be difficult at first, but getting accustomed to spending less than you make is the first step to achieving financial health and improving your credit score. With the exception of the use of a credit card for sudden, unforeseen emergencies, you should only spend what you have available now; furthermore, you should begin to bulk up your savings account in order to diminish the need for credit cards in the event of an emergency.

2. Pay off current debt.
If at all possible, pay more than the minimum payment for all credit cards and other debt. If you regularly submit only the minimum required payment, it will take a very long time to pay off the entirety of your debt. In fact, you may reach a point at which you discover that your payments are only covering the interest you owe, while the actual amount of your original debt is not even being affected by your payments! Quite obviously, this is a situation that you want to avoid. Even an extra $5 or $10 per month can save you hundreds or possibly thousands of dollars in interest down the road and can help decrease the time it will take you to pay our debts off.

3. Make a strategy…
Assess all of your debts and come up with a game plan for paying off your debt. Although it is smart to focus on paying off your highest interest rate debts before those with a lower rate, for some, it may be advisable to work on paying off one or two of their smallest debts first. The gratification of seeing concrete results quickly may provide just the motivation and confidence needed for tackling bigger debts.

If you have some savings, you might consider using some of it to pay off your credit cards. Your savings account may be paying you two or three percent, but what percentage of interest are you paying on your debt? Weigh this option carefully, and before acting, carefully construct a detailed plan for how and when you will replenish your savings account.

4. …and stick to it!
A good debt-reduction strategy is important, but you must stick to it in order for it to work. Always keep in mind that your ultimate goal is to get and stay out of debtso in the long run, you will be able to do more with your money. Think of how much more freedom you will have with your life and your money if you were completely out of debt! It may help to seek support from family and close friends who can help you stay on task. If you find that you still are unable to stick with your strategy, professional assistance may be warranted. This assistance may come in the form of a support group, twelve-step or other program, or mental health professional.

5. Consider consolidating debt.
Check out the possibility of consolidating multiple credit cards and other debts. Consider transferring the high-rate cards to a new credit card that may have low-introductory rates, as this will help lower your payments and the interest you pay in the long run. After doing this, keep your lowest interest rate card(s) and cut up the rest; be sure to notify the credit card company to close the accounts. Remember to limit use of credit cards to extreme emergencies only, using cash or debit cards for everything else.

6. Avoid unnecessary spending.
Most of us strive to attain the American dream, or at least some version of what we perceive that to be. A challenge we all face is balancing our life expectations with reality by differentiating between what we truly need and what we simply want. Temptations exist in every strip mall, on television commercials, on billboards, everywhere we look. America has developed a culture of indulgent consumerism that emphasizes, “Buy now, pay later!” But this attitude does not lead to financial health or security. The next time you make a trip to the mall, really think about what you need, what you want, and the long-term ramifications of your purchase. Ask yourself what more important things you should be spending your money on or saving your money for. Don’t shop unless you know specifically what you are shopping for, why you need it, and if you can afford it.

7. As you make more, save more.
A big mistake many people tend to make is that of neglecting to increase their contribution to savings and investments as their income increases. Instead, they begin to spend more money as soon as they make more money. The danger of this is obvious, and I should point out that increasing one’s lifestyle is pointless if he or she does not provide for a way to continue that lifestyle past retirement. So hold off on that sports car or boat for little while, and put that extra income into savings, or better yet, put that money to work for you!

We tend to get too comfortable with our situations as we grow more confident in our jobs. The recent economic recession and record unemployment rates should be a reminder to all of us that we don’t always know what is around the corner, and sometimes, it can be out of our control. What is in our control is how prepared we are to deal with different circumstances as they arise. What would happen if you lost your job, or if your home’s value decreased by 50 percent? The less debt you have and the more savings you have, the better position you will be in to handle whatever comes your way.

8. Make timely payments.
Late fees are unnecessary, expensive, and can wreck havoc on your financial situation. Late fees can be $35 or more, even if you are only one day late. They can easily, and quickly, add up to hundreds of dollars per year.

9. Pull your credit report regularly, and immediately address any errors that it contains.

Check your credit report regularly, and dispute any inaccurate information that you find. Because of the Fair Credit Reporting Act, both the consumer reporting agency and those parties from whom they receive the information they are reporting have an obligation to ensure the accuracy of their reports. By law, they must conduct an investigation within a reasonable time period and, if they find that your complaint has merit, must correct any errors found.

To begin this process, first contact the consumer reporting agency via certified mail and:
a. provide them with your personal and contact information
b. provide them with as much information as possible about your complaint
c. provide them with copies of anything you have that helps prove your case
d. request that they remove the error

Next, repeat these steps with the creditor or party who is providing the false information to the reporting agency, and ask that they notify all three major credit bureaus of the change. For more information, visit
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm.

If you suspect identity theft, rather than a simple error, first contact your local police department. You will need to obtain a police report and case number to aid you in proving fraud. If they do not have a way to file an identity theft case, you may have to file the report as a “miscellaneous incident” report, but you will still be able to get a record of the complaint.

Next, file a report with the Fair Trade Commission by calling 1-877-IDTHEFT.
Then contact the institution in possession of the fraudulent account to report the fraud and ask them what documentation they need you to submit. Be sure to request fraud dispute forms, and submit these and any other documentation as soon as possible. Demand that the fraudulent account be closed, and ask for documentation that this request was honored.

You should then contact your banks and financial institutions, as well as the three major credit bureaus, to make them aware of the situation so that they may issue a fraud alert.

10. Consider hiring a debt-management company.

If you feel you are in need of more help, or worry that you lack the discipline or knowledge necessary to get started on your own, you may want to consider retaining the services of a debt-management company. The credit counselors can help you set up a debt-management plan that works for you, and can also help you stay on track to meeting your goals.

They can help work out the details of consolidating and liquidating your debts. You can then just send one bill to the company, and the company will be responsible for payments to the other creditors. These services can also help you get into a hardship program; these programs are not available to the general public.

Be sure to thoroughly investigate the companies you are considering to make sure they are legitimate and can offer you the services you need. Check their listing with the Better Business Bureau, as well as some of the numerous consumer report and complaint sites. Be sure to read the fine print, save all documentation and correspondence, and keep detailed records.

Improving your credit score and eliminating debt can be an important step to a higher quality of life and to providing peace of mind. Many of these steps require discipline, dedication, and a desire to acquire the knowledge necessary to manage your money properly in the midst of complex financial times. When you are choosing how to spend your money, remember that if you invest first in yourself by building such character traits as self-discipline and perseverance, your financial future will be on solid ground.

Posted 11:22 AM | Permalink | Comments (0)

Economic growth or contraction plays a critical role in the trends of the market place general. As defined by Investopedia.com, Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.

Monitoring, or keeping our finger on the pulse of the market, can play a very important role in the trading decisions we make and in the strategies that we may choose to implement. In this time of increased uncertainty and economic downturn, it becomes more critical than ever to have our ear to the ground, to know what is happening, and moreover, why it is happening.

Under the newly-elected administration, government policy and implementations appear to change nearly by the moment. If we are alerted to these changes, it will potentially allow us to take advantage of the various legislation and mandates. It is important for us to know that our economy is growing, and it is equally important for us to understand where the growth will be coming from. Will new legislation allow for growth in the private sector, or in the public sector? Will it promote corporate growth, or corporate contraction?

Among other things, many believe that sustained economic growth and stimulus must be ascertained through the promotion of private investment, lower corporate tax rates, and smaller capital gains taxes. Others come from a standpoint of larger social programs, infrastructure buildouts, and bigger government programs as a bottom-up approach to help stimulate the economy.

Other matters that might concern us are an increasingly aging population and whether those types of demographics will contribute to an economic demise. Some of those concerns include health benefits (Medicare and Medicaid), social security, and housing.

We can expand the health benefits issue beyond the elderly and out to the general population. A socialized medicine program is now being seriously considered, which has the potential to cause an expansive burden on the taxpayer and could contribute to the continued diminishing of economic growth. Some would say that seeing all citizens possess health coverage would be worth the cost to the American taxpayer.

Will we have social security? This has been a monster topic, hotly debated, for decades now, yet nobody has really offered up any viable solutions. What will be the costs if social security went belly-up? What would be the costs if it were sustained?

Housing! I think that it is safe to say that this issue has been front-and-center throughout 2008 and on into 2009. We are definitely in uncharted territory, with a failing housing market and foreclosure rate the likes of which we have never before seen. There has been a precedent set through the establishment of government programs that will allow the refinance of mortgages at new terms, or to have bankruptcy judges determine if, not only interest on loans should be modified, but additionally, whether or not the principle of the loan should be modified. Agree or disagree?

Bailouts, moral hazard, Ponzi schemes, Congressional tax evasion, undocumented workers—somebody stop me! Whether you are for or against any of the aforementioned and inclined to believe that Program A or Program B is either the best thing since sliced bread, or the worst idea since the first person who considered careening over Niagara Falls in a barrel, we cannot let our personal views cloud what is real; we cannot allow our ideals to affect our investment decisions. This is where the consistent monitoring of economic reports and the economic calendar come into play.

There are a series of economic reports that are advertised weekly for scrutiny by such market participants such as the United States government, the Federal Reserve, institutional investors, investment banks, hedge funds, mutual funds, pension funds, analysts, floor traders, professional traders and the increasingly knowledgeable retail investor. These reports have the potential to be a forward look into the future, and make projections as to the robustness, or lack thereof, of the economy. These are the type of reports that are followed by the bigger market participants, allowing them to evaluate where they believe the economy may be headed. They are generally not looking to tomorrow’s market or to next week’s market, but are rather making their investment decisions based upon where they believe the market will be six to nine months down the road.

This gives us great reason to be following in their footsteps, achieving realizations of what is happening in the economy to help us make our investment decisions. Like it or not, the institutions are the stock market. We need to be sharp and nimble to compete in a very unforgiving and volatile investment environment. Therefore, we need to be in the ballpark ready to play ball and compete for the championship.

So, what is the mechanism and resource for access to these reports? It is the economic calendar. The economic calendar allows us the same transparency into the market afforded the big boys and girls. We can follow the results of the economic news events via this calendar day-to-day, week-to-week and month-to-month. The types of economic reports that we’ll find on this calendar are various inflationary reports, economic growth reports, energy reports, and employment reports, among many other results. They can be such a benefit to us as traders/investors, since they allow us to make a determination as to where we believe the economy is headed and which sectors of the markets will be most positively or adversely affected by their results. In this manner, we can select investment candidates by investigating those sectors of the markets and finding securities within those sectors. We can then watch that list for the right opportunity to enter a position.

Economic reports can be a vital and critical part of our investment decisions and knowledge base. An awareness of market and economic conditions can not only potentially enhance the way that we invest, but moreover, can enhance our lives by allowing us a deeper understanding as to why things are happening. Through that process, it has the ability to grant us an opportunity for more educated and valued decision making in many aspects of our lives. Whether it translates to mortgages, interest rates, inflation, deflation—a greater understanding of the economy through the study of economic reports will help us to position ourselves more effectively in all investment decisions.

We will better understand where we are headed as a nation and what those implications mean to us as individuals when we make the decision to become more informed. Knowing the choices available to us and possessing an in-depth understanding of these options makes us better-prepared to meet the challenges ahead.

Posted 10:54 AM | Permalink | Comments (0)

Do you ever wonder what your walls would say if they could talk? What secrets would they share? Well, walls can talk…in a way. Whether the property you are seeking to acquire is going to be your primary residence or an investment property, you must do everything you can to get those walls to come clean with their secrets.

An insurance company would not underwrite a life or medical policy without having the prospective policyholder answer numerous questions and possibly take a physical examination. A title company would not issue a title insurance policy on a property without checking chain of title.
So why should you, the prospective property buyer, not subscribe to the same manner of thinking?

Investors often buy properties in “as-is” condition. While there is certainly nothing wrong with that practice, less experienced investors often forget that “as-is” is not the same as “sight-unseen.” I buy property as-is on a regular basis, but I certainly do due diligence. I make sure I know what I am getting myself into and what issues need to be addressed before I spend the money.

So how can you get those walls to tell their secrets?

A few of the more popular methods are:
• Home inspection
• Insurance report
• Seller’s disclosure

Home Inspection
Home inspections are one of the most popular and thorough ways to examine a property. There are several people who may inspect a home:
• Professional home inspectors
• Contractors
• You, the prospective buyer

Professional Home Inspectors
In the residential real estate industry, professional home inspectors are most commonly used for property inspection. Many companies provide this service, from small, mom-and-pop operations to national franchises. These companies show up at your potential purchase prior to closing, bringing with them ladders, flashlights, electrical testing equipment, and many other tools and resources to help them evaluate the property. They take a look at everything, from the basement and foundation to the roofing material.

A typical home inspection should take anywhere from three hours to a full day, and should cost anywhere from $300 to $750, depending on the size of the house and scope of the inspection. At the conclusion of the process, the inspector will produce a rather large binder containing information about your prospective purchase and listing any issues or potential issues with the property.

As with the hiring of any contractor, you should do your due diligence. The following are just a few things to consider when hiring a home inspector:
• The inspector’s credentials and experience
• The inspector’s licenses
• Their references
• Their membership and status with the Better Business Bureau

When choosing a home inspector, I recommend that you find your own. If you work with a realtor who likes a particular inspector, and you are comfortable with that, then okay, but sometimes the seller’s realtor or the sellers themselves will recommend a home inspector. I consider it bad practice to take the recommendations of the seller, simply due to the conflict of interest. The sellers and their agent may have the best intentions in the world, but it is up to you to look out for your own best interests.

Contractors
If you have been an investor or rental property owner for a while, you have probably developed relationships with contractors who are very good at what they do and who are a wealth of information. These people can be a great resource when you need an inspection conducted.
You will likely be able to establish a better working relationship with a contractor than with a professional home inspector. This means that the contractor will probably have your interest at heart a little more than the professional home inspector would. While both the professional home inspector and the contractor are likely to do a thorough job, a relationship with a professional home inspector is more likely to be one that is maintained at arm’s length.

A contractor may or may not be less expensive than a professional home inspector, and will probably not give you the results of his inspection in a way that is quite as organized or aesthetically pleasing as the binder you might receive from a professional home inspector, but remember, it’s not how slick and glossy the format of the report is, but the quality and accuracy of the information in the report that it is important.

You, the Buyer
If you are a well-seasoned investor, rehabber, or contractor, then you are probably more than capable of doing your own home inspections. I know several investors who do them—successfully—every time. So consider doing your own inspections, but only if you are an experienced investor.

As you become more and more successful, there may be a point at which you wonder whether or not you really want to continue doing your own inspections. Is it not a better use of your time to be out putting deals together and have someone else do the inspection? Until then, however, you may very well be able to save yourself that inspection cost.

Insurance Reports
When we buy cars, one of the first things most of us ask for is a CARFAX® report. We want to know if there have been any significant repairs or damage done to the vehicle. As long as an insurance claim was filed, the information will show up on the CARFAX® report. However, if there wasn’t a claim filed, it probably won’t show up on the report.

In the real estate business, there are several services offered to buyers that are comparable to the service offered to automobile buyers by CARFAX®. Two of these are Property Fax (www.uspropertyfax.com) and First American C.L.U.E.® Report (www.fanhd.com). They provide information concerning any insurance claims filed on the home in the past, whether the claims were paid or not. As with the CARFAX® report, though, if no claim was filed, nothing will show up on the report. These sites are not free, but the cost is minimal when compared to the money the information could potentially save you.

While these reports are helpful, but I don’t feel they are nearly thorough enough to be solely relied upon to make a decision to close or not. I see this information being utilized in conjunction with the physical inspection performed by the professional home inspector, contractor, or the buyer. I have found my insurance broker to be helpful in this area as well. Before you close, you should have or will need to have a home-owner or landlord policy in place. If numerous claims have been filed on the property in the past, regardless of the person who filed them, you may not be able to get coverage for the property. Check with your agent about this.

Seller’s Disclosure Report (SDR)
The seller’s disclosure report (SDR) is last on my list of methods of discerning the secrets of a property. In my opinion, they are not often very informative for a number of reasons. Many sellers simply don’t know the answers to many of the questions and, as a result, the report is full of “UNK” (unknown) or “D/K” (don’t know). In the rare instances in which the seller does produce a complete SDR, the investor must verify everything. Essentially, one can use the SDR to confirm information gathered from the physical inspection, but that is largely where its usefulness stops. In fact, as a buyer, I no longer even ask the seller for an SDR report.

Once you have obtained all information possible about the condition of the property you are considering purchasing, you will be in a better position to make an informed decision. You will know whether the property is worth the asking price, and, if not, you will be knowledgeable enough to renegotiate a more reasonable purchase price.

So remember, through the home inspection, the insurance report, and occasionally, the seller’s disclosure, those walls can talk, and the secrets they tell you will make you a more informed buyer.

Posted 11:11 AM | Permalink | Comments (0)

Carving out your niche as an investor in the area of manufactured homes may not sound exciting, but the potential for cash profits to be made on this type of housing is nothing to whine about. Once called “trailers” or “mobile homes,” Warren Buffet has been credited with calling them “little tin boxes that spit cash.” I believe that it is safe to assume that if Warren Buffet thinks something is a valid investment option, you and I should look into it.

The typical returns on investment that I have seen manufactured homes produce are far greater than most investors see with typical site-built homes. The reason for this is really quite simple. Site-built homes are generally larger, therefore requiring more of an investment into fix them up, as well as more maintenance throughout the years. Also, the median price of a site-built home is three times that of a manufactured home; however, the average rental rate for a three bedroom manufactured home is only slightly less than that of a starter home in the same area! While many people prefer a site-built home, there are also many people who want or need to buy or rent a manufactured home.

You can still use many of the same strategies with manufactured homes that you use with site-built homes, making only slight changes in the paperwork. There are a few characteristics of manufactured homes (and their buyers) that make them even more exciting. First, as we mentioned previously, their low price is a serious advantage. Did you know that you can often buy and clean up a manufactured home (usually 15 years old or older, though not always) for $5,000 or under? One reason this is possible is that the purchase of a manufactured home usually does not include the purchase of any land; the land is typically what appreciates on any home, not the home itself. Without any land increasing the value, the manufactured home continues to decrease in value, and at a faster rate than a site-built home would, since they generally are not as well-built.

Additionally, you have quite an advantage when fixing up a manufactured home: its size. The typical manufactured home is a three-bedroom home, all crammed into 1,000-1,200 square feet of space. This is great news for an investor, since the small amounts of carpet, paint, and other home improvement products are less expensive to purchase, as is the labor associated with them.

These are the two primary reasons why I could buy a manufactured home for a couple thousand dollars, invest a couple more in cleaning it up, and then re-sell it. However, why would you want to re-sell a home that is now worth only $10-15,000? Wouldn’t it be a much better option to rent out the home?

There are a couple of issues that come up when renting out a manufactured home. The first is that many manufactured home communities across the country are no longer allowing landlords to buy homes and rent them, due to absentee landlords and problem tenants. Also, selling a manufactured home requires much less effort than renting it, considering the ongoing responsibilities of management. However, the issue of compound interest must be considered. Hopefully, you have worked through the numbers on the savings end of things to see how much you can earn if you invested in stocks or mutual funds, but you may not understand how the same principals would that apply to manufactured homes. I think that the easiest way to explain it is to work through an example which illustrates the ROI (return on investment).

Let’s say you find a home for sale for $1,700. Believe me, finding such a deal is not as hard as one might think. After your purchase the home, you have to re-paint it, re-carpet it, and do some general maintenance and clean-up to make it a clean, safe home. Spending $3,000 is not hard to do, but if you are carefully plan and stick to a budget, you will be surprised how easy it is to fix up a manufactured home for that price. Now that you have invested nearly $5,000 in the home, you will mark the home up to $12-16,000 and work to find a buyer. Occasionally, it is possible to find a buyer who may want to buy this type of home for a lower price in exchange for paying in cash. For example, let’s say that on this deal, you are approached by a cash buyer offering $10,000. This deal is appealing, since such a deal would offer a 100% ROI in a very small amount of time and with very little at risk. However, an even better arrangement would be to offer financing to a buyer for a slightly higher asking price, let’s say $14,000. In order to make this a more convenient offer for your buyer, you can offer to accept low monthly payments of $311.42 over 60 months, rather than requiring the $14,000 upfront. Now you have an owner in the home, rather than a tenant, meaning that he or she is solely responsible for caring for the home. Hopefully your buyers made a down payment that was close to the $5,000 you put into the home, but even without such a down payment, if you multiply their payments out ($311.42 X 60), you would see a total income of $18,685.20 for this one property! That is a gain of $13,685.20 (over the course of 5 years). Now you are at 273% ROI! That is a nice ROI.

Even though the yearly gain may be higher if you can sell all the manufactured homes you buy for cash a month or two after you buy them, this deal is a lot more common and gives you cash flow, which gives a peace of mind all its own. And since the homes are sold, the management is minimal. I hope you now see manufactured homes in a new light. Happy investing!

Posted 11:00 AM | Permalink | Comments (0)

“Bulls make money, bears make money, pigs get slaughtered!”

This market adage has become increasingly popular in recent years, as it’s been a favorite mantra used by a famous—and to some, infamous—market pundit, who often bellows, “Bulls make money, bears make money, pigs get slaughtered!” after which, he hammers a button that emits squeals like a hog’s. Entertainment aside, there is value in understanding why pigs get slaughtered, and in learning how to avoid becoming someone else’s side of bacon.

It’s crucial to understand that the participants of the financial markets aren’t objective, emotionless robots, but human beings. Thus, the subjectivity of people’s perceptions, beliefs, and emotions often drive the market, rather than the objectivity of reality and the fundamentals. We could purport that there is often times a gap between what the stock market should be doing, based on reality and the fundamentals, and what the stock market actually is doing. Therefore, truly understanding the market isn’t as simple as learning economics and fundamental analysis; rather, it requires a solid understanding of human psychology and how it’s intertwined with the financial markets.

There is a spectrum of emotions that we as human beings can experience, such as happiness, sadness, panic, regret, embarrassment, etc. However, when dealing with money, greed and fear tend to be the most powerful emotions influencing one’s decisions. Unfortunately, these emotions wreak havoc on one’s trading performance. We are all in a constant battle, striving to overcome these emotions and eliminate their ability to lose our money. One of the most common phrases used to help discourage greedy behavior is, “Pigs get slaughtered.” This helps to convey the notion that greed is your enemy, not your ally. Being greedy would, perhaps, be beneficial if the market moved straight up, as staying in longer would always result in more profits. However, the unfortunate reality is that the market moves in swings and cycles, often causing your unrealized profits to turn into realized losses. The 2007 market top and subsequent bear market serve as a prime example of what can happen when greed controls one’s actions.

Consider those who bought in 2002 or 2003 and participated in the bull market run from 2003 to 2007. The S&P 500 nearly doubled within that 4 ½-year time period, moving from sub 800 to over 1550. Now, what do you think is the prudent action to take in the event of a colossal gain in any position? While the greed of the moment may be enticing you to kick back, relax, and watch the money flow into the coffers, the disciplined investor would be tightening up stops, placing hedges to lock in gains, or taking partial profits. Although the prime time to take profits on long-term holdings was the 2007 market top, there have been subsequent opportunities to exit bullish positions. These bear market rallies of 10, 15, and sometimes more than 20 percent, have provided an opportunity for savvy traders to exit bullish positions at higher prices.

Since the beginning of 2008, the S&P 500 has experienced seven different bear market rallies of 10 percent or more.

Although each has varied in length and magnitude, the sad conclusion to each of these bullish forays is the exact same: a failure of the short-term uptrend and subsequent resumption of the bear market. The same greed that prevented investors from taking profits at the peak of the market is the same little devil that has probably prevented them from exiting their bullish trades on these bear market rallies. In other words, rather than unloading their bullish positions once the short-term uptrend has exhausted itself, many investors have allowed their greed and the hope of even greater profits to cause them to remain in their positions too long, thus missing these opportunities. Then, as the bear market rolls forward, these investors learn firsthand what “pigs get slaughtered” is all about!

Shun the Slaughter House:

There are techniques that will aid in controlling greed and curtailing your inner piggyness…oink, oink!

Develop a Target: Lacking a trading plan may just be the cardinal sin when it comes to trading. In the absence of a trading plan, you are bound to be driven by emotions, tossed to and fro by whatever your feelings of the moment may be. If your approach is one of shooting from the hip, then you’re never going to experience consistent results. Ironically, the only consistent thing you’ll probably experience is inconsistency. Building a trading plan consists of determining where to enter a trade and where to exit. You should establish a plan A for how to react if the stock rises in value, and a plan B for how to react if the stock declines in value. We can decrease the effects of greed merely by establishing pre-set targets to serve as benchmarks for when to take action to lock in profits. Setting a target will depend on a myriad of variables, such as your style of trading, strategy, and personal preference. There isn’t one right method in establishing targets; the key is to make sure it’s realistic and fits your comfort level.

Scale Out: A dilemma that always presents itself when you have a winning trade is that of deciding when to take profits. When sitting on a profitable trade, fear and greed will begin to create some inner turmoil. Picture yourself in front of your computer with two little demons, Fear and Greed, perched on either shoulder, ranting in both your ears in an effort to incite you to action. While Fear is urging you to exit the trade to lock in the gain before you lose it, Greed is whispering promises of windfall profits and goading you to stay in the trade. Rather than fully satisfying one emotion or the other by staying all in or getting all out, we could compromise and sell a portion of our position (such as half), thus partially appeasing Fear as well as Greed.

Scaling out can be considered a win-win technique. If, after selling half, the stock moves adversely, resulting in giving back some of your gains, you will be glad that at least you exited part of your position with profits. On the other hand, if the stock continues to rally after scaling out, you will be relieved that you still have a portion of your position, enabling you to continue to profit.

Posted 12:13 PM | Permalink | Comments (0)

So you want to become a real estate investor. It probably sounds exciting, exotic, and powerful. You dream of becoming the next Donald Trump. Visions of luxury homes, fast cars, and long vacations on sun-drenched, white, sandy beaches fill your mind. Just think of all the grand parties you will be invited to, where you will rub elbows with the rich, famous, powerful, and beautiful. You will be envied, respected, and admired by all--now wait just a minute! Come back down to earth!

Becoming a real estate investor can certainly be fun and exciting, but you must realize one important thing: doing so definitely does not mean you will be respected and held in high esteem in your community. In fact, just the opposite may be true. Recent polls have shown real estate investors are trusted only slightly more than used car salesmen.

Ouch, that hurts!

While you do want everyone to know you are in the real estate investing business and want to buy properties, simply approaching your business in this way will do nothing to give you the reputation you aspire to. In order to earn the respect of the community (and your family and friends), you need to demonstrate that you are a problem solver. So take off your real estate investor hat and put on your problem-solver hat.

Becoming a problem solver is a process, not an event, so be patient and work hard. Here are suggestions that will help you to be branded as the real estate problem solver in your community:

• Get educated. Take classes online, read books, go to seminars, and take advantage of as many live classes as your budget allows. Your clients will look to you as an expert if you know a little bit more than they do about real estate. After taking classes with the Wealth Intelligence Academy, you will know more about real estate than most people, including many of the real estate professionals in your area. You should also engage the valuable services of a Wealth Intelligence Academy Mentor. The more information and guidance you have at your finger tips, the better you will be at solving problems.

• Immediately put your education into action. You will always learn more by doing than by simply studying. You may not be the ultimate problem solver to start with, but you will mature into one quickly if you put into action everything that you learn in your classes.

• Think of yourself as an expert problem solver, and soon, you will be. Your perception of yourself drastically affects the perception that others have of you, and building the confidence of others is virtually impossible unless you first have confidence in yourself.

• Position yourself as the local real estate problem solver. How do you do this? By teaching and becoming an expert. Be an information source without an agenda. Always give information that may be useful without pitching them on the fact that you are looking for homes to buy. In this way, people will learn to trust you. Once people trust you, they will start coming to you to solve their real estate problems and sending their friends to you for help. When you are dealing with potential clients for the first time, listen carefully to their stories. Ask questions until you have a complete understanding of their situations. Building trust is critical. As you have heard, people do business with people they like and trust.

• Keep your name in front of your target audience. For example, once you have selected a specific area to work in (sometimes called your “farm” area), send out a newsletter every six to eight weeks. The newsletter should contain useful articles on the current state of the real estate market, tips to make a home more likely to sell quickly and at the desired price, and tips to get financing. Prevail upon local experts, such as real estate agents, mortgage brokers, accountants, and attorneys to write articles and help pay for the mailing costs of your newsletter. This publication will build credibility for them as well, but will position you as the expert. Also, take time to add educational information to your flyers. Short articles on the local real estate market will get people’s attention.

The main goal is to educate people in as many ways as you can. If you provide valuable information, people will keep coming back for more; they will do business with you, or will refer someone to you who will.

Here’s a list of traditional ways to get your information in front of as many people as possible:

• Letters - Make sure your letter contains valuable content and mail out new letters every couple of months.
• Postcards – This option is a little less costly than sending out letters.
• Flyers – These can be hand delivered by you, your kids, or others for a minimal expense.
• Newsletters – Follow the suggestions detailed above.
• Press releases – Create a press release for your business and submit it to our local news outlet. Newspapers are always looking for solid content, and will run a well-written press release at no cost to you. Be sure to utilize this opportunity to build your credibility. Also mention that you send out a newsletter, and provide the necessary contact information for requesting this publication.
• Educational seminars – Put on a free educational seminar on how to sell your home in this current down market, or on some other interesting real estate topic. Again, serving as an educator to others builds your credibility and gets your name in front of more people.
• Offer to speak at local civic clubs and groups. These groups are always looking for people to speak on interesting topics.
• Join your local real estate investors club, and offer to speak on a topic such as wholesaling or foreclosures. Again, you will begin to brand yourself as the local expert, and other investors will start to come to you with deals and ask for your help.
• Offer to speak at some of your local real estate company meetings. Be sure to concentrate on teaching/educating the agents on topics that they don’t teach in real estate school. Now you will have the real estate agents bringing their problems to you to solve. Eventually, you may even get approval from the real estate board to teach a continuing education class for real estate agents. It would not be such a bad deal to get paid while getting your name in front of a bunch of agents!
• All of your correspondences should encourage people to call a 24/7, toll free phone number that provides additional information. Have a short, prerecorded message that gives interesting real estate information and offers a free newsletter on relevant real estate topics. Ask people to leave a phone number, e-mail address, and an optional physical address to gain access to the report. This can be handled by an automated service, and will create a list of future clients.
• Develop a website that provides further information and valuable content.

As an expert problem solver, you will have more business than you can handle.
Get educated, and immediately put that education into action. Teach others and help solve their problems. Following this advice will help you get that much closer to making all of those dreams come true!

Posted 12:33 PM | Permalink | Comments (0)

In today’s world of real estate investing, there are many different ways to structure deals and make money. One can invest in tax liens and deeds, foreclosures, rental properties, commercial properties, raw land for development—the list goes on. For most investors, the starting point of the investing experience is the basic rehab project: buy a property at a discount, rehab the property, and sell it for a quick profit. For some investors, their first project may be a wholesale deal where the investor contracts to buy a property at a discount and then assigns the right to buy the property to a rehabber. The investor makes a quick profit from an assignment fee, and the rehabber makes his money by buying the property at a discount, rehabbing the property, and selling it for a profit.

In the past, the common advice you would hear from most real estate experts was to concentrate on finding “motivated sellers,” and success would follow. This is still wise advice. Without a motivated seller, there is no deal. However, today’s real estate market has changed dramatically in the past few years. In most parts of the country it is a “buyer’s market,” meaning that there are many more homes for sale than there are qualified buyers. With the collapse of the “easy money” sub-prime mortgage market, and the tightening of loan requirements, there are fewer and fewer buyers who can qualify for real estate loans resulting in many homes sitting on the market for months and months before being sold. And the problem is made even worse by the glut of bank-owned homes (REOs) flooding the market.

According to numerous real estate investors from around the country, the number one problem in today’s real estate market is not finding motivated sellers, but finding motivated (and qualified) buyers. A lot of investors are not taking advantage of the current buying opportunity because they are afraid they will be stuck with a property they can’t sell in a reasonable amount of time. Their fear is based on truth. No matter how good of a deal you get on a property you plan to sell, a long holding/selling period can eat away most or all of your profit.

You will hear some people say, “Well, if you can’t sell the property, just rent it.” This may work sometimes, but is definitely not a cure-all solution. Properties that can make a great profit from a resale, very well may be negative cash-flow rental properties. Unless you have pretty deep pockets, you should stay far away from negative cash flow rental properties; they can eat you alive!!!

However, there are many investors currently buying properties as fast as they can in today’s buyer’s market and they have little fear of not being able to sell. Why? Because they have taken time to develop a buyers list.

If you have a list of ready and willing buyers, you can make offers and contract to buy properties without the fear of not being able to sell the property. Many times, you may have the property “pre-sold” even before you finalize the purchase. Having a good buyers list gives you the power to take advantage of today’s fantastic buying market.

So how do you create a buyers list? In the long run you will create two different buyers lists: a wholesale buyers list (other investors and rehabbers) and a retail buyers list. The topic of this article is building a retail buyers list. A retail buyer is basically defined as someone who is going to live in the property.

There are many creative ways to build a buyers list, so network with other investors at your Wealth Intelligence Academy (WIA) training classes and your local real estate investment clubs. See what others are doing to build their list. Here are a few suggestions:

1. If you have a property for sale and people are calling on your ads or your signs, be sure to get their names and contact information, even if they are not interested in the home you are advertising. Let them know that you will have other homes in the near future and get a description of what type of home they are looking for. Find out as a minimum:

* What area(s) they are interested in
* Their desired price range
* Desired size of home, number of beds, baths, etc.
* How soon they are looking to buy
* Available down payment
* Are they pre-qualified with a lender
* Indication of their credit
* Do they have a contract with a real estate agent (buyer’s agent)

Create a database to store this information so you can retrieve it easily as you get homes under contract that match your potential buyer’s needs. Your coach can help you in setting up this database.

2. When the home you are advertising sells, don’t cancel the ad right away, but let the ad keep running for several more weeks and keep capturing the names and data of potential buyers. When they call on the ad, just explain that the home is sold, but that you will have more homes in the near future and ask them what they are looking for.

3. If you don’t have a property to sell yet, you could run a blind ad and still capture the names and data of people who call. Make it clear that you are not acting as an agent to help these people find a property, but that you will simply notify them when you have another property ready to sell.

4. You can network with other real estate investors through your local Real Estate Investment Association (REIA) and actually share other investor’s buyers lists. Let other investors know when you have a property for sale and even if they are not interested in buying it themselves, they may have someone on their list who would be interested in your property. You can return the favor when they have a property to sell by helping them find a buyer from your list.

5. In today’s real estate market, many banks are using auctions to sell their ever increasing number of REOs. The auction companies, hired by the banks, spend thousands of dollars attracting buyers to these auctions. You can use these auctions to build your buyers list. Your strategy is to find out when the next auction is being held in your area. Your coach can direct you to the websites of auction companies in your area. The night before the auction or the day of the auction, go to the area where the auction is being held and post your signs everywhere along the main roads leading to the auction site. These signs need to be made to attract attention and need to say something like “Desperate Seller” or “Handyman Special.” Your headline is critical. The signs will attract buyers because the language indicates you are motivated. Your signs should be up before the auction starts and should be up when it ends so you can get the traffic going to and from the auction. Again, when you get calls on these signs, capture the potential buyer’s information and build your buyers list.

Note – check with your local city for the signage regulations. In most cities, even with strict signage laws, signs put up and taken down the same day will cause no problem.

Note – you can hire someone to place and remove these signs for you. A wise investor, however, will drive the “sign route” before the event to make sure the signs were posted properly and on time.

6. You can also leverage local home shows and other events that attract potential home buyers. Strategically place your signs to take advantage of traffic that is generated from other people’s advertising dollars.

7. In today’s real estate market, more and more people are going to the Internet to find homes to buy. You can spend a lot of money setting up a website, and it will be money well spent in the long run. But many new investors don’t have a large advertising budget. A great alterative to a potentially expensive website is a blog. Property blogs are popping up all over the Internet. Blog sites can be a very effective way to build your buyers list and get people to view your properties. Two of the most popular blog sites are WordPress and Blogger. With both sites, you have choices of templates that will get your site up and running in no time, at no expense. Your visitors can post comments and if you provide solid, interactive content with regular postings, visitors will be more inclined to come back to your blog often. Your signs and advertising can direct people to your blog.

8. You can create a video or virtual tour of a property you have for sale and post it on your blog or website. This will attract more visitors and thus build your buyers list. Video tours give you the ability to not only sell the actual home, but also allow you to sell the city, the neighborhood, the schools, etc. It’s a 24/7 open house! Creating videos can be fun, but don’t forget to sell yourself. Remember, people do business with people they like and trust.

9. Another way to get lots of calls on your ads and add lots of names to your buyers list is to offer seller financing. There are many potential buyers in today’s market who have good income, have a substantial down payment, but who have less than perfect credit. The banks and lenders are getting more selective every day and are continually raising the loan-qualification bar. If you offer seller financing, you will open the door to hundreds of buyers who can’t get reasonable loans from the banks. Add these names to your buyers list.

10. Standard advertising, such as advertising on-air or in newspapers, costs a lot of money. But with more and more people going to the Internet to find properties, why not advertise your properties on the many free Internet posting sites. Free posting sites are all over the Internet and they are generating great results. Maybe there is such a thing as a free lunch after all. Some of the most popular sites are:

• CraigsList.org (can post descriptions and pictures).
• Postlets.com (allows you to submit an ad for free and then distributes the ad to numerous other free posting sites). Is that cool or what!
• Zillow.com (a site that has primarily been used to find comparable values, but is now expanding into other areas of real estate).
• Base.google.com (site is in beta version, but is very effective).

There are many other free sites and new ones are showing up everyday.

There are many buyers out there right now…you just need to put forth the effort to find them. Start to create your buyers list, today! Your buyers list will grow every week. You can then fearlessly buy homes in today’s buyer’s market, knowing you have many hungry buyers just waiting to gobble up your properties.

Posted 11:01 AM | Permalink | Comments (0)