I thought I’d provide a handy list of things you don’t want to do on your website, from a Search Engine Optimization standpoint. Each of these mistakes has the potential to kill your rankings on Google™ and the other search engines, leaving your site dead in the water. Some of them will interfere with the ability of its search engine spider, or Internet scanning robot, to see all the important content scattered across the pages of your corporate website. Others will earn your website a place on the blacklist for using a technique intended to deceive the search engine. Also included are many of the mistakes which are commonly made by a webmaster who has not yet learned about search engine optimization (SEO).

By Mich Christensen

Keywords
1. Failure to have a keyword strategy—Your business should complete a detailed keyword analysis to determine a focused keywords list.

2. Use of the wrong keywords—It is a common mistake to focus on the keywords that bring less business revenue.
3. Targeting overly general keywords—It is a waste of time to target for “real estate” or similarly general terms since the chance of ranking for that simple phrase is remote.
4. Satisfaction with the company name as the only working keyword—The first thing many website owners do is check to see that their corporate name appears in the search results. This is only the first test; the website should perform well for multiple important keywords.
5. Inconsistent use of your keywords—For each page of your site, you will choose a keyword string for that page of up to four words. That exact string must appear in the title, headings, and body text of that page to reinforce that particular keyword. You cannot have apples in the title, oranges in the heading, and bananas in the body text.
6. Lack of customer focus—Try to find the actual words your customers are using to type in the search queries instead of relying on the ones you think they should be using.
Titles
7. No titles—If your main page has just “home” for a title, you’ve made this mistake.
8. Failure to have your chosen keywords in the title tag—This is the most important place to include your keywords, and, therefore, neglecting to do so is one of the best ways to shoot yourself in the foot.
9. Including the keyword too late in the title—The sweet spot is at the front of the title. From an SEO standpoint, your corporate name is less important than your page’s keyword, so put the name in the middle or at the end.
10. Having the same title on multiple pages—This makes Google think every page of your site is the same old stuff. You must reflect the theme of each page in its title.
11. Stuffing the title tag with too many repetitions of your keyword—There is a limit to what Google considers a natural occurrence of the keyword. If there are too many instances of the same keyword in the title, you run the risk of raising a red flag.
12. Accidentally leaving a double space in the title—This simple mistake can cost you dearly. Some search engines have been known to choke on double spaces in the title, leaving you with no listing.
Headings
13. Lack of proper heading tags in the body text—A proper heading is more than larger bold text above a paragraph. Your webmaster should make sure these headings are proper headings with the tags

and

before and after the text in the heading. This tells the search engine that the text in the heading is significant.
14. Headings that have the wrong keywords, or no keywords at all—The second most important place to have your keyword is in the headings. You can shoot yourself in the other foot by neglecting to include the proper keywords words here.
15. All headings and no body text—Webmasters will try anything, including making the entire page a heading. Keep in mind that Google will look for natural copywriting, and will flag and investigate anything which appears unusual.
Body Text
16. No keywords in the body text area—The body text is the main body of words visible on the page. This is the third most important place to have your keywords.
17. An unnatural number of occurrences of the keyword—Google looks for a natural pattern of text in the body. In most writing, the keyword would appear a couple of times in the first paragraph, and perhaps again near the end. The same keyword in every sentence would raise a red flag that you might be an SEO expert trying to cheat the system.
18. Including too much body text—It is possible to have too much text on one page. This dilutes the effectiveness of your keywords.
19. Use of someone else’s content—Borrowing content from another source on the Internet is risky and, at worst, can flag your site for the duplicate penalty.
20. Failure to add new content—If the content of your website never changes, it will gradually slip lower in the rankings.
Links
21. Not including links from other important websites to yours——In
order to achieve top rankings, acquiring good incoming links from
other websites to yours is a must.
22. Absence of links from other websites in your keyword niche—Google knows whether the website linking to yours has any remote relation to your keyword niche. If your site is about trucks, a link from a car site would be desirable, whereas a link from a site selling strawberries would not be.
23. Back-link spamming—This is the practice of creating numerous links to your site from inappropriate locations, including forums, blogs, and guestbooks – the subject matter of which is not related to your site.
24. Participation in link farms—Your site will be considered to be in a bad neighborhood if you participate in a link farm, which offers multitudes of incoming links for your site when you post a page of the link farm’s outgoing links.
25. Having no site map—The site map is the fastest way to illustrate all your links to both the human visitor and the search engine spider. Without one, navigating or spidering the site can be limited to the effectiveness of the linking structure between pages of your website.
26. Including no keywords in the URL—The URL is the entire web address of the page. It is desirable to include the keyword either in the domain name, the folder names, or the actual filename. Examples: www.mybusiness.com/folder-name/keyword.htm or www. mybusiness.com/keyword/filename.htm.
27. Lack of inclusion in directory listings—Inclusion in large directories, such as the Open Directory Project at www.dmoz.org, is very desirable.
28. Having no anchor text— Also called link text, this is a link to a
page of your website which appears on one of your pages or the pages
of another website, which uses the keyword phrase as the actual link.
29. Use of paid links—Google can detect and penalize those utilizing any system to trick the search engines though the use of paid links intended to increase rankings.
30. Including no outgoing links—You should include outgoing links to other quality websites.
Meta Tags
31. Ignoring the description meta tag—This is the fourth most important place to have your keywords.
32. Keyword-stuffing in the description meta tag—Be careful not to include the keyword too many times; it should read naturally.
33. Placing your chosen keywords only at the end of the description and keyword tags—The sweet spot for your most important keywords is at the front of these tags.
34. Ignoring the keyword meta tag—This is a great place to include all the important keywords of your page. The search engines give it some limited weight when making their calculations.
35. Keyword-stuffing in the keywords meta tag—Keep any repetitions of the keyword separated by other words, and try to keep a balance of various words versus your keyword.
36. Including false keywords—The reason the keyword tag carries less weight in the search engine calculation these days is that everyone made a habit of stretching the truth here. Try to use only the words actually appearing on the page and you may get a boost in your rankings.
Tricks
37. Hidden text – Using white text on white background in an attempt to include more keywords on the page that humans won’t see. This long outdated trick will only get you blacklisted.
38. Cloaking – This technique was used by webmasters to trick the search engine into seeing an alternate version of the page with the intention of earning higher rankings If detected by the search engine algorithm, this intentionally deceptive trick brings a severe penalty, since the search engine spider sees something entirely different from what a human sees.
Unreadable
39. Expecting the search engine to read flash animation—Most search engines haven’t yet learned how to scan and index flash content, which is invisible to the indexing spider. An html alternative that the search engine can read should be provided.
40. Use of a splash page—If you have only a large flash graphic on the first page of your site, Google cannot see it. You now have a blank page for your index page, and the automatic redirect that is common for splash pages will give Google a second reason to pass it by. The index page of your site being the most important one, this is a serious mistake for a site seeking high rankings.
41. Entire site in flash – Some high-end sites consist of only one page,
with one huge flash file that gives the appearance of several pages.
Keeping in mind that most search engines cannot read flash, now the
site from their point of view has only one page. This is less than
optimal for rankings, to say the least.
42. Text in images—A search engine spider cannot see anything included in an image. Any fancy image-based headings should be redesigned.
43. No alt attribute tag for images—At the very least, alt tags for images should help the visually impaired to view your site. At its best, it can be an opportunity to include keywords. Use the alt attribute to describe, with keywords, the image content.
44. Javascript menus—Javascript is often unreadable by the spider. This interferes with the basic function of a spider, which needs to follow links to find other pages of your site.
45. Lack of robots.txt and no follow—In some cases, there are pages of your site that shouldn’t be indexed, like your printer friendly pages, which are essentially duplicates of the original page. To avoid the duplicate penalty, use a properly constructed robots.txt file or use no-follow attributes in links to instruct the spider to ignore these pages.
Wasting Time
46. Submitting your web pages to every search engine you can find—Most of the search engines you can submit your site to will only fill your mailbox with spam. No legitimate search engine will require an e-mail address to add your site.
47. Using your unique content on more than one of your websites— If you
have created unique content for your site, that is ideal. You can
quickly ruin all that work by posting that content in more than one
place before Google has a chance to register who posted first.
48. Leaving spelling and grammar errors uncorrected—These can undermine trust between you and your customer. Google has even considered scanning for spelling and grammar mistakes as an indication of a website’s readiness for the business web.
49. No or limited SEO specialist involvement—You will save a lot of advertising dollars if your SEO specialist participates in your website development in the early stages. Many website owners make the mistake of hiring an SEO specialist and then assuming the interaction is over. You’ll get best results by sharing regular updates with your hired professional, and by ensuring that the specialist uses no high-risk techniques.
50. Ignoring the webmaster guidelines published by the search engines—Google™, Yahoo!® and MSN® each have a set of recommendations published for webmasters to follow. Disregard them at your own peril.
Note: Google™, Yahoo!, and MSN® are trademarks owned by third parties not affiliated with the author or publisher.

Posted 10:16 AM | Permalink | Comments (0)

After spending hours of searching for potential deals, looking at houses, crunching numbers, and putting in offers, you finally have an accepted offer. However, your work is far from done! Many people believe that the only thing left to do at this point is to wait for the deal to close and the money to come in. While we all wish that were true, the reality is that once you have the property under contract, the real work begins. Up until this point, the work that you have done has been for free. The work that you are doing now will get you paid.

I knew a Realtor who was putting two to three properties under contract a week, yet had fewer than one closing per month. This was because he expected the deals to close themselves. He finally realized that a signed contract does not guarantee that a deal will close. Once he began to understand the amount of work involved in taking a contract from signature to closing, his income skyrocketed.

The type of follow-up you need to do will depend on your role in the contract. As our first example, let’s take a look at how this process can be used to close a deal on a basic rehab project.

Step 1 – Get the property under contract with the seller.

o Be sure that you have included at least one escape clause which states that the deal is contingent upon something, such as financing, inspection, or cost-bid analysis.

Step 2 – Write your deadlines on a calendar.

• When is your inspection contingency or cost-bid analysis deadline?
• Do you have any other escape clauses? When do they run up?
• Circle the date 24 hours prior to your deadlines. This is the date by which you absolutely must have all of your numbers and financing in place. If you don’t have an approved loan by this date, either cancel your contract or get an extension. You don’t want to be forced to buy a property that won’t work for you, nor do you want to lose your earnest money.

Step 3 – Submit the accepted contract to the title company and to the lender.

• Begin working on your preliminary title report and get your lender to begin working on your loan.
• It is the responsibility of the lender to order the appraisal. In order to approve your loan, they must get the appropriate final or updated documents from you. If your lender has not yet submitted your loan to underwriting, it is important to approach him or her and be direct in asking the reasons for the delay. If the lender continually says that he or she needs just one more thing before your package can be submitted to underwriting, you may want to start looking for a backup lender. This is especially true if you are the seller and the buyer’s lender is stalling.
• Follow up with your lender on a weekly basis.
• If the lender requests something from you, make it your top priority to provide it to them within 24 hours.
• Each time you talk to your lender, confirm the date of your closing.

Step 4 - Order the inspection of the property.

• Make note of any unexpected problems that were discovered in the course of the inspection.
• Determine whether or not it would be a wise decision to continue to negotiate the purchase price. If you are working with a bank, send them a copy of the inspection report and ask that they negotiate further on the price. You never know how motivated the bank is. There is no harm in asking; the worst thing they can do is say no.
• When you are the seller, be sure to follow up on the findings of the inspector. You don’t want to receive any surprises from a buyer.

Step 5 - Start getting bids on the repairs.

• When getting estimates, try to schedule all your rehab people to come to the property either at the same time or in 15-minute increments to minimize the number of trips you have to make to the property.
• Once your offer has been accepted, schedule the repair men to start their work on the property on the day after your anticipated closing date. Once you have closed on the loan, the interest clock is ticking. Arranging ahead of time for work to begin on the property immediately after closing is crucial.
• Don’t do any work on the property prior to becoming its owner unless you are 100% positive you will close on the deal. You do not want to spend money on a property that fate may prevent you from purchasing.
• Remember, you can double-schedule your repair guys as long as they won’t be tripping over one another. For example, it is unlikely that scheduling your roofer, plumber, and gardener to work at the same would present any problem.

Step 6- Follow up with the title company.

• Find out whether or not they have done the PR.
• Be sure there are no judgments or liens that need to be satisfied.
• Make sure that your offer afforded the seller enough of a payoff.
• Confirm the scheduled date and time of the closing.
• Find out when you will be able to actually take possession of the property.

Step 7- Follow up on the appraisal.

• Find out when the appraiser is scheduled to visit your property. You need to ensure that you will have time to inspect the property to determine if it meets your approval prior to time of the appraisal.
• Find out whether or not there are any repairs you are obligated to perform in order to receive the financing.
• Look into whether the amount needed to make the repairs can be put in escrow or if the repairs are required to be completed prior to closing. This is critical when you are the seller.

Step 8 – Go to closing.

• Know how much money you need to bring to the closing table, and in what form you must bring it.
• Take your state-issued picture ID.
• Take copies of all the signed paperwork with you in case there is a problem, and make sure you bring anything else the title company has requested.
• If you do not get your keys at the time of closing, schedule a pickup time prior to leaving the title company.

Step 9 Put up a “For Sale By Owner” (FSBO) sign, install a key box, and begin your marketing campaign.

• The second that the title has been put in your name, start advertising the property. Don’t wait until you have finished rehabbing the property to begin to market it. You cannot afford to lose that valuable time.
• Make use of Craig’s list and other free websites, take out an ad in the paper, put up signs, hire an agent, or use other methods; but begin your marketing campaign as soon as possible.
• In front of the house, post fliers that tell potential buyers what repairs you are going to make. List both the price of the home after repairs and the as-is price. Entice potential buyers by offering to provide them with the option to choose the color of paint you will use and to make other decisions that will allow them to put their stamp on the home without affecting your budget. Get people excited about the product before you even open the front door.
• Install a key box so you do not have to meet those workers whom you trust at the property every time work is being done. Choosing to do this will save you time and spare you the inconvenience of traveling back and forth to the property. Another benefit is that your workers will be able to put in work at the times most convenient for them.

Step 10 - Get a buyer under contract to purchase your home!

The process begins again when you find a buyer for your property, although this time, your role is that of seller. The first thing you must do is evaluate any prospective buyers to make sure they are qualified to purchase the property. You don’t want to take your property off the market only to discover the interested party was unable to get a loan. Once you are satisfied that financing will not be an issue, go through the above list again, but from the point of view of the seller. When talking to and following up with lenders, you will be talking to the buyer’s lender. You will need to make sure that there are no judgments against the buyer, and you will need to schedule your closing. Instead of marketing this property, you will begin searching for your next deal, on which you will repeat the process again. At some times, you may be working on multiple deals at a time, functioning as buyer on some and seller on others. I have found that in these situations, it is helpful to have a checklist. This will help you avoid any mix-ups by enabling you to keep track of exactly where you are on each property.

The process for assigning a contract or doing a simultaneous closing is almost the same, but there are a few important differences of which you should be aware. The following list is similar to that above, but addresses the differences involved with doing these types of deals.

Step 1 – Get the property under contract with the seller.

• Confirm the presence of escape clauses that can be used in the event that you are unable to find a buyer for the property.

Step 2 – Write down your deadlines on a calendar.

• Know the deadline of your inspection contingency or cost bid analysis.
• Know the date that any other escape clauses expire.
• On your calendar, circle the day before each of your deadlines. This is your absolute deadline for finding a new buyer. If you do not have a buyer by this date, cancel your contract or get an extension. Do not put yourself in a position in which you are forced to buy a property that won’t work for you, nor do you want to lose your earnest money.
Step 3 – Start marketing your property to other investors.
• Spread the word to other investors that you have the property.
• Call all the people in your network.
• Post the property on your Real Estate Investment Association (REIA) website.
• Advertise in the newspaper.
• Post information on the property on the Wealth Intelligence Academy (WIA) discussion boards.
• Pick up the phone and call around to let people know that you have a great deal.

Step 4 – Hold an open house.

• Bring your potential buyers in to see the property. For both you and the seller, the easiest way to do this is to hold an open house, where any interested buyers may come see the property.
• Be sure to write down the information of all those who attend. These are people whom you should bump to the top of your call list; be sure to contact them when you find your next deal.
• If no one comes, don’t be discouraged. Simply pick up the phone and call to invite all the investors that you know.

Step 5 – Get a contract signed with your new buyer.

• Make sure that the dates for their escape clauses end before your dates do. For example, if you need to have your inspection done by the 15th, they must have theirs done by the 13th. If you have to close by the 28th, they have to close by the 25th.
• Give yourself some leeway in case any unforeseen problems arise.
This is where most investors go into cruise control. A wise investor knows that there is still work to be done. You may have received half of your assignment fee up front, with the other half due at closing. However, if you received the entire amount up front, you should take the new buyer to meet the seller. Let them know that they will be dealing with each other from that point forward.

Step 6 –Get the contract to the title company and to the buyer’s lender, if applicable.

• Make sure you get a copy of the new contract and the assignment of contract to the title company so they will know who the interested parties in the transaction are. The title company must have all the information to ensure the accuracy of the funds collected at closing.
• Obtain the preliminary title report to give to your new buyer.
• To help the process move as quickly as possible, make sure the buyer has submitted everything to his or her lender.
• If you are doing one-day financing in order to facilitate a simultaneous closing, you will need to follow up with both lenders to make certain that they have all the necessary paperwork from you and the buyer.

Step 7 - Follow up with your new buyer.

• Be sure the buyer has ordered the appraisal.
• If your buyer is receiving a loan, speak with the lender to see what still needs to be submitted in order for the loan to go to underwriting.
• If you are working with a cash buyer, insist on seeing proof of funds.
• If the new buyer wants to have an inspection done, you should allow an inspection period of no more than 24 to 48 hours. If for some reason they decide to back out of the contract, you will have more time to find a new buyer for the property if you provide them only a small window in which to have an inspection done and make use of their escape clause.

Step 8 - Follow up on the appraisal.

• If a lender is involved in the deal, they will probably require an appraisal before finalizing the loan.
• Be sure of the scheduled time and date of the appraisal.
• Be sure you are aware of any appraisal-required repairs that must be completed in order to receive financing.
• Find out if the amount needed to make the repairs can be put in escrow, as being required to make the repairs prior to closing may present a real problem when trying to assign the contract.

Step 9- Follow up with the title company.

• Find out whether or not they have done the PR.
• Make sure there are no judgments or liens that need to be satisfied.
• Be sure that you have provided the seller with a high enough payoff amount.
• Confirm the date and time of the closing.
• Make sure that you have taken all necessary steps and have everything that is required to assign the property and do a simultaneous closing, if applicable.
• Confirm the date you will receive the remainder of your assignment fee.
• Take copies of all the signed paperwork with you to the closing in case there is any problem.

Step 10 - Finally, send a thank you note to your buyer. Make it a positive transaction for them. You want to do business with them again down the road.

No matter what kind of transaction you are doing, the key to being successful is remembering to follow up. Take these steps and implement them. If you discover a need to add steps in a particular area, do so. There will be bumps in the road, but if you choose to view every problem as a riddle to be solved, you will find a way to close the deal. You can be a successful investor!

Posted 09:09 AM | Permalink | Comments (0)

Myth #3: Inexpensive Options are Cheap Options

The inexpensiveness of the options may be alluring inexperienced traders into thinking they are cheap, thus an obvious buy. The reality is just because an option is inexpensive, it doesn’t mean it’s cheap.

For example, on April 26, BAC was trading around $9.40 and the May 12.50 calls were trading at $.37. There’s no doubt that $.37 for an option is inexpensive, but is it cheap? Well, let's look at the facts. We have a mere three weeks to expiration and BAC would have to rise to $12.87 just for you to breakeven (assuming you hold to expiration). That’s a 37 percent move in a very short period of time. This suggests that the 12.50 calls are trading at a very high-implied volatility, as an option trading for $.37 that far out-of-the-money with three weeks left would have to be. Under a lower-volatility scenario, those 12.50 calls may only be trading around $.05. So the bottom line is you can’t look at an options price to determine if it’s cheap. You have to take into account its strike price, time to expiration, and current levels of implied volatility. Oftentimes when implied volatility is pumped up too high, inexpensive out-of-the-money options can rise to unjustifiably high prices.

Myth #3: Inexpensive Options are Cheap Options

The inexpensiveness of the options may be alluring inexperienced traders into thinking they are cheap, thus an obvious buy. The reality is just because an option is inexpensive, it doesn’t mean it’s cheap.

For example, on April 26, BAC was trading around $9.40 and the May 12.50 calls were trading at $.37. There’s no doubt that $.37 for an option is inexpensive, but is it cheap? Well, let's look at the facts. We have a mere three weeks to expiration and BAC would have to rise to $12.87 just for you to breakeven (assuming you hold to expiration). That’s a 37 percent move in a very short period of time. This suggests that the 12.50 calls are trading at a very high-implied volatility, as an option trading for $.37 that far out-of-the-money with three weeks left would have to be. Under a lower-volatility scenario, those 12.50 calls may only be trading around $.05. So the bottom line is you can’t look at an options price to determine if it’s cheap. You have to take into account its strike price, time to expiration, and current levels of implied volatility. Oftentimes when implied volatility is pumped up too high, inexpensive out-of-the-money options can rise to unjustifiably high prices.

The most inexpensive options you are going to find are short-term, out-of-the-money options. Statistically speaking they have the lowest probability (versus longer-term ATM or ITM options) of being worth anything at expiration. These options are priced inexpensively because they are a low statistical bet. Thus, if you decide to buy them, you better be sure the stock has the ability to reach the strike price prior to expiration. Remember, the options market is quite efficient so don’t think that you are getting a steal of a deal if an option is ostensibly cheap.

In an introduction to economics class I took in college, I was introduced to a phrase that sheds some light on this scenario: “there’s no such thing as a free lunch.” The options market does not have a track record of handing out freebies. For everyone buying an option, there’s someone on the other side of the table selling it to them. Odds are if the option was such a great deal (read: too inexpensive), then option sellers would be asking more for them. So don’t be too quick to think that those selling these ”inexpensive“ options are idiots...you never know, the idiot may just be you.

Myth #4: Options are Riskier than Stock

Due to the myriad of strategies one can trade with options, it is impossible to make a general statement that options are riskier than stock. It depends completely upon how you use options.

Options are merely tools. Although some use them to speculate or take on risk, others use them to reduce or hedge off risk. Due to the leverage inherent with options, it is quite easy to blow up an account when they are used improperly. This option myth is probably fueled by the occasional inexperienced option trader who loads up on an exorbitant amount of call or put options in an effort to amass large profits. All too often these traders lack any semblance of a sound money-management plan and blatantly disregard the drawbacks of leverage. In short, they commit financial suicide.

Are there certain scenarios where trading options could be considered more risky than stock? Absolutely. One such scenario will be explored in a minute. But there are also a plethora of situations where options can be used to reduce risk (covered calls and protective puts being two obvious ones).

Suppose I'm bullish on IBM, currently trading at $107, and am considering buying 100 shares of stock. My total capital outlay would be $10,700. The theoretical risk would be the entire $10,700 (this is of course assuming you would be foolish enough to ride the stock all the way to zero) and the potential reward is unlimited.

Scenario #1: The SMART idea

Instead of tying up $10,700 of capital to control 100 shares of stock, I could buy one October 105 Call for $880. This call option gives me the ability to control the same 100 shares of stock at a drastically lower cost. I then have the option of using the other $9,820 in whatever manner I want. I could merely place the cash in an interest-bearing account for the duration of the trade, or use it for other strategies. Because my maximum risk is $880, this is a scenario where using options is much less risky than buying stock.

Scenario #2: The STUPID idea

Instead of using the $10,700 of capital to buy 100 shares of stock, why not just use the same $10,700 and buy as many call options as possible? At $880 a pop, I could buy around 12 contracts ($880 x 12 = $10,560). Some erroneously assume that since they are paying the same amount of money, they have the same amount of risk. WRONG! To lose the $10,700 in the stock trade, IBM must fall to $0. To lose the $10,700 in the option trade, IBM only needs to reside beneath $105 at August expiration. There is a much higher chance of losing your money in the call-option trade. Furthermore, by buying 12 contracts, you now control 1,200 shares, not 100.

Scenario #2 presents a good example of how an improper use of options and their leverage can present more risk than buying stock outright.

Bottom Line: It's fair to say that the biggest risk of all is ignorance. With proper education and application, options serve as superb vehicles for minimizing risk and are indeed less risky than stock.

Posted 01:44 PM | Permalink | Comments (0)

People have been investing in real estate for years, but ever since the stock market “correction” of 2000 (the dot-com bubble crash that wiped out $5 trillion in market value), there has been a surge in real estate investing. People seem to have finally realized that real estate is quite possibly the only investment that can offer a safe harbor, especially in today’s very unpredictable and turbulent world economy.

However, in order to fully realize the advantages of investing in real estate, one must be very educated and make sure that he or she is really investing in real estate, rather than speculating in real estate. Unfortunately, many of the people who most recently pulled money from the stock market to invest in real estate were not real estate educated and paid far too much for properties in a seller’s market because they hoped to make a killing as property prices continued to climb at record rates. Before the recent housing bubble burst, investors who knew what they were doing (and some who just plain lucked out) sold in time and made substantial profits. Many others were not so fortunate. Numerous so-called investors got caught at the top of the appreciation bubble and now have property that is worth far less than they paid for it, and many more that were in this situation ultimately lost those properties through foreclosure. If a person’s only plan for profits is continued real estate appreciation, he or she is speculating, not investing.

Many of the people who pulled money from stocks and bonds to invest in real estate were not looking to build a business buying and selling properties or renting properties, but were looking to invest in a vehicle that would give them all of the benefits of real estate ownership without any of the responsibility or hassles. These passive investors found a home in real estate investment trusts (REITs), real estate partnerships, and tenant-in-common (TIC) properties.

For many years, the favored way of investing in real estate for passive investors was the limited partnership. However, in recent years, educated investors have been opting for TIC and REIT-type investments as the preferred way of getting the benefits of real estate ownership without being saddled with the property management issues normally associated with real estate. REITs and TICs are both controlled by managers who make all of the day-to-day decisions, meaning the investors need not do much more than cash their monthly checks.

Real Estate Investment Trusts (REITs) – A REIT is a corporation or trust that uses pooled capital from many investors to purchase and manage income property (equity REIT) and/or mortgage loans (mortgage REIT). REITs are traded on major exchanges just like stocks. REITs offer some benefits over actually owning properties. First, they are highly liquid; unlike traditional real estate, shares can be rapidly bought and sold. Second, they allow the small investor to benefit from various types of commercial real estate, from malls and hotels to large office buildings and apartment complexes. A major disadvantage of a REIT is that they do not qualify for 1031 exchange treatment, since REIT investors are not on the property title. REIT investors only own stock in a corporation. A REIT corporation must pay out 90 percent of its taxable profits in the form of dividends to the shareholders to keep its status as a REIT. The right REIT can provide a nice monthly income, but as with any real estate investment, you need to do your homework before you invest.

In recent years, some REITs were bringing in so much money that they were cash rich, and unwise managers paid too much for buildings (based on the property’s income-generating capability) just to spend the money. Some of these REITs are now in trouble with building vacancies and reduced income, resulting in reduced monthly cash flow to the investors. In fact, in some cases, cash flow to the investors has all but dried up. The lesson to be learned is that no matter what entity is used to buy real estate, the purchase price needs to be based on sound economic principles.

Tenant In Common (TIC) Investments – A TIC investment is defined as a property that is owned by a group of individuals who each have an undivided interest in the property. In other words, each individual is actually on title to the property and owns a fractional interest in the entire property based on their investment amount as compared to that of the other investors. For example, Joe might own 10 percent, Bill 15 percent, Mary 31.5 percent, Fred 7.563 percent, and so on. At one time, there were lots of questions as to how TICs should be structured and how many people could be involved in their ownership. The issuance of IRS Revenue Procedure 2002-22 gave TIC investments some rules and guidelines. The IRS procedure indicates that TICs can have up to 35 different owners and that, if structured properly, TIC investments qualify for a 1031 exchange, in which owners can turn deeded and undivided interests in their smaller apartments (or any type of real estate investment) into partial ownership of high-quality, institutional-grade properties, formerly out of the common investor’s reach and only in the purview of REITs, pension funds, and other major investors. Cash investors can also benefit from a TIC investment and 1031 exchange-out when the property is sold. The goal of most TICs is to hold the properties for five to seven years and then sell at a substantial gain. For the investor who wants a monthly cash flow without any management responsibility at all, TIC investments make great sense. And when the property is sold, they share in the profits.

All TICs are not created equal, but when you do your homework and make wise decisions, there are many advantages to investing in a TIC:

1. TIC investments are great for people who are tired of being landlords but still desire the benefits and safety of real estate ownership. Rather than selling their properties outright and paying a huge amount of money in capital gains taxes, they can 1031-exchange the entire sales proceeds into a TIC property, postpone any capital gains tax, and still reap the benefits of real estate ownership without any of the management responsibilities.

2. Any type of real estate held as an investment qualifies for a 1031 exchange into a TIC property. For example, many people have farm ground that is now surrounded by homes and new developments. The property may have been in the family for generations, have a zero basis, but is now worth two million dollars to a developer. If the property is sold without a 1031 exchange, capital gains taxes (federal and state) could take over 25 percent (>$500,000) of the proceeds. With a 1031 exchange, all $2,000,000 can be invested in a TIC property, generating a healthy monthly income with no time or management requirements.

3. Many different types of properties are available for TIC investing: apartment complexes, commercial office buildings, malls, mixed-use facilities, etc. You can exchange your raw ground for part ownership of an apartment complex, your two duplexes for a part ownership in a Class A office building, etc. TICs offer great flexibility.

4. The IRS requires 1031 exchanges to be conducted between properties that match in value, dollar for dollar. If there’s a mismatch, the owner has to come up with additional money for a new property with a higher value or pay some capital gains tax if a new property is of lesser value. This problem is eliminated with a TIC investment, since the exchange can be made for a fractional interest in the TIC that exactly matches the proceeds from the property being sold.

5. Another 1031 exchange rule requires that the debt on the new property be equal to or greater than the selling property. Again, since the TIC property has debt that is attached to it, the person doing the 1031 exchange can match the debt requirements as well. This eliminates a lot of the 1031 exchange headaches.

6. An additional 1031 exchange requirement that is solved with a TIC investment is the restrictive time requirements for a 1031 exchange. From the date of the sale of a property, the owner has 45 days to identify up to three replacement properties for the exchange and has to close on the replacement property within 180 days. Finding suitable replacement properties (within the 45-day time frame) that meet the owner’s needs can be difficult at best. Many times the properties are sold to another investor before the owner can finalize his purchase but after the 45-day identification period has ended. Ouch! The owner is stuck paying the capital gains taxes. By identifying a TIC property, the owner can be assured that the property will be available for purchase, since his portion is just a piece of the larger property.

7. TIC investments allow an investor to diversify property ownership into other areas of the country, where the real estate market and growth potential may be much stronger than in his own backyard. With no management worries, the TIC investor can own properties all across the country.

8. A TIC sponsor who is selective about the prices they pay for properties can provide an opportunity for the TIC investors to obtain a good return on their investment, even in a weak real estate market. Values of commercial investment properties are directly proportional to the net income they produce. Major factors that affect the net income are proper management, reduction in expenses, increases in rents, and increases in overall occupancy. Proper management resulting in an increase in the net income and a proper original purchase price, will result in an increased property value and profit for investors when the property is sold.

9. Most TIC investments qualify for funds that are invested in IRAs, 401Ks, etc. Many wise investors have moved some of their IRA funds into TIC investments in order to diversify their portfolio. Millions of dollars have been invested into TIC investments this past year; those who moved their retirement savings out of the stock market and into stable, safe, real-estate-backed TIC investments before this latest market crash are very happy investors today.

TIC investments can be very beneficial and offer opportunities to invest in commercial grade real estate that is normally out of reach for individual investors. However, as with all real estate investments, one needs to do the proper research before investing. Here are some tips that will help in choosing a company that will meet all of your expectations and provide you with a safe, secure, and rewarding investment experience:

• Invest with a company that has a great track record. Track record is not a guarantee of future performance, but it is a very good indicator of the management skills and ability of the company. No matter what dollar returns are projected, you really don’t want to go with the new kid on the block with little or no history.
• Do not invest with any company that does not provide audited financial statements for its investors. An independent financial auditor needs to prepare the reports. Without that overview, how do you know if the reports really reflect what is going on?
• Do not invest with a company that does not stay involved as an owner alongside the other investors. Good TIC sponsors will retain a fractional ownership of the property and also provide the property management. Part of the profits they get from the property when it is sold in five to seven years comes from their fractional ownership. This ensures that they do the best job possible managing the property, minimizing expenses, and maximizing income. Their own profits depend on good performance. Avoid TIC sponsors who only syndicate the project. Some TIC sponsors raise money from investors, then go out and find a property, mark that property up a few million above their negotiated purchase price and sell property to the investors at the inflated price. They don’t stay in as part owner with the investors. They make their profit from the sale to investors and have no vested interest in helping the project succeed from that point on, since they have already made their profit. The wise investor will invest with a sponsor who is also a part owner and manager of the property.
• Invest with a company that has owners who are very strong financially and are willing to sign on the recourse carve outs. Most commercial loans are non-recourse loans. In other words, if the property was ever foreclosed on, the bank could only take the property back and not come after the owners for a deficiency judgment (if the property was sold by the bank at a loss). But banks also want someone with deep pockets to sign what they call recourse carve outs. This means that if there were any fraud or mismanagement that caused a foreclosure and a devaluing of the property, the bank could come after the personal assets of the people who had signed the recourse carve out documents. Some TIC sponsors want the investors to sign those recourse carve out documents. Don’t do it! Find another TIC investment where the sponsors sign the recourse carve outs.
• Invest with a company that uses a cost-segregation approach to obtain accelerated depreciation benefits for the investors. A lot of the material that goes into building an apartment complex or any commercial building can be depreciated over five or 15 years (like carpeting, flooring, piping, lighting fixtures, etc.) rather than 27.5 years. A property cost-segregation study will identify the total dollar amount of materials that qualify for this accelerated depreciation treatment. Since the properties will only be owned from five to seven years, it is to the investor’s advantage to use the accelerated depreciation to create greater write-offs during this ownership time frame.
• Make sure you invest with a company who structures the TIC investment so that it meets the IRS requirements and conforms to all 15 points listed in the IRS March 2002 – Rev. Proc. 2002-22. If the IRS were to find that a TIC structure violated any of their guidelines, it could disallow the TIC structure for 1031 exchanges. This would be very costly for the investors.
• Try to find a TIC sponsor who not only has a good track record, but has not had any investor lawsuits in the past. Lawsuits usually indicate that an investor lost money. The absence of lawsuits indicates happy investors. That’s the type of company you want to deal with.
• Invest with a company that only leverages the property to 50 or 55 percent. This means that the monthly cash flow may be a little lower, but in the long run it means a safer, more secure investment.
• Avoid companies that use higher-leverage, interest-only loans just to provide a little higher monthly return. Higher loan-to-value and interest-only loans create more risk for the investors.
• Find a company that deals in newer properties – brand new is best. Newer properties mean less maintenance and fewer repairs, which produces increased net cash flow, which equals a higher property value, which results in a higher selling price, more profit, and happier investors. Plus, newer buildings are easier to lease and will bring higher rents, which also means higher returns for the investors.

TIC properties can provide you a safe and secure investment vehicle and provide very good returns. They can become an important part of your investing strategy and provide a way to maximize your profits through 1031 exchanges. Be sure to wisely choose the company you deal with and you will sleep much better at night. Then your only responsibility will be to deposit your check each month. You will love being a mailbox manager!

David Boyd is a real estate investor and owner of Wasatch Front Homes, LLC in Farmington, Utah. He is also a licensed securities agent with Regent Capital Group, specializing in 1031 Exchanges and Tenant-in-Common investments.

Posted 09:24 AM | Permalink | Comments (0)

In today’s world of real estate investing, there are thousands of successful investors all across the country. Unfortunately, there are also numerous unsuccessful real estate investors. These are the people who were swept away by excitement over the vision of prospering through real estate investing, but, for whatever reason, failed to obtain those results. Why are some people successful at real estate investing, while others are not? There are many answers to that question. If you want to be successful, find out what successful real estate investors are doing, and do the same thing.

It goes without saying that a good real estate education is vital to one’s success. Successful real estate investors know the basics, and are continually getting additional education and learning new skills and tactics. In the past, one had to learn the basics from another investor or from the school of hard knocks. In today’s world, there are numerous educational and coaching programs that can teach you the basics of real estate investing in record time. Take advantage of all the education you can get. Novice investors are prone to making costly mistakes that those who have received proper preparation are easily able to avoid. You can save yourself a lot of time and money by learning from the mistakes that others have made in the past.

Education is only one part of the equation for success. You must take action to make things happen! Unless you act, your education can only make you a more knowledgeable broke person. A good real estate coach can help you apply the education, will keep you focused on your goals, and help you keep going when you hit roadblocks on your path to success.

Look in the mirror and ask yourself the hard question, “Am I taking action, or simply making excuses?” The list of excuses is seemingly endless—I don’t have my office organized, I don’t have my Power Team put together, the real estate market is bad right now, I don’t have the time or the money, and so on—but they all have one thing in common. Beneath every excuse is fear.

Most new investors are fearful of making offers, and rightly so. They are fearful of making a mistake by entering into a deal that may end up costing them money. This is a valid concern, which is why a sound education is so crucial. With the proper training, you will know how to conduct business in such a way that minimizes your risk. For example, any offer you make should be subject to a final inspection and approval by your associates. Then, you are able to back out of the deal while you are still within your inspection and approval period, and you can go back to the seller and let them know that your associates did not approve the purchase or that the property did not meet final inspection. With the proper conditions in your contract you can make offers without fears of becoming trapped in a deal that is later discovered to be disadvantageous. Many new investors also fail to make offers out of fear that their offers will not be accepted, yet there is only one absolute rule in real estate: 100 percent of the offers you don’t make will not be accepted.

Let’s take a look at two friends, Bill Action and Fred Excuse. Both Bill and Fred have good jobs, but both are tired of the corporate rat race and long hours of commuting to and from work. Bill sees an ad for a real estate seminar coming to town, and he and Fred decide to attend. They like what they hear and get excited about the prospect of investing. They decide to invest in their real estate education, and both attend a three-day class on the basics of real estate investing. Over the next few weeks, they continue their education by reading books and attending online real estate classes. When time permits, each one schedules some additional, live-training classes.

They are both on the road to success. Bill starts making offers on properties right away, as he continues receiving his education. He knows enough to make offers that limit his risk, and he sets himself a goal of making five offers every week. He is on the “earn-while-you-learn” program.

Fred, on the other hand, feels as if he needs to know more before he starts making offers. He lets fear keep him from making offers; he feels that just one more class or book will prepare him to make that first offer. After all, the real estate market really stinks according to the local news. Not a good time to be getting into real estate, right? He studies more and more, but makes no offers.

A year later, the two friends get together to review the progress they have made. Fred is still working his full-time job, still commuting, still going to seminars on the weekends, and is hoping to turn his first deal in the near future. Theoretically, he knows everything there is to know about real estate investing, but still has not done his first deal. Bill has enough income to do as he pleases and is closing on his seventh property. By his projections, he can rehab and sell the property within the next six weeks for a $30,000 profit. What made the difference between these two friends? Bill took action! He took his education and put it to work. He began making offers right away. He was frightened at first, but after making more than 20 offers in the first month, he was no longer intimidated by doing so. He became accustomed to talking with sellers, finding out their level of motivation, and making the offer. He knew how to quickly analyze the property to determine what price to offer, and he had streamlined his offer process so that it only took him a couple of minutes to write up paper work. As time went on, he created a system that allowed him to screen potential sellers and make dozens of offers every month.

Most of the things needed to become successful real estate investors are easy to do. The problem is that those same things are also easy not to do. It is really easy to pick up the phone and call 10 potentially motivated sellers every day, but it’s also easy not to make those calls. The best advice comes from a famous shoe company: “Just Do It!” And do it now! Acting now is always better than acting later, and nothing helps you overcome fear better than taking action. Those 10 calls a day add up to over 200 calls a month, which equals more than 2,400 calls per year. With a total call volume that high, you will find the motivated sellers in your area, which is crucial to making money.

Decide to take action now! And be prepared to work! You need to take responsibility for your own success or failure. There are no excuses. If you take action, there is a high chance that you will be successful. If you do not take action, it is certain that you will not succeed. What can you do to break the cycle of no action and start a cycle of taking action? Get out a piece of paper and write “it” down! Write down four action items that you will do this week. Just the act of writing these items down is taking action. These four action items should be actual money-making activities. We are not talking about doing market research, developing your Power Team, or setting up your business entity. These are all important things to accomplish, but don’t let them divert your focus from making offers.

Remember, you will never make any money unless you are making lots of offers!
Here are some examples of action steps that will lead you to make offers and, in turn, make money:

• Distribute 300 fliers within your area. You can distribute them yourself or hire someone to do it for you, as long as the task is completed.
• Speak with 10 to 15 sellers every day. You can locate sellers by calling the phone numbers that you see on signs and in newspaper ads, as well as by contacting people who have previously contacted you in response to your fliers or other forms of advertising. Don’t stop calling around until you have reached your goal.
• Make five really low offers on REOs (real estate owned by mortgage companies). If the bank rejects your offer, make an even lower offer a couple of weeks later.
• Send out 100 letters of intent to expired listings in your area.
• Make five backup offers on properties that are already under contract through the real estate agents on your team.
• Go to the court house and research 20 to 30 properties in your area that are in default. Make house calls to the property owners who have received a notice of default (NOD) and offer your services.
• When driving in your area, stop at five properties that are for sale by owner to ask if you may see the property. Talk to the owners to determine whether or not they are motivated sellers. If you determine that they are, make an offer!

Get going and take action. Make quick decisions. Ready, aim, fire! You’ll never hit the target if you don’t pull the trigger!

Posted 04:54 PM | Permalink | Comments (0)

Entrepreneurship has long played a critical role in American history. In many ways, it has served to drive and define the true spirit of the American economy and culture. It aligns perfectly with the great American nuance of being all and anything that you want to be.

There have been a multitude of definitions for entrepreneurship. Wikipedia.org describes entrepreneurship as:

“the practice of starting new organizations or revitalizing mature organizations, particularly new businesses, generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. Angel investors generally seek returns of 20-30% and more extensive involvement in the business. Many kinds of organizations now exist to support would-be entrepreneurs, including specialized government agencies, business incubators, science parks, and some NGOs.”

It is hard to choose a starting point when attempting to describe the benefits that entrepreneurs have provided through their vast contributions to society. They have provided new methods and technologies that have catapulted American culture to the elite status that it enjoys today. The creation of a competition in which only the strong survive has stimulated the initiation and incubation of new ideas that has led to the increased quality of products and the availability of enumerable choices to the people. The existence of choices is vital to maintaining a situation in which prices are kept low enough to ensure that affordable options are open to people at all economic levels. Entrepreneurs have also provided jobs and employment through the establishment of thriving businesses and new market places, thereby increasing the opportunity for prosperity. Therefore, the average American family has been able to provide a good life and future for their children and their children’s children.

And let’s not forget charities! The willingness to give to those less fortunate has long been a hallmark of the traditional American spirit. Where would our nation’s charities be today if not for the entrepreneurs who created the opportunities for businesses and individuals to give literally billions of dollars to those who cannot help themselves or who have significant short-term needs?

The benefits of entrepreneurship have not only been seen corporately, but individually as well. Imagine for a moment the satisfaction that must be produced by taking a thought or idea and transforming it into something tangible, something that you can feel, touch, and watch others benefit from. What a sense of individual accomplishment and personal satisfaction that must bring! The impact of such an experience on one’s psyche and self esteem is beyond description, as is the sense of freedom that can only come from being in full control of your own personal and professional life. Having the ability to control your own time and choose your own direction in accordance with your own vision provides unlimited potential for financial prosperity and wealth creation. It is a place only limited by where your imagination and drive will allow you to go.

Due to the current circumstances of our country, many are questioning the future of the entrepreneur in our society, and whether entrepreneurship will survive this spell and still remain the dominant force that we have always known it to be. Despite the concerns of some, the reality is that in recent history, there has not been a greater time for the entrepreneur.

Have you ever wished that you could go back in time to insert yourself into a particular situation in the past, thereby becoming able to take advantage of the unique circumstances of that opportunity? Well, I believe that we are now in a rare moment in time, with a unique chance that those in the future may envy; a true once-in-a-lifetime opportunity may be at our very doorstep!

At the beginning of the 20th century, our country experienced an industrial revolution. In those times, we saw great innovations and new technologies, and revolutionary new ways of doing things were invented. I believe that a similarly significant and exciting time is immediately ahead.

With a rising national debt and uncertain economic future, we are once again at a crossroads in our history. I do not think that we have choice whether or not to innovate. We must either innovate, or accept the occurrence of major changes in our culture. With our very way of life at stake, I believe that the entrepreneur will again lead the way.

In an ever-changing and more dangerous world, we have heard our leaders discuss the need to wean ourselves from reliance on foreign oil and forge ahead to discover and cultivate alternative energy resources. Because such technology would profoundly impact both the immediate and long-term future of our country and the rest of the world, those who are seeking to discover solutions are privileged to an immense amount of support, especially from the American government. The opportunity is there for the taking, and this is far from the only opportunity of its magnitude. The list, I am sure, is endless.

Is entrepreneurship for everybody? No, nothing ever is. Becoming an entrepreneur does not necessarily require high intelligence or great initial wealth. But if you feel that willingness and drive to be an innovator and understand that there will be risk involved, than you may be the next great entrepreneur on the horizon.

Here are few things to think about if you are considering the path of entrepreneurship. First, you must ask yourself some tough questions: Am I willing to create the time necessary to establish a business, even if it means taking time away from my family and activities that I enjoy? Am I really motivated enough to stick with this? Will I really be able to make tough decisions when confronted with them? Is this the life I really want?
If you can affirmatively answer the preceding questions with confidence, then proceed by taking a few first steps:

• Construct a plan. Entering the game without a strategy or a game plan is an almost certain setup for failure. Structure and development when building a business are vital. There are proper steps that one can take to increase the probability of success. Write a business plan. If you have never written one, than seek out someone or some organization that has.

• Ensure that your endeavor will be adequately funded. It takes venture capital to start virtually any business. Be realistic; if your ambitions are big, you must consider investor money. If you determine that this is not desirable or doable in your situation, you may have to consider starting smaller by establishing a home-based business and eventually moving on to bigger and better things. One of the greatest slayers of the supportability of new businesses is undercapitalization, or simply trying to grow too fast. Avoiding this pitfall should be a primary purpose of your initial business plan.

• Evaluate your strengths and weaknesses. Understand and accept your limitations. Despite how qualified and talented you may be, no one can do it all. Reach out for assistance in the areas in which you think may need a little more expertise than you alone possess.

• Maintain your level of determination and build perseverance. Do not give up. You must never allow yourself to have a defeatist attitude. You must believe that you can and will do whatever is both necessary and ethical in order to reach your goal. There will be ups and downs, and the ride will be bumpy at times. Only those with a burning desire to make it will do so.

• Socialize with positive, successful people. There will always be the naysayers that will tell you it is impossible and encourage you to give up. You will need the support of those around you who remind you that you can, and the guidance of those who have achieved their own success.

Entrepreneurship has always been the American way. The impact that entrepreneurs have had and the impact that they will continue to have on our society is immeasurable. It has molded our culture and given it defining characteristics, and entrepreneurship will continue to influence our society well into the future—that much is certain. The question you must ask yourself is whether or not you want to play a part.

Posted 04:43 PM | Permalink | Comments (0)

The federal government has recently introduced an extensive and comprehensive Financial Stability Plan in hopes of helping the American economy start to recover from its current crisis. At the heart of the current financial crisis is the depressed housing market. Foreclosures are at record highs and still climbing and property values in most areas are still declining. In an effort to help reduce the number of Americans who are at risk of losing their homes, a key element of the Financial Stability Plan is the Making Home Affordable Program. The purpose of this program is to help stabilize the housing market and help up to seven to nine million Americans reduce their monthly mortgage payments to levels they can afford in the present, and hopefully for the foreseeable future.

The Making Home Affordable Program is really two separate programs: the Home Affordable Refinance Program (HARF) and the Home Affordable Modification Program (HAMP). HARF is set up to give four to five million homeowners with loans owned or guaranteed by Fanny Mae or Freddy Mac an opportunity to refinance into more affordable and long-term stable loans.

HAMP is even more far-reaching: the government has committed $75 billion as an incentive for lenders to modify the terms of existing loans for three to four million homeowners. The goal of the HAMP program is to reduce the homeowners’ housing expense payments (principal, interest, taxes, insurance, PMI, HOA dues, etc.) to an amount they can currently afford and be able to sustain in the future. Payment reductions will mainly be accomplished through lowering interest rates and extending the term of the existing loans. However, principal reductions may also be considered in some situations if interest rate reductions and extended terms do not get the monthly payments to an affordable level for the homeowner.

These two basic programs have very different qualification requirements. In order to be successful with either of these government programs, homeowners need to know and abide by all the rules. In Part 1 of this 3-part series, we will discuss the details of the Home Affordable Modification Program.

THE HOME AFFORDABILITY MODIFICATION PROGRAM

This is the program that most people have heard about and the one that is getting lots of attention from the press. It was designed to help approximately three to four million Americans keep their homes from going back to the lenders through foreclosure. Plus, borrowers who make timely payments on their modified loans will receive success incentives. The government will pay an incentive that reduces the principal balance on a homeowner’s loan for every month a payment is made on time. The incentive will be applied directly to the loan balance each year for up to five years. The government has earmarked $75 billion for incentives to lenders and homeowners in order to help accomplish the goal of keeping more Americans in their homes.

1. Who is this program for?

This program is specifically designed for people who have a strong desire to stay in their home, but who are having trouble making their current mortgage payment(s). The people who will qualify for this program also need to have the ability to pay the monthly mortgage payment once the terms of their loan are modified to provide a new lower payment amount, which will be determined by program guidelines. People without income or with very little income will not qualify for this program.

2. Do loans have to be owned or securitized by Freddie Mac or Fannie Mae to be eligible for this loan modification program?

No. Loans serviced/owned by any lender are eligible for this program. Lender participation is voluntary, but the government is encouraging all lenders to help homeowners where they can.

3. What are the eligibility requirements?

• The program is only available for principal residences; properties held only as rentals do not qualify.
• You may be eligible for assistance if you are the owner occupant of a one- to four-unit property (if the unit is a duplex, triplex or a fourplex, the owner must occupy one of the units).
• Your current loan must have been originated prior to January 1, 2009.
• The current loan balance for a single-family home must be equal to or less than $729,750. Depending on the lender, higher limits may be available for two-, three-, or four-unit properties.
• The homeowner must have a current mortgage payment that is not affordable due to a verifiable hardship, such as an increase in mortgage payment due to an adjustable rate mortgage (ARM) loan or interest-only loan, or illness, divorce, death, job loss or other reduction of income, etc.
• One cause for the record number of foreclosures in today’s real estate market is that some homeowners have housing cost to income ratios of 50 to 60 percent! To qualify for assistance under this program, one’s current mortgage payment (including principal, interest, taxes, insurance, PMI, HOA fees, etc.) must be higher than 31 percent of the gross monthly (pre-tax) borrower’s total income. For example, if a homeowner had a gross monthly income of $2,500, the current mortgage payment would have to be higher than $775 per month in order for the homeowner to qualify under the program guidelines.

4. Does the borrower’s credit score(s) matter?

No. The program is for modifying the existing loan. No new loan is being originated, so the borrower’s credit is not part of the consideration.

5. Can the homeowner be behind on their mortgage payments?

Yes. The purpose of this program is to help homeowners keep their home, so it is specifically designed for people who are facing foreclosure.

6. Does the homeowner have to be behind on their mortgage payments?

No. Borrowers who are struggling to remain current on their mortgage payments, but who are still current, are eligible if they are at risk of imminent default (for example, from an adjustable rate mortgage that is going to adjust upwards in the near future). However, the homeowner will have to provide documentation of the hardship.

7. How will the lender determine how to modify the loan?

A lender can modify the existing loan in several different ways, but the goal is to end up with a payment (including principal, interest, taxes, insurance, PMI, HOA fee, etc.) that is no more than 31 percent of the borrower’s gross (pre-tax) income. The lender will generally take the documented total income and multiply it by 31 percent to get the target payment. The current loan interest rate is then lowered to see if that will bring the payment to where it needs to be. The government is providing incentives for lenders to bring interest rates down to as low as two percent if required. If that doesn’t reduce the payment to the target amount, the length of the loan term can be extended to 40 years. If the payment still has not been lowered to the target amount, the lender can consider a reduction in the principal amount owed, but this scenario will not be common.

The borrower has to have sufficient income to make the new, lower payment, or they will not qualify for the loan modification. If they can’t qualify for a loan modification, they will most likely need to consider a short sale of their property in order to avoid foreclosure.

8. When should a homeowner apply for a loan modification?

Apply as soon as possible. Don’t wait until your property goes into foreclosure. The sooner you get started, the easier the loan modification will be. A property that is in foreclosure still qualifies for loan modification, but since the lender may opt to just continue with the foreclosure at that point, waiting too long to start the process could result in the loss of your home.

9. Should I use a loan modification specialist to help me with my loan modification?

This is a decision you need to make based on your ability to handle the process properly. If you do not have the time to completely research all of your options, gain an understanding of all the rules, put together a complete and convincing loan modification package, and contact and negotiate with your lender, you would probably be better off hiring an expert with experience to negotiate for you. You only get one shot at the loan modification, and if you get turned down, or don’t get the terms you need to solve your problem for the long haul, you may not get another chance for awhile. Some lenders are saying they will only consider a loan modification once every 12 months. Therefore, it’s critical to do it right the first time. It could mean the difference between keeping and losing your home.

10. What documents are required for a complete loan modification package? Each lender may be a little different, but as a minimum, provide the following:

• A letter describing your hardship. Why is it that the loan is now unaffordable? What has changed in your life? What has changed with the loan? This is a critical part of the package. You need to prove and verify that you do have a real hardship.
• A cover letter describing why it is important for your family to stay in the home. The lender needs to know that you really want to stay and will make every effort to meet the new payment requirements.
• Proof of monthly gross income for all borrowers on your loan. Include recent pay stubs and documentation of income from any other sources.
• Your most recent tax returns
• Second mortgage information, if applicable
• Account balances, monthly payments on all debts, including student loans, car loans, private loans, etc.
• Account balances, minimum monthly payments for all your credit card debt and revolving charge card debt
• Other information such as proof-of-employment statements from employer, etc.
• Information about other assets

11. How long will the loan modification program be available?

The program will be available through December 31, 2012. All loan modifications must be in place by that date.

The Home Affordable Modification program is being put into place to help many homeowners keep their homes. If you think you qualify, don’t hesitate to apply for this program. But remember, knowledge is key to you success. Get educated on this program and seek the professional help you need. Make sure you complete your loan modification application and documentation package right the first time; you might not get a second chance.

Posted 05:24 PM | Permalink | Comments (0)

There is no question that we are experiencing one of the strongest buyer’s markets in the history of real estate. A buyer’s market creates both opportunity and challenge for the real estate investor. On one hand, potentially lucrative deals are everywhere; in fact, it seems as if America itself is on sale! On the other hand, when the time to sell those properties comes, the investor must compete with thousands of other sellers who are all trying to find those elusive few qualified buyers.

The good news is that the educated real estate investor can learn the art of selling properties in a buyer’s market and truly win at the selling game. With even just a little selling knowledge, investors will be able to compete with most other sellers and get their properties under contract quickly.

One of the most important factors in selling a property quickly is to have it priced substantially below its true market value. Buyers in a buyer’s market are looking for bargains. Having a property that is priced right is critical and provides an advantage over the competition.

Another important factor in selling a property quickly is to have it in tip-top shape. The home must be clean, both inside and out. The property must have curb appeal to entice a potential buyer to see the inside. Staging the property with some nice furniture will give it that warm, welcoming feeling that sells homes fast.

But having your property priced right, “mother-in-law clean,” and beautifully staged will make little difference if no one comes to see your home. In order to sell a property in a buyer’s market, you must get the property information in front of as many people as possible. Investors must master the art of marketing their properties.

Here are some tips that will help you effectively market your property:

1. Consider enlisting the help of a real estate agent. While many people feel as if they must choose between marketing the property themselves or working with an agent, I suggest that they do both. Your marketing efforts, when coupled with the efforts of your real estate agent, should result in maximum exposure for your property.

A real estate investor must have several good real estate agents on his or her Power Team. These agents should be willing to list properties using an exclusive agency listing. In this type of listing, the real estate agent and his or her brokerage represents the seller and has the right to market the property, but the seller reserves the right to sell the property on his or her own without paying a commission if the opportunity presents itself. This way, the seller can benefit from his own marketing efforts and still retain the benefit of having the property listed on the Multiple Listing Service (MLS), which provides exposure to hundreds of hungry Realtors.

If you have your property listed on the MLS at a price substantially below its true market value, you should get a lot of activity. Make sure your agent notes in the MLS listing that the property is priced well below the market. Real estate agents know that most buyers in a buyer’s market are looking for a good deal and will show them properties that really are good deals. If your property is priced well, then there is built-in equity right at the purchase.

Typically, real estate commissions are around six percent, with three percent going to the listing office and three percent going to the selling office. Consider offering a four percent commission to the selling office. Agents are money-motivated, especially in a slow real estate market. That extra commission incentive will entice more agents to show your property, and it will encourage your own listing agent to work harder to find you a buyer since the listing office would get the full seven percent.

Work to get agents on your team from some of the major real estate brokerages. Nowadays, more than 90 percent of home buyers start their research for a new home on the Internet, even before they contact a real estate agent. Since buyers don’t usually have direct access to the MLS, they will search using real estate company names they are familiar with. If you want your property to be seen by more people, it helps to have it listed with a major company and posted on their company website. However, if you have an agent on your team from a smaller local real estate company, and that agent is an aggressive marketer, don’t hesitate to use him or her.

2. Put your property on the MLS even if you decide against working with an agent. There are companies who, for a nominal flat fee, will list your property on the MLS. You can do an Internet search to find a company who performs such services in your particular area, or you can use one of the national companies. Call the companies to find out their cost for listing a property on the MLS, and inquire about what other services they offer. A few national flat fee listing companies are:

www.flatfeelisting.com

www.flatlist.com

www.owners.com

www.fidelityflatfee.com

A nationwide directory of flat fee MLS brokers can be found at:

www.flatfeemlsmarketing.com

3. Run a classified ad online. As mentioned previously, statistics show that the majority of buyers are now initiating their search for a home using the Internet. Another great way to market your properties is to run classified ads online. Unlike running ads in the local newspaper classifieds (which can be costly), most classified ads on the Internet are free to place, making this route ideal for the investor with a limited budget. Some of the major sites for free classified ads are:

www.craigslist.org

www.backpage.com

www.kijiji.com

www.classifiedsforfree.com

Even Wal-Mart has free classified ads at: walmart.oodle.com

There are literally hundreds and hundreds of places to advertise. To get your ads out to numerous sites without having to post your ad individually on each site, you can use ad posting services such as:

www.adsubmitter.inetgiant.com

www.Postlets.com

www.ClassifiedFlyerAds.com

www.Vflyer.com

Another way to market your properties is to run classified ads on free websites sponsored by your local radio and/or TV stations. Almost every business now has a website, including radio and TV stations. Check to see if any of these websites offer free classified advertising.

4. Scan through the real estate section of your local paper to find the rental section. Contact individuals who are running for rent ads to see if they might be interested in purchasing your property to use as a rental. If you bought the property right, you should be able to sell at a low enough price that it would produce cash flow as a rental.

5. Join and attend local real estate investment club meetings in order to find potential wholesale buyers for your property. Virtually every investor you meet can be added to your wholesale buyers list. At the meetings, you can hand out fliers advertising properties you currently have for sale. Many groups allow time at each meeting for members to highlight properties they are trying to sell.

6. Expand your real estate investment club membership beyond your local area by joining online real estate groups. Most real estate investment clubs now have websites and/or blogs. Visit these sites and post comments, always using a signature block with your contact information and/or website URL. By posting comments, you will be getting your name in front of other investors who may be looking to buy properties.

A unique way to find real estate investors who could be potential buyers for your properties is suggested by Kent Clothier. He and his group scan the sold MLS listings for sales in the past 90 days that were all cash transactions. They then go to the county tax records to find the names of the people who purchased these properties for cash. In contacting these buyers, they find that many are real estate investors and, after a short conversation, they add these investors to their wholesale buyers list.

7. Research specialty websites that are designed to help you find wholesale buyers for your properties. An example of this type of website is:

www.3daybid.com

8. Do not overlook social networking sites. Today, these sites are useful for far more than tracking down and keeping in touch with family and friends. All types of businesses and groups are now using these sites to get their messages out to the world. There are rules and regulations as to how you may use these sites, but they give an investor a chance to get their bio and interests in front of a lot of people. You can also place links that allow interested people to go to your website or blog where you can talk more about properties you have for sale. The most popular social networking sites are:

www.twitter.com

www.myspace.com

www.facebook.com

Remember, there are literally hundreds of social networking sites, with new ones being added almost everyday. Review these sites to see if they would be a good place to make contacts that could help you market your properties. You can find lists of social networking sties at:

www.en.wikipedia.org/wiki/List_of_social_networking_websites

Many sites also have an advertising section. This is also worth looking into.

9. Make a video. One of the best ways to market a property is to make a video highlighting the property. You could hire a professional to do this for you, but in today’s high-tech world, you really don’t have to be high-tech to be successful. You can get a flip video camera for around $150 and do the job yourself. Once you have made the short, yet informative video, you can post the video on the Internet with very little effort. To help you publish your video and get it online for all to see, go to:

www.viddler.com

www.youtube.com

10. Don’t forget the more traditional methods used to market and sell properties: for sale by owner signs at the property, bandit signs in the area (placed on Friday evening and removed on Sunday evening), passing out fliers in the neighborhood, hard copy ads in local newspapers, ads in throw-away papers (like the Penny Saver or Thrifty Nickel), ads in the numerous for sale by owner publications, car magnets, and selling using your buyer’s list.

Selling a property (especially for the new investor) can be daunting even in a good market, let alone in a buyer’s market. Knowledge and preparation will help you compete and sell properties fast. Talk to other investors in your area and see what strategies they are using to sell their properties. Find out what is working and follow suit. If you aggressively market your properties, have them move-in-ready and priced right, you will attract those elusive qualified buyers.

Posted 09:07 AM | Permalink | Comments (0)