Business Capital:
The Life Blood of Your Real Estate Business

By Matt Fagerness

We’ve all heard about the numerous ways you can successfully do real estate transactions with no money down (or at least with a bare minimum of operating capital) and I am a believer in these techniques myself. After all, I was also a Wealth Intelligence Academy® student before becoming a trainer and a mentor for the Academy. I have done deals with owner financing and I have done my share of wholesale deals too, which goes to show that the no money down concept is alive and well, and that these kinds of deals are also something you can do.

With that said, let me shift gears just a little bit. It is often said that businesses (particularly small ones) usually fail for three common reasons. One is the business owner selects the wrong business to begin with. With real estate being as diverse and commonplace as it is, I am not concerned about this pitfall being in your way. Another reason that businesses may fail is they are poorly managed. Right now, your business is likely so small (personnel-wise) that management is not really a factor. On top of that, remember none of us need to be experts on all facets of the business and what you do not know can and should be delegated to your professional power team.

Continue reading "Business and Finance: Business Capital for Real Estate Investing Businesses" »

Posted 01:20 PM | Permalink | Comments (0)

A report from the Center for Media Research reveals some interesting facts about the wealth of Americans. The report says that a new segment of wealthy Americans has emerged in recent years:

“Known as the New Mass Affluent, this new crop of wealthy Americans were born of the post-war boom, raised in middle-class suburbs and benefited from college educations and years of economic prosperity during the bull market of the 1990s. Today they're the empty-nesters converting their kids' old rooms to home gyms, the well-heeled shopping at Costco and the workaholics fiddling with their BlackBerry on the express commuter train.”

These people are also investing and could be ideal financial partners for real estate investors.

Click here to read the full post by Jack Loechner (you have to sign up, but the account is free), then look around at the people who know who fit the demographic he describes. You may have some funding sources right in front of you that you never thought about before.

Posted 09:01 AM | Permalink | Comments (0)

Consumer debt and a lack of financial intelligence is putting our country at serious risk. In a recent New York Times column, David Brooks made that point with chilling clarity.

He points out that the United States has been affluent since its founding, but until the past few decades, had remained “industrious, ambitious and frugal.” He writes this about lotteries: “Here is the government, the guardian of order, telling people that they don’t have to work to build for the future. They can strike it rich for nothing.”

He also observed a dangerous shift in values, writing: “[Benjamin] Franklin made it prestigious to embrace certain bourgeois virtues [of hard work, temperance and frugality]. Now it’s socially acceptable to undermine those virtues.”

Click here to read the full text of the column.

Posted 05:53 PM | Permalink | Comments (0)

Forbes.com iConference: All-Weather Portfolio Strategies

On May 22, 2008 Forbes.com will hold its first-ever virtual investor conference that is designed to help investors navigate the current turbulent market environment.

Prospering during times of uncertainty takes more than just patience and investor fortitude, it requires smart, actionable investment advice. This day-long online event begins at 10:00 a.m. and goes to 6:00 p.m., and will feature Steve Forbes and an all star panel of investment advisors and experts, including Robert Kiyosaki. The event is free to all investors and is accessible via any Web-connected computer.

In addition to speakers and discussions, you can visit an exhibit hall with booths and information about the sponsors. There is also a resource center, opportunities to network, receive advice through chat rooms and message boards and the opportunity to win prizes just for attending!

Steve Forbes and Robert Kiyosaki will present Stocks, Politics and the Economy: Prudent Strategies for Turbulent Times at 10:15 a.m. to 11:15 a.m.

Click here for more information and to register for this valuable free event.

Posted 08:15 AM | Permalink | Comments (0)

Book Review

Get Rich by Getting Smarter About Money

Increase Your Financial IQ: Get Smarter with Your Money by Robert T. Kiyosaki (Business Plus, 2008)

In what may be his best book to date, Robert Kiyosaki challenges his readers to wise up about their own financial situation and what they need to know to become financially intelligent because, he says, if you can increase your financial IQ, you can become richer.

Continue reading "Get Rich by Getting Smarter About Money" »

Posted 06:05 AM | Permalink | Comments (0)

FICO (the credit scoring company) sends out a e-newsletter with interesting information. The latest one included a question about the impact foreclosure has on credit scores. If you are a foreclosure investor, you should understand this. Here’s the question and answer as published by myFICO.

Continue reading "How do foreclosures and bankruptcies affect credit scores?" »

Posted 10:31 AM | Permalink | Comments (2)

A real estate investor in Flagler Beach, Florida didn’t know a computer problem at Fifth Third Bank had dumped bad information on his credit file, sending his credit score into the basement, causing him to lose deals because he couldn’t get financing, and causing his line of credit with another bank to be cut off. (See “Real-estate investor sues Fifth Third Bank over computer error”)

The problem, which Fifth Third says occurred when it was consolidating with another bank, was not disclosed to customers unless they complained—and most didn’t complain until they applied for a loan and were turned down.

Real estate investing can be a fast-moving business. While it’s possible to delay closings while problems are worked out, not every deal will wait. That’s why it’s important to keep an eye on what’s going on in every aspect of your financial life—especially in your credit file.

Posted 06:39 AM | Permalink | Comments (0)

You’ve set your financial goals, but do you know how far you have to go to reach them? And how will you know when you’ve made it? A net worth statement will tell you.

By Jacquelyn Lynn

Do you want to be a millionaire? A billionaire? Or do you just want enough so you can retire comfortably? Regardless of what your goal is or how you intend to reach it, you should know your net worth. This information lets you know where you’re starting from and helps you measure your progress. If you’re going to be in control of your financial future, you need to know where you are today.

Continue reading "How Much are You Worth?" »

Posted 07:35 PM | Permalink | Comments (2)

Think about this question: Are your friends putting you in debt? Of course not, you probably say. But think a little more.

Have you ever taken a trip, gone to an expensive restaurant, or done something else that you couldn’t afford because that’s what your friends were doing and you wanted to be a part of the group? Peer pressure is a powerful thing, and it doesn’t end with childhood.

If you’re on a serious wealth-building plan, you’ll sabotage it if you succumb to pressure from friends to spend money on consumables that you don’t need at the point in your life when you should be focused on building resources for the future.

Do you really need to do the old “keeping up with the Joneses” thing? No! And remember this: you have no idea how much debt “the Joneses” are in.

Economic inequality is a fact of life. It’s not easy, but you should acknowledge the economic disparity between yourself and your friends—whether it’s a disparity based on what you actually have or just how you’re willing to spend what you have.

Two important lessons here:

One, don’t spend what you don’t have on entertainment just to be with your friends. Suggest alternatives. Or recognize that not all friendships will last forever, and maybe it’s time to move on or at least take a break from this one.

Two, when you have achieved your own financial goals and can afford the luxuries you’ve always wanted without going into debt, recognize that not all of your friends may be in the same position and be considerate of their financial situation when making suggestions and issuing invitations.

How do you deal with this issue? Please share your comments.

Posted 06:56 AM | Permalink | Comments (0)

Hear Robert and Kim Kiyosaki on Doing It Right Radio™. Click here to hear Robert speak on entrepreneurship and Kim on the importance of financial literacy for women.

Posted 06:46 AM | Permalink | Comments (0)

President Bush has unveiled a plan designed to reduce the rate of foreclosures by extending the period of “teaser” rate for subprime mortgage holders for five years.

If—and this is a big if—the plan works exactly as it’s supposed to, there will still be plenty of foreclosures. According to the news reports, to qualify for the plan, a borrower must have a loan originated between January 2005 and July 2007 with a reset scheduled between January 2008 and July 2010; made all payments on time; and can’t afford the reset payment. Unfortunately, there are plenty of people who are now and will be in the next few years facing foreclosure who don’t meet those parameters. What’s more, it’s not clear just how much help this plan is going to provide people who do meet the parameters. Read “Up in ARMs – the Mortgage Bailout” by Matthew Graham for a view you’re not likely to get in your daily newspaper or on the network news.

This is still an excellent time to learn and use foreclosure investing skills and strategies.

Posted 03:42 PM | Permalink | Comments (0)

Finish this sentence: “I’d like to invest in real estate, but ____________.”

If you said, “I don’t have the money,” there is a solution.

Remember that while it takes money to invest in real estate, it doesn’t have to be your money. If you have a good deal, you can find the funding. One alternative is a simple partnership.

Continue reading "Partnerships are a Great Way to Fund Real Estate Investments" »

Posted 07:55 AM | Permalink | Comments (7)

Tax Actions to Take Now

What to do before the year ends to prepare for your 2007 tax return

By Jacquelyn Lynn

The one sure thing about taxes is change, and some significant legislative changes made over the past year could affect your 2007 tax bill. Because few tax strategies can be applied retroactively, it’s a good idea to be aware of this year’s changes now so you can consult with your tax advisor and take the most appropriate action for your circumstances while you still have time. Brian M. Lewis, CPA, a certified public accountant in Maitland, Florida, says primary issues you should be aware of include:

Continue reading "Tax Actions to Take Now" »

Posted 07:48 AM | Permalink | Comments (1)

If you’re investing in foreclosures, you may encounter prospective sellers who can’t pay their mortgages and are considering bankruptcy. In fact, as a foreclosure investor, your biggest competitor is not other investors, but bankruptcy. You’ll find it helpful to have a good understanding of the bankruptcy process and what it can and can’t do for debtors.

Here’s a link to a post on MyFico.com that discusses bankruptcy basics: click here to read Bankruptcy FAQ.

Posted 05:20 AM | Permalink | Comments (0)

90 days same as cash.

No payments for one year!

Buy now and pay nothing—no interest, no payments—until next year!

Should you take advantage of these offers? Of course, that’s up to you. But my personal policy is this:

If I want or need the item and have the cash to buy it, I buy it and take advantage of the delayed payments as long as there is no interest or other charges involved. I take the money I would have spent for the item and invest it until it’s time to pay it off.

I don’t charge or otherwise finance depreciating assets, such as furniture, clothes, jewelry, and electronics. But I don’t pay for them before I have to, either.

Let’s say I want new furniture and I’m going to spend $5,000, which I have in disposable income. The store is offering no payments, no interest, for 18 months—all I have to do is pay the sales tax up front. I buy the furniture, take the $5,000 and put it in either real estate or stocks (or even just a simple savings account or certificate of deposit), and make sure my records are noted so that when the debt is due, I pay it off in full. My money has worked for me for a year and a half while I’ve enjoyed having the new furniture.

If you use this strategy, it’s critical that you exercise the discipline to pay the debt before you have to pay interest on it. Merchants typically sell these contracts to a finance company of some kind, and the finance company is counting on you to not have the money at the end of the no interest period. Don’t buy on one of these deals thinking that you’ll save the money—if you don’t have the cash, don’t buy until you do. But don’t part with your cash until you have to.

Also, be sure to carefully read and understand any buy now, pay later contract so you know exactly what you are obligating yourself to. Don’t count on a salesperson’s explanation—read the contract and question anything that doesn’t make sense.

Jackie

Posted 01:30 PM | Permalink | Comments (0)

The Internal Revenue Services (IRS) has introduced a weekly news service, e-News for Small Business, that will contain timely, useful tax information for businesses and the self-employed. It’s free and scheduled for weekly distribution on Wednesdays. To subscribe, go to http://www.irs.gov/businesses/small/content/0,,id=154826,00.html.

Jackie

Posted 12:28 PM | Permalink | Comments (0)

If you buy a property with less than 20 percent down, many lenders require that you also purchase private mortgage insurance (PMI). Do not confuse this with mortgage life insurance (click to see my earlier post on that topic), which you should think carefully about buying.

PMI is the promise of a private insurer to repay your lender if you default on the loan. It’s a contract between your lender and the insurance company for which you pay the premiums. And the monthly PMI premiums can make a significant difference in the amount of your total mortgage payment.

Depending on the specific terms of the PMI contract, if you default on the loan, the lender can collect 20-25 percent of the total outstanding loan from the PMI insurer and then foreclosure on the property. Or the PMI insurer can pay off the entire loan and gain title to your property. Either way, you and your family are not protected—the lender is the entity that is protected with PMI.

Most lenders that require PMI also have provisions in their contracts for when the coverage can be dropped—typically after the loan is a certain age or the loan-to-value ratio reaches a certain point.

If you are required to buy PMI coverage, understand that this will not protect you from the consequences of defaulting on your loan or pay off your loan in the event of your death or disability. Read the contract carefully and make a note to follow up and get the insurance canceled when your lender allows.

Jackie

Posted 04:46 PM | Permalink | Comments (0)

It’s common for lenders to require that a borrower purchase life insurance that will repay the loan in the event the borrower dies. This is not unreasonable, but be cautious if you are urged to purchase mortgage life insurance.

With mortgage life insurance, you pay a fixed premium for decreasing term life insurance. In other words, you will pay a certain amount per year for a policy that will pay off the balance of the loan, which is decreasing every time you make a payment.

Most borrowers will find that it’s far less expensive to buy a traditional term life policy and collaterally assign it to the lender than it is to buy mortgage life insurance, especially through the lender.

If the lender does not require insurance to collateralize the loan but you want to have it to protect your family or as part of a partnership agreement, shop around for the best deal.

Jackie

Posted 02:09 PM | Permalink | Comments (0)

3-29-07 Owning Real Estate in an IRA

While it’s possible to own real estate in a traditional IRA, it may not always be the best strategy to take. This issue requires some serious thought and planning. Click here to read one financial planner’s opinion – and be sure to scroll down and read the comment from a reader who is not in complete agreement.

Jackie

Posted 10:03 AM | Permalink | Comments (0)

In his book, Millionaire Real Estate Mentor, Russ Whitney wrote: “Don’t take financial advice from poor people.” Makes sense, doesn’t it?

So how do the very rich invest their wealth and what can that teach you? Private equity and hedge funds are not the vehicle of choice for many high net worth investors. For details, read Fortune reporter Katie Benner’s article, “How the very rich invest their wealth.”

Jackie

Posted 08:30 AM | Permalink | Comments (0)

Thousands of U.S. military troops are so deeply in debt that they are considered security risks. The Pentagon says that overwhelming financial problems can be distracting (a dangerous thing in a war) and also make individuals vulnerable to bribery and treason.

Much of the problem is stemming from the use of high-interest “payday loans.” Click here to read the USA Today article on the subject.

What does this have to do with real estate investing? Directly, not much. But indirectly, it spotlights the importance of the need for financial literacy. People need to understand the difference between good debt and bad debt, and how to borrow money for the right reasons at the best possible terms.

The Rich Dad Poor Dad website has a great tool for testing your financial IQ. Robert Kiyosaki wrote: “My Rich Dad said: ‘In order to get where you're going you need to know where you are.’” Click here to find out where you are.

Jackie
Chief Blogger
Wealth Intelligence Academy

Posted 02:49 PM | Permalink | Comments (0)

One of the most common and costly mistakes investors make is to get emotionally involved with their investments, whether they be real estate, stocks, or something else. When the investment tanks, they can’t let it go.

No matter how skilled you are or how much you know about investing, not every deal will be a winner. When you realize you’ve got a loser on your hands, the best strategy is to cut your losses and move on. Get rid of the bad investment and focus on adding profitable ones to your portfolio.

Carla Fried with Money Magazine puts it well: “If it isn't a good investment, sell. Period.” Click here to read her article, then take an honest look at your holdings.

Chief Blogger
Wealth Intelligence Academy

Posted 04:03 PM | Permalink | Comments (0)