What’s Better - Short Sales or Tax Certificates?

Late night guru’s and top selling books both proclaim tax certificates as a sure-fire way to build wealth. While tax certificates and liens can certainly become a profitable part of your investment portfolio, they are not without risk. When it comes time to investing your hard earned dollars into real estate, what is better - short sales or tax certificates? Keep reading to learn the facts behind the façade then decide for yourself which makes the most financial sense.

Fact- Tax Certificates can generate returns as high as 16 to 18 percent. While that certainly beats putting your money into a savings account or even the stock market, it’s still a far cry away from the returns realized by many short sale investors. Consider this, if you were to take $100,000 and invest it entirely into tax certificates each earning an incredible 18 percent, you would generate $18,000 profit (before taxes, transaction fees, losses etc…). On the other hand, that same $100,000 could be used to purchase up to 5 short sale properties at 20 percent down payment…each of which could easily earn $18,000 in much less than one year’s time!

Fact - Tax certificates and raw land rarely generates residual income. Your money is tied up until the redemption period or the property is sold. Short sales can be rented, leased or otherwise used to generate income prior to the actual sale.

Fact - Tax certificates are not always redeemed! Especially during tough economic times, the back taxes plus interest and other fees may cost more than the property is worth leaving tax certificate investors holding the bag. You can petition to have the property sold but back taxes, liens and other expenses often make it a losing proposition. Worse, if you don’t continue to pay the taxes on the property, additional liens could drive up the total cost even more.

Fact - Liens, environmental restrictions and major clean-ups can further reduce the profit potential of a property even should you become the “high bidder” for a non-performing concern. People promoting the benefits of buying tax certificates for investments rarely talk about the cost of taking acquisition should a property fail to be redeemed. The underlying assumption is the value of the underlying land would compensate for the risk - but what happens if the land itself is the risk? Remember, there is a reason certain properties are forfeited…typically because the value of the property has dropped below the back taxes and other liens or because there is a very high assessment, clean-up fee or restriction associated with the parcel.

Fact - Minimum bids on auctioned properties may not ever reach the minimum you have invested into the property. Further compounding the problem, if more than one tax certificate investor has an interest, proceeds are further divided.

Fact - Clouded title is common. Another relatively expensive problem rarely mentioned in association with tax certificates is the issue of a clouded title or lack of proper recording. Remember, tax certificates only earn those great interest rates if they are actually redeemed - otherwise, you could be stuck with a property you never expected to own and which could cost a small fortune to obtain clear title, pay off existing liens, bring the property up to par in order to sell or even “unload” if excessive environmental or other concerns are noted.

Value Matching - Selling What Matters Most

There is a new trend hitting America that every real estate professional and short sale investor should use to their advantage; getting back to basics. You’ve seen the credit card commercials with feel good family values that claim conspicuous consumption is dead or the big box stores touting stay-cation’s rather than expensive European getaways….but how can you make it work for real estate?

It’s simple once you understand the basics about value matching. Keep reading to learn more:

1.      Don’t Pigeonhole. Value matching is not about putting labels on people; in fact, that is a sure-fire way to fail. Instead, it is about learning what values are important to your target population then meeting their needs by providing the best “fit” possible. Real estate is one of the most important investments most people will make during their lifetime. Aside from the large dollar amount, it is often a critical decision which will define the future of their family and social standing for years to come.

2.      Listen. Value matching requires the ability to listen in order to understand the needs, hopes and desires of the buyer (or seller). It’s imperative to find out what matters most to each client then sell those factors - forget about the typical trappings of success (unless that is indeed what matters most to your client) and instead focus on what they value most. The typical family will fall into several distinct categories including:

*       Family - Young married couples searching for safe, affordable family oriented neighborhoods. Schools, cost, local amenities like parks and safety take top priority.

*       Empty Nester’s - Convenience typically trumps everything else. Low maintenance yards, access to hospitals/grocery/shopping/golf and good neighbors get their attention.

*       Sanctuary - Freedom, privacy and safety is of utmost concern for some; don’t be too quick to put a label since these come in all shapes and sizes. From high net worth individuals seeking solitude to good-ole-boys that want to practice commando moves in their back yard, those seeking safety and privacy will pay a premium for the right property.

3.      Build Relationships - The future will require the ability to build meaningful relationships even for temporary transactions like those of real estate. Trust has become a bigger issue than ever as people feel uncertain about whether or not they are getting a good deal or will encounter trouble later down the road. Word of mouth marketing has always been a real estate agents best friend but now, investors are recognizing the benefits as well.

4.      Position as a Problem Solver - Become more than a sale person or investor by positioning yourself as a problem solver with solutions to people’s most urgent housing related needs. People have an inherent need to feel unique and a growing grudge about paying for simple ‘paper shuffling’. On the other hand, everyone is grateful when someone solves their most pressing problem…even if the cost is higher. Remember, its part of the value you bring to the table during any transaction.

The Truth About These 7 Real Estate Investing Myths

By Julie A Broad

Many people believe that the secret to successful real estate investing is to time the market - buying at the bottom of the cycle. Other people believe that you have to buy properties that cash flow - and that is the most important thing. While people that believe these things may not necessarily be wrong, they are buying into a real estate myth more than a reality.

If you want to make money in real estate, you have to separate the myth from fact. To help you, here are seven of the most common myths dissected:

Myth 1: You don’t need money to invest in real estate

Reality: You DO need money to invest in real estate, but it doesn’t have to be your money. At the end of the day, every real estate deal requires some cash. Even if you do a no money down deal that does not require a cent for a down payment you will still need cash for things like appraisals, inspections and lawyers.

And, almost every property needs a bit of love when you buy it. Even a simple coat of paint requires some cash. So, you don’t need your own money to buy property, but you WILL need money.

This does not mean someone without a penny to their name can’t buy property - but it does mean that person will have to do some networking to find a few sources of funding.

Myth 2: You need a corporation to buy property without risk

Reality: Every situation is different, so you should always get professional advice to determine what is best for you. In most cases, however, a corporation is not necessary at the start. In fact, if you wish to get conventional financing from a bank, you will not be able to buy property in a corporation without personally guaranteeing it. There are exceptions, but even business owners that buy it for their business (example, a Dr. buying a property for his business), will usually be required to personally guarantee the mortgage on their property.

Eventually incorporating may be beneficial for tax or liability reasons, but when you are just starting out, a corporation is just another hurdle that will slow you down to the point of stopping. When you are first starting out don’t worry about complicated and costly things like corporations, just find a good property and buy it. You can always restructure how you hold your properties later on.

Myth 3: Cashflow is the most important thing

Reality: Cashflow is important, but setting your real estate investing goals and then finding properties that help you achieve your goals is the most important thing.

Focusing purely on the numbers can result in buying problem properties that do not attract tenants easily, do not appreciate, and require a lot of work. You always have to consider what you want to achieve, what your exit strategy is and whether the property will deliver on your expectations.

It is more important to figure out what you want, and then find a property that works for you, then it is to find a property that makes plenty of positive cashflow every month.

Myth 4: Buy the Ugly House on a Good Street

Reality: Sometimes the seller of that ugly house thinks their house is worth more than it is just because the comparable properties around it are of higher value. You also might find yourself with a money pit.

If you have a good contractor, you have the money, and you know you can make the ugly house pretty then there often is tremendous opportunity in finding the ugliest house on a good street. But if you are buying the ugly house on the street, just expecting it to be worth more later because it is surrounded by good houses, remember it is still the ugly house.

And, ugly houses do not attract good tenants, even if they are in good locations. If you are not planning to fix it up, you will have a hard time getting and keeping good quality tenants in that property.

Myth 5: All real estate is a good investment

Reality: Over the long term, properties purchased in good locations will usually be good investments. We rarely hear long time investors say “I never should have bought that place” but we often hear them say “I never should have sold that place” or “I wish I had bought that when I had the chance”.

Over the years, real estate has gone up in value nearly everywhere. However, if you buy in an area that is in decline or dependent on one industry that is struggling (timber, fishing, etc,) you are taking the risk. It is possible for areas to decline and never improve.

You can make poor investment decisions in real estate just like you can with stocks. Not all real estate is a good investment, just like not every blue chip company stock is a good investment.

Myth 6: You need to time the market

Reality: Unless you have a crystal ball, you will never know what is going to happen in the market. The reality is that you just have to find a good deal. You don’t have to wait for the right time. In fact, waiting is the worst thing you can do in real estate. The sooner you buy, the better for your wealth growth. Just make sure you buy a good deal.

Your best bet is to focus on your objectives and find a good area with good prospects for the future, and buy there. If you hold onto it for 5 or more years, you will be able to weather any downward turns the market takes, and as long as someone else is paying down your mortgage and it costs you nothing, or very little, to hold each month, you don’t have to time the market.

Myth 7: Real Estate Investing is Easy

Real estate investing is simple, but it is not easy. It takes work. It takes effort to find good properties. Once you own the property, it becomes pretty easy over time.

For more insider strategies for getting started as a real estate investor, sign up for real estate expert Julie Broad’s free monthly newsletter at her website http://www.revnyou.com Get your free report for making money with real estate here.

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Flipping Houses For Profit - Today

By Alex Nghiem

So you’ve decided to get into real estate investing? You’ve done your research, and realized that of all the potential investments out there, real estate investing offers the best returns, both short and long term. That’s great! Now what?

To really profit from flipping houses, you need to have a good strategy. You need to decide how you’re going to go about things, and what your time frames are. Here are a few basics you’ll need to figure out before you get started.

Your Budget

Before you start flipping houses, or getting involved in real estate investing, it’s wise to know your budget. Whether in cash or loans, your funds are finite, and you’re going to have to set a limit on what you’ll spend. Remember though, when venturing into flipping houses for profit, that your calculations need to take into account the cost of repairs and renovations, and possibly realtor or lawyers fees, as well as the cost of the property itself - you don’t want to get caught short when you need to buy supplies, or pay contractors!

Suppliers

If you’re serious about real estate investing, and making profit off the houses you flip, it’s a good idea to find a few good suppliers of paint and other hardware, that offer great prices - the less you pay, the more money you’ll make. Consider buying paint in bulk, and saving. There’ll always be a use for paint, and if you get neutral colors, you should be able to use it on more than one house!

If you stick to the same suppliers, you might also be able to get discounts, or free deliveries, which all add up to more profit for you.

Be Prepared to Get Your Hands Dirty

When you venture into flipping houses as a real estate investing strategy, you’re going to need to do a lot of the dirty work yourself. Stripping, painting and other labor intensive, but not complicated jobs should all be on your to do list.

When it comes to more tricky and specialized tasks, like plumbing, tiling or electrical work, find a local contractor who offers reasonable labor rates, and supply the materials yourself - you’d be surprised at how much you save, but be careful of using really cheap contractors too - the saying cheap and nasty didn’t come out of nowhere, and if the price seems too good to be true, it might just be.

Plan Well

Ideally, you should have a plan to renovate before the ink is even dry on the contract for the home you intend to flip. The sooner you can get your property ready for sale, the sooner you’ll recoup your money, and, if you’re using debt finance, you’ll save on installments. Make sure you plan your renovation well, take time off work if necessary, and if you have it, and you should be able to flip your property in record time.

As with all real estate investing, flipping houses is about knowing the market, careful planning, and being ahead of the pack. Make sure you have all your ducks in a row, and you should be able to make a lot of money, in very little time.

Learn More About Real Estate Wholesaling Download the FREE Wholesale Manifesto Now: Click Here

Alex Nghiem is the co-founder of several Real Estate investment websites and is a well respected coach. His latest project is the just completed Wholesale Manifesto. Learn All about - Real Estate Wholesaling Here.

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Real Estate Investors - “7 Step Formula” to Secure Private Money

By Mike Lautensack

First - Determine how much money you need to acquire a certain property and be sure to include the purchase price, closing cost and complete renovation costs. If you do not know the renovation cost be sure to make your best estimate so you do not leave these out.

Second - Start to market for private lenders. Make a point to tell everyone you know and meet “that you investing in discounted real estate investments and are looking for investors.” Show your potential private lenders how to start investing passively in investment real estate. You can also use other marketing strategies such as sending out post cards to wealthy people or putting up flyers in 55+ communities.

Third - You will need to create a presentation kit to educate your potential private lenders to the power and security of investing in discounted real estate. Essentially, position them as “the Bank.” Deliver your presentation to your contacts within your sphere of influence and your warm market, such as business associates, friends, family, realtors, accountants and attorneys to name a few. Some of these people may know other contacts within their own networks interested in investing.

Fourth - You will find that many potential private lenders have CD’s or money market funds that are only yielding 3% to 5%. Your presentation has to show that you can offer your investors anywhere from 9% to 15% return on their money versus the small returns they are currently getting at the bank. If they stocks or bonds they may be even more willing to invest in something as safe as good solid local investment real estate versus losing 50% or more in their stock portfolios. You need to offer them more income with a secure investment.

Fifth - Once you have a potential lender or two that has expressed some interest you need to present your proposed deal. You will need to show them what it will cost to purchase and rehab the property and what it will be worth once compete. You may want to borrow all of the money to purchase the property. Or you may go to a bank and borrow 80% and then use your private lender to fund the remaining funds.

Sixth - Make sure your private lender sends the funds (i.e., certified check or wire transfer) to your closing attorney or title clerk. Never have the funds made out to you or your company. Create a promissory note for your private lender explaining the terms of the transaction and make sure they are in either first or second lien position on the property.

Seventh - Complete the purchase of the property and rehab and be sure to invite your private lender out a couple times to see the progress so they remain comfortable the investment and build a long term relationship.

I invite you to learn more about Private Money Lending and get FREE instant access to a 60 minute audio and 20-page eBook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by going to http://realestatewealthtoday.com/FREE-eBook.html.

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive
your FREE Real Estate Wealth Newsletter go to Private Money Lending Kit.

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