Residential Real Estate Encyclopedia (R2E2)

Subscribe in a reader

Nouveau Riche offers a home study course to review while you begin your investing career. The Residential Real Estate Encyclopedia (R2E2) is a 15 volume set recorded and written by our educators at college. In this set you will receive information on:

The Checkered Flag – A Winning Approach to Real Estate Investing™

Murphy's Law – Legal Pitfalls in Real Estate Investing and How to Avoid Them™

Diamonds in the Rough – A Guide to Successful Rehabs™

Long Profits on Short Sales™

The Reference – The Building Blocks of Real Estate Investing™

Give me a Break – Tax Minimizing Strategies for Real Estate Investors™

Property Professor – Standard Edition - A Powerful Analytical Software Tool™

Tenants, Toilets, & Termites - Successful Landlording Without Losing Your Money Or Your Sanity™

Effective Real Estate Negotiations®

It’s All About the Money – Raising Private Money for Real Estate Investments™

Divide & Conquer- Creating Wealth In Creative Ways With Multi Family Dwellings™

Put the Gold in Those Golden Years - Simple & Safe Wealth Maximizing Strategies to Enhance Your Retirement™

Here Today, Gone Tomorrow – The Wholesale Real Estate Game and How to Win It™

Flippin’ Explosion – Fix ‘n Flip, the Fastest Growing Trend in Real Estate™

The Standard - Unconventional Profits from Mortgage Financing™

For more information on Nouveau Riche, their products or to attend a local briefing, please contact me in the Contact Us section of my blog.

Happy Investing!

Tony

Seller Financing

Subscribe in a reader

In an earlier article I mentioned a big factor in building your wealth is using leverage. A great form of leverage for obtaining real estate is using seller financing. There are several ways to get seller financing for your deals. The seller can take back a second mortgage, you can take over the property 'subject to' the sellers existing financing, write-up a wrap-around mortgage, and if you are investing in commercial properties you may be able to assume the existing mortgage. Assuming a loan does not exist in residential loans anymore. In this article, I'm going to focus on 'subject to' financing.

As you start to invest you made need to educated certain professionals along the way because they tend to only know one way of operating real estate transactions.

Case in point: I was showing a group of people how to fill out my contracts so they can start making offers on deals. First thing they did was take my contract to their attorney for him to review for accuracy and legitimacy. I'm glad they did this. Trust but verify. I love it! In our next session they came back telling me their attorney had an issue with some writing on my contract. Their attorney told them no title company will close on a deal 'subject to' the sellers existing financing.

The group happened to have their laptop with them. I asked them if they had a HUD 1 Settlement statement in their word documents. After hearing yes, I asked them to open it so I could show them their attorney was wrong. The HUD 1 Settlement statement is a document with all the numbers and closing fees for a real estate transaction. Page 1 of the HUD, Left Column, Line 203 it clearly states 'subject to sellers existing financing.'

I told them to call their attorney and point this out to him. His rebuttal (of course) was "I wanted to make sure you are covering your bases." He was simply saying he didn't know this existed. Imagine how many more transactions he could have closed for his business if he understood this strategy. Title companies issue the HUD 1 for closings and attorney's use them every day.

The more education you have, the more benefits you will receive!

In a 'subject to' transaction you negotiate with the seller to quit claim the deed of his/her house to you but keep the financing in their name. You are now morally obligated to make their mortgage payments. If this is an investment strategy for you, you should have already complied a list of sources to put renters into the home to cover the mortgage payment.

With the transfer of deed, you now own the property and the equity that exists. You must ease the sellers mind ensuring them you will pay their bill every month. As an investor you are not going to put forth all this effort to close the transaction and not make the payment. However, as the investor, you need an exit strategy in case you cannot make the payment further on down the line if you have a shortage of cash or no renter.

My business partner and I put a clause in our contracts every time to get rid of the property if we cannot pay the mortgage because of depleted funds. It doesn't matter if we have $500,000 in our accounts, we still put a clause in for our protection and that of the seller.

If you want to be successful, you must treat this as a business and run it morally and ethically. This will result in building a positive reputation as an investor and more referrals will come your way. There are a lot of people not operating their investing business in an ethical way. The seller suffers and eventually the investor gets caught and is shut down.

I cannot stress enough the value of the right education and who is teaching you. Nouveau Riche's real estate investment college does exactly this. Also, there is a huge community of other investor's in NR that you can talk to and generate more ideas. I'm constantly learning new ways to invest, negotiate and profit on my deals because of the people I associate with. In turn, I do the same for new people getting involved who want to make a difference not only in their life, but the lives of others.

To learn more about Nouveau Riche please contact me in the Contact Us section of my blog.

Happy Investing!

Tony

Nouveau Riche Real Estate Investment College: Knowledge – Power – Freedom

Subscribe in a reader

The title says it all. Nouveau Riche (NR) is a company that teaches real estate investing in a college style format. They use the scientifically proven Instructional Systems Designs (ISD) process to create real estate investors. ISD is the taxonomy for accelerated learning and maximum retention used by colleges all over the country. If you can educated a person to become a doctor or lawyer using the ISD process, why not a real estate investor?

With close to 40 classes being offered, NR designed their curriculum so each individual can choose their own path. Whether you want focus on short sales or fix ‘n’ flips, NR put together a Personal Preference Questionnaire (PPQ) to determine your Curriculum Path that best fits your investing preference. The college offers 100 – 400 level courses allowing you to grow and expand on each course. From ‘Establishing Your Business Vision’ and Understanding Mortgages’ to ‘Rehabbing’ and Multi-Family Properties, NR offers a myriad of classes to start you on your path to wealth.

Each class is taught by an investor/practitioner in their area of expertise. Every instructor must be actively investing, have achieved millionaire status showing proof via their financial statements, and have a FBI background check in order to teach at NR’s college. This ensures credibility of the type of instruction every student will receive.

The college is currently being held at the Renaissance Glendale Hotel & Spa in Glendale, AZ. Classes are offered at different times throughout the year lasting a week for each session. NR is in the process of building a $74 million Entrepreneurial Center that will house the college sessions along with their students. The center will have state of the art technology to further enhance the educational experience for their students.

This year alone Nouveau Riche has been featured in ‘Your Business At Home’, ‘Success’ and ‘Success From Home’ magazines highlighting experiences and success stories from their students. NR has generated tremendous growth over the past 7 years educating people from across the country. They are sweeping the nation teaching people how to establish and run a successful real estate investing business.

Their world premiere education stands on its’ own. I could not think of being taught how to invest in real estate and run a successful business by anyone but millionaires. How about you?

To learn more about Nouveau Riche’s real estate investment college, please contact me in the Contact Us section of my blog.

Happy Investing!

Tony

Retirement Planning and Real Estate Investing

Subscribe in a reader

Disclaimer: I am not a licensed attorney, accountant or financial planner. The information provided in this article is exactly that, information. You should seek a licensed professional when getting ready to establish your business entity, tax strategies, asset protection and retirement planning.

Retirement Plans are a great source of money to use for investing in real estate. A retirement plan is not an investment but a vehicle in which you place your investments. Whether you have a mutual fund, LLC, money markets or real estate, these are investments you place into a retirement plan. The two types of plans are a Defined Benefit Plan and a Defined Contribution Plan. Both have there own set of rules of how they are set up, the amount you can contribute per year and how and when you can receive your money. You can only contribute earned money into these retirement plans.

A lot of people do not know that they can establish self-directed retirement plans to control their own money and grow it tax deferred and tax free in real estate. The reason for this is the retirement plan owns the account and not the individual. You can take money out, invest it in a piece of real estate tax free, and after the money comes out of the property, put back into the retirement account tax free. As long as you do not borrow on the account, it is tax deferred money until you are ready to do so.

Example: Tom has $5,000 in a self directed IRA. He finds an apartment building that fits the criteria of his buyers and places the $5,000 into escrow. The property is being sold well under market value with a $3 million equity position. Tom knows his buyers can move quickly with cash to buy the building. Tom contracts the property and assigns his rights over for an assignment fee of $200,000. Tom then puts the $200,000 back into his retirement account tax free and it will be tax deferred until he draws on the account.

If you approach a financial planner and tell them you want to do this type of investment, they will tell you it can’t be done. Well, it can’t be done by them, but it sure can be done by you. They may tell you it is illegal. But the truth is they can’t do it because they will not earn a commission on the transaction. It is legal to do all day long in a self-direct retirement plan (SDRP).

***The wealthy write the rules. When you know the rules, you can play the game!***

Is it really legal? Check Section 408 of the IRS code, this governs retirement plans and IRS publication 590, pages 40 and 41 tells you what are prohibited investments from your retirement plan. Real Estate is not listed as a prohibited transaction. Make sure you consult with the right professional to set up the transaction properly. There are written instruments needed to make the transactions possible. Once the plan is in place you can take checkbook control of your IRA.

This topic is extremely detailed. I wanted to give you a little taste of using your retirement plan as another vehicle for investing in real estate. There is currently $3.7 trillion dollars in retirement accounts and this number is going to swell over $10 trillion dollars over the next 10 years as the Baby Boomers start to retire. Investing in real estate is the safest, most profitable investment in the history of business and finance. When educated by the right people you have the ability to grow your wealth at your pace. Curtis DeYoung teaches IRA and Retirement Planning at Nouveau Riche’s real estate investment college. He has many years of experience in this area. I highly recommend his services. Click on American Pension Services in the Recommended Links section of my blog.

Happy Investing!

Tony

Taxes for Business and Real Estate Investing

Subscribe in a reader

Disclaimer: I am not a licensed attorney, accountant or financial planner. The information provided in this article is exactly that, information. You should seek a licensed professional when getting ready to establish your business entity, tax strategies, asset protection and retirement planning.

Tax planning strategies for your business and real estate when utilized properly will save you more money resulting in higher profits and lower expenses. It may seem time consuming for you to maintain good bookkeeping records of your taxes plus the cost of professional services, but the long term benefits of hiring the right individual will be substantial. Even though you are using a professional for your taxes, I highly recommend having a basic knowledge of tax planning.

Keep Receipts and good Records- It won't keep you out of an audit 'per say', however, if you do get a letter or call from the IRS, it will certainly help you to have good records to present your side of the story. We recommend clients keep as many receipts as they can and keep their tax and important business records for at least 6 years. One of the most efficient and effective ways to keep receipts is through the new software and equipment Neat Receipts©. The most important thing is to find a system that works for you and be consistent. (1)

Establishing your entity, type of income generated and the types of assets being held by your business will help you determine the type of tax planning you will need. Each entity has its pros and cons and when it comes to these specific factors, there is a recommended structure for all of them.

S-Corporation- In some instances, clients should actually transfer the ownership of their real estate to an S-corporation. This is in a situation where the taxpayer is considered a "dealer" or "real estate professional," and the sale of the property is short-term in nature and will create a self-employment tax problem. For example, if you are flipping short-term property, building spec homes, completing "short sales" or flipping foreclosure property, the property should really be transferred to an S-Corporation before the sale.

On a cautionary note, please consider three important issues: 1.) Sometimes "due on sale clauses" in your mortgages apply to certain types of transfers, 2.) title insurance policies are generally not going to cover the entity you transfer the property to, but only cover the original buyer; consider a warranty deed to ensure the policy is not terminated, and 3.) transfer taxes may apply in certain states to a transfer of real property. For example, Florida has an onerous transfer tax scheme; in summary, we want to point out that we rarely see "due on sale clauses" as a problem and "title policies" thwarted with a transfer to your own trust or entity. (2)

Another factor that will determine your tax structure as a real estate investor is what type of investor you are. Whether you are a dealer/professional or non-dealer/non professional there are benefits and drawbacks for both. You may want to consider a multi-entity structure depending on the type of business and investment strategies you will engage in. A multi-entity structure when set up properly has great tax advantages.

Owning your own small business is a great tax strategy with many tax deductions to consider. Not every deduction is available for every business owner. You should speak with your professional team to verify what can and cannot be deducted. One deduction I personally like is paying your spouse and kids to do work for your business. I was amazed the first time I saw this diagrammed from our educator at Nouveau Riche. Be sure to keep a record of what your family members are doing in the business so you can show it at tax time.

There is a lot of information on tax planning. It’s impossible for me to type 10% of what is out there. I didn’t even cover that much in this article. I wanted to give you a taste of what is possible. Understanding the concepts will give you enough to get started. Leave the actual work to the professionals and stay informed.

Mark Kohler’s Tax Strategy and Legal Strategy classes were my two favorite at Nouveau Riche’s Real Estate Investment College. He makes it exciting and very easy to understand so you can grasp the basic concepts. You need to have an understanding of these principles before engaging in your business or investing. This information will help you immensely, minimizing your risks and maximizing your profits.

Happy Investing!

Tony



(1) Source – Kyler, Kohler, Ostermiller E-Newsletter March 2008.
(2) Source – Kyler, Kohler, Ostermiller E-Newsletter May 2007.

Entity Set-up for Your Business

Subscribe in a reader

Entity Set-up for your business

Disclaimer: I am not a licensed attorney, accountant or financial planner. The information provided in this article is exactly that, information. You should seek a licensed professional when getting ready to establish your business entity, tax strategies, asset protection and retirement planning.

Protecting yourself from liability when you operate a business should be your number one priority. Although there are a variety of entities you can establish based on the type of business you are going to run, I’m going to focus on four of them in this article. They are a Sole Proprietorship/General Partnership, Limited Liability Company, (LLC), S-Corporation and C-Corporation. These entities can be set up for any kind of business. They are not limited to real estate, but as I break them down, you will see where a certain entity will work for you and how it relates to your business.

A Sole Proprietorship/General Partnership is a cheap and easy way to get started with your business. There is no written agreement that needs to be established to start operating and moving forward. A General Partnership only requires a handshake but every partner is liable for their actions and can put the partners at risk based on those actions. The major downside of both is you have Unlimited Liability. If you are sued, the courts can not only go after the assets of the entity, but your personal assets as well.

A LLC, S-Corp, and C-Corp all provide asset protection but differ on your tax planning, shareholder planning and raising capital. Proper formation, annual meetings and operations for your business are essential. Do not co-mingle your personal and business finances and you should follow the procedures of operating your business under one of these entities. It will be easier come tax time and keep you reputable. If you enter into a Family Limited Partnership you will want to consider asset protection and have 2 entities. With the right education and professional help, this will do wonders for your business.

A LLC is a great entity for buying and holding real estate rentals including both residential and commercial properties. Along with a Sole Proprietorship, a LLC has Self Employment Tax. However S.E. Tax does not apply towards rent, royalties, capital gains and any long term passive type income. It is a great entity set up for long term real estate investing.

C-Corps is great for raising capital and if you want to take your business public in the future. The negative side for a C-Corp is double taxation. When you take money out of your C-Corp you have to pay Corporate Tax before you pay your individual Income Tax. Why throw away your money if you are not planning on going public with a C-Corp. This leads us into the S-Corp. A great entity if you are providing a product or service.

S-Corps have no Corporate Tax and no Self Employment Tax. You do need to take a salary but here is where the beauty lies with S-Corps. You can divide the money you take out of the S-Corp into a salary/dividend split. You pay normal taxes on your salary but on the dividend split you only pay income tax. If you made $100,000 in your business and you did a 1/3 - 2/3 split, 1/3 going to salary, you are paying normal taxes on this money and only income tax on the dividend money. You save yourself money with this type of entity and accounting set-up. S-Corps are great for short sales, wholesales, fix ‘n’ flips, any short term real estate investing and any business providing a product or service.

LLC’s, S-Corps, and C-Corps all provide the same inside liability protection. Based on the type of business you are operating will determine the type of entity set-up you will choose to protect yourself. Do not believe the hype of the existence of a ‘bullet proof’ entity. If someone tries to tell you there is such a thing do not believe them. The corporate veil can always be pierced if someone wants to diligently go after you. These are the four most widely used entities but this is the extreme tip of the iceberg for corporate protection. I have not even gone into multiple entity set-ups, talked about insurance protection or asset protection for some real estate investing.

As I have said in the past, in is not what you are being taught but who is doing the teaching. You can learn a lot more by attending Nouveau Riche’s real estate investment college and purchasing their home study course. The educators are millionaires in their areas of expertise and cannot teach unless they have reached this status and prove it. If you are interested in learning more about our college and other products, please contact me in the Contact Us section of my blog.

Happy Investing!

Tony

Entrepreneurialism

Subscribe in a reader

Merriam-Webster defines Entrepreneurialism as: 'one who organizes, manages, and assumes the risks of a business or enterprise'

It takes a lot of desire, determination, drive, ambition, sacrifice and the willingness to not give up in the face of adversity. If you have these qualities, becoming an entrepreneur will be an extremely rewarding experience. No matter what business or enterprise you are starting these qualities are demanded of you. Real estate investing is no exception because it is a business too. I will emphasize again that continuing education in your field must be constant.

My business partner and I had to revise our purchase contracts because of the changing laws for investors in our state. I made him aware of this and he contacted our attorney immediately so the changes could be made. If not we would have been in violation of state law resulting in a possible felony charge. Stay on top of your industry's news and laws.

Here are factual statistics about entrepreneurs:

*Entrepreneurs account for the majority of new job creation and innovation.

*Entrepreneurs who have no employees account for 75% of businesses in America.

*This past year, nearly 20,000 entrepreneurs grossed over $1 million in a home based business environment.

*On average, entrepreneurs make at least 25% more than the general population.--Experian, August 2006

*62% of entrepreneurs in the US claim "innate drive" as the number one motivator in starting their business.--Northeastern University's School of Technological Entrepreneurship, October 2006

*62% of entrepreneurs say they do not have a family member that is an entrepreneur.--Northeastern University's School of Technological Entrepreneurship, October 2006

*37% of entrepreneurs identify family members as the biggest inspiration in their life.--Northeastern University's School of Technological Entrepreneurship, October 2006*

42% of entrepreneurs say they launched their first venture during childhood (i.e. lemonade stand, paper route, etc.).--Northeastern University's School of Technological Entrepreneurship, October 2006

*49% of the nation's businesses are operated from home.--US Census Bureau, September 2006

*68% of business students are interested in owning their own business.--Collegiate Entrepreneurs Organization, July 2006

*More than 70% of early-stage entrepreneurs are already employed workers.--GEM, January 2006

*44% of small business owners say they love what they do and "cannot imagine" making a living any other way.--Open from American Express, May 2006

*69% of teens say they would like to start their own business; 25% saying they would like to start a retail business.--JA Worldwide Interprise Poll, September 2005

*65% of small business owners would tell a friend to start a business now, rather than wait a year.--MasterCard International, January 2006

As an entrepreneur, you must take on the qualities demanded of you to succeed and be willing to create success for others. The more you give, the more you receive. It is a fact of life. The founders of Nouveau Riche have put in place the highest quality support system for those who want to start their entrepreneurial career in business and real estate investing.

For more information and to get your questions answered about our education and getting started, please contact me in the Contact Us link in my blog.

Happy Investing!

Tony

The Art of Wholesaling

Subscribe in a reader

Wholesaling properties is the investment strategy I used to get started as a real estate investor. To wholesale is to buy something less than retail and re-sell it for a profit. The common practice of wholesaling in real estate investing is to contract a property for purchase and 'assign' the contract to an end buyer who will actually close on the property and own it. The wholesaler finds, analyzes, negotiates, and contracts properties for buyers. He/she is the middleman in the transaction and will sign a ‘purchase contract’ with the seller and sign an ‘assignment of contract’ with a buyer. The wholesaler receives an assignment fee as payment, not a commission. Using the term commission and not being a licensed agent to receive a commission will get you into hot water.

If you want to wholesale properties, the first step I recommend is to build your buyers list. A lot of people I have taught to wholesale seem to refuse to do this all important first step. They get excited about finding deals but have no one to give them to. Build this list first. The saying goes, “if you build it, they will come.” Thee most important rule to follow is, what is your exit strategy for every deal? Contracting properties for wholesale is great, but if you have no one to market them to, then what is the point? Build your list!

You need to find out from your buyers what type of properties they are looking for. I was wholesaling rehab properties because there was more equity spread in the deals. A bigger equity spread will allow for you to possibly receive a higher assignment fee. However, this should not be your focus. The bigger the equity spread will probably equate to more work needed on the property. You will have to factor in the rehab costs which will reduce your chance for a higher fee. Your primary focus should be giving your buyers a great deal. As time goes on, the more quality deals you give them could result in a higher fee for you.

A general equation used in the industry for contracting rehab properties for your buyers is as follows:

After Repair Value (ARV) X 65% - Repair Costs.

Example: ARV - $200,000 X 65% = 130,000 - $25,000 (Repair Costs) = $105,000. This is a good price to start negotiating to contract the property.

$105,000 Contract Price
+25,000 Repairs
$130,000 Cost for rehabber
+10,000 Re-sale after repair - Realtor commission (if rehabber uses Realtor)
+10,000 Estimate Closing costs, holding costs for repair time
+5,000 Assignment fee
$155,000 Total cost for Rehabber

$45,000 Net Profit for rehabber and $5,000 assignment fee for wholesaler. Remember these costs are estimates. Repair costs may be more or less. I made these numbers up for this example. Find out as much as you can about the seller and the property. The more you know, the more negotiating power you will have to contract the property at a lower price.

Depending on the quality of your negotiating skills will determine how solid your purchase contract will be along with protecting yourself in case one of your buyers does not want the property. You will want exit contingencies in your contract in case none of your buyers bite on the deal. The more you have written in your contracts, the better chance of getting out. All contracts have contingencies such as financing, title, inspection, etc. It is in some of these contingencies that I add on to, to protect myself in case I need to get out. I also include my own contingencies for further protection and wording in the contract so there is no money out of my pocket. Remember, everything in real estate is negotiable. The extra contingencies I add in always gets me out of the contract if needed.

I only give out these extra contingencies to those who commit themselves to further education. This is the way I learned. If you are truly committed to learning how to wholesale and get the best real estate investment education, contact me and I can get you started today. Once you commit, I will fill in the rest for you so you have a solid win-win-win transaction for all parties involved and you will have my team as a resource. One couple who committed to further educating themselves called me and asked me to show them how to do this. Last year they made over $600,000 in their business and real estate investing. Of course, they took action. Will you?

If you are ready, contact me in the Contact Us section of my blog.

Happy Investing!

Tony

Foundation for Building Your Business

Subscribe in a reader

When I opened up my page, this was the Inspirational Quote:

"Good advice is always certain to be ignored, but that's no reason not to give it. "

The quote is perfect for this article. Although it will not be a long article, I'm going to introduce you to a product every entrepreneur must have in their library. When you are starting your business you need to have a solid foundation and build upon it. As an entrepreneur, you are taking on sole responsibility of your business and the liability that goes with it. Specialized knowledge is essential to lay the base of your expanding venture. Most businesses fail because they don't know or ignore these imperative pieces of vital information.

Remember the quote from above. If you are serious about starting any business, this product is for you!

S.E.E.K. (SUPER ENTREPRENEURIAL ENCYCLOPEDIA OF KNOWLEDGE)™

Learn how to take back the AMERICAN DREAM and gain your financial stability with S.E.E.K. (Super Entrepreneurial Encyclopedia of Knowledge)™! Learn vital information for business success from the best—Master Entrepreneur and Venture Capitalist Jim Piccolo! Mr. Piccolo has gained national recognition as a member of a recent round table with the President's Advisory Council on Financial Literacy at our nation's Capital. Through the Super Entrepreneurial Encyclopedia of Knowledge™, compiled by a team of select subject matter experts and professional university curriculum designers, Mr. Piccolo shares his vast business expertise and the “Super-Entrepreneur” way to:

• Write a Detailed Business Plan

• Create a Comprehensive, Expandable, and Scalable Marketing Plan

• Build a Feasible Economic Model

• Design Accurate Projections

• Find FUNDING for Your New Business OR to Expand Your Business

• Build Long-Lasting Relationships and Leverage Them for the WIN-WIN

• And much more!

S.E.E.K.™ offers 10 video modules delivered via the Internet with 3 topics/segments per module, for a grand total of 30 INSTRUCTIONAL SEGMENTS! Each segment provides 15-30 minutes of critical information for a total of OVER 10 HOURS of Instruction! Access ALL modules at once and view them at your own pace!

MODULE 1: ENTREPRENEURIALISM

MODULE 2: BUILDING RELATIONSHIPS

MODULE 3: HUMAN RESOURCES

MODULE 4: MARKETING

MODULE 5: TAX STRATEGIES

MODULE 6: FINANCIAL LITERACY

MODULE 7: CREDIT

MODULE 8: SOURCES OF FUNDING

MODULE 9: BUSINESS PLANS

MODULE 10: FRANCHISING

Retail Value of $1,695

PLUS - RECEIVE SPECIAL BONUS GIFTS - FOR FREE!

Property Analysis Wizard (P.A.W.)™ A powerful and analytical real estate investment computer software tool -- retail value of $1,295. MORE INFO

AND

Computer Property Analysis

Live Instructional Level 200 Course

A live property analysis training session that exposes learners to a variety of on-line property information -- retail value of $400.

If you have questions or are ready to purchase this product, send me your contact information in the Contact Us section.

Happy Investing!

Tony

http://www.youtube.com/watch?v=NgbHLxt4Xw8

Today's Real Estate Market

Subscribe in a reader

This is an extremely hot topic in the news. Everywhere you hear of foreclosures, slow selling or no selling of properties, property values going down and banks going under because of non-performing mortgage notes. Fear is blasted into everyone's face minute-by-minute and a lot of people don't truly understand what is going on. To go into deep detail would take days to write this article and the flesh on my fingertips would wear away to the bone. I'm going to cover 3 topics regarding today's market and how you can profit from it as an investor. They are:

1) Why there are so many foreclosures
2) Why banks are going under
3) How you can benefit/profit as an investor

I was a mortgage broker before I started investing. The mortgage products available to consumers in the sub-prime market were vast based on credit. All the products were 2 and 3 year adjustable rate mortgages (ARM’s). 100% purchase and refinance products were available to people with lower credit scores and no cash reserve requirements. A lot of these consumers had less than perfect credit showing a history of not managing their finances to their best ability. I know some people had divorce issues and job losses, but for the majority, this was not the case. Simply, they over-extended themselves causing financial turmoil in their lives. I’m not going to lay blame on either the consumer or the banks but both are a factor in today’s market.

Why? The banks had mortgage products consumers could not afford long term. However, these products were designed for the consumer to clean up their credit over a 2 or 3 year period, refinance and obtain a better loan product. On the contrary, knowing the consumer they were marketing to with a poor credit history, the banks could capitalize on these consumers over and over again refinancing them into the same product because of their spending habits and mind-set. You could place blame on both. The banks for having products consumers could not afford and consumers for signing on the line knowing they could not handle a mortgage long term. You be the judge, jury and executioner.

Day after day we are hearing of banks closing, changing their charter status, and merging with other banks and financial institutions. Why are all of these banks going under? Answer: Non-performing loans. Lenders package mortgages and sell them in the secondary market. This allows them to borrow more money to make more loans. When the consumer stops paying on the note and goes into default, it is now a non-performing asset to the bank.

How does this affect the bank and why they go under? First, for every dollar a bank brings in from a performing note, they can lend 7 to 10 times that amount. The opposite holds true when they have a defaulted note. For every dollar they have on their books from a non-performing note they must have 7 to 10 times that in liquid reserve. This is when they actually take the home back. If a bank has 10 homes on their books at $200,000 each, they must have $14 million to $20 million in cash reserves. More homes, more reserves. Do the math.

Next, their stock goes down upsetting their shareholders. Shareholders sell and bring down the value of the lending institution. The banks credit rating with the Fed goes down resulting in higher interest rates when they borrow. This ripple effect eventually results in the banks insolvency. Banks are in the lending business and suffer when they have to take back all of these homes.

With the right specialized knowledge, an investor can profit in ANY market condition. Understanding why the banks are suffering allows them more negotiating room for a discounted purchase on a short sale or a real estate owned (REO) property that is on the banks books. What about financing and the credit crunch? Private money is key for investors in today’s market. Outlining the terms and conditions and the return-on-investment (ROI) to your private money source will result in a win-win for both parties. There are other investment strategies you can use in this market to profit such as ‘subject to’ purchases, lease options, and option contracts. The smart investor buys at a wholesale price and not retail. With the banks having so many problems, now is the time to get great discounts on properties.

The right education is needed to invest in real estate. The most important factor in your education is “who” is doing the teaching. I learned from attending Nouveau Riche’s real estate investment college. The educators are practitioners in their area of expertise. They have achieved millionaire status and cannot teach unless they have proven this. The resources provided by Nouveau Riche are priceless.

For more information regarding Nouveau Riche’s education, products and community benefits, please contact me in the Contact Us section of my blog.

Happy Investing!

Tony

Real Estate Investing vs.Traditional Investing

Subscribe in a reader

In this article we are going to compare traditional forms of investing vs. real estate investing. You will see the advantages real estate investing has when you break down the numbers.

For both examples we will use $10,000 available to invest.

Traditional Investing: Savings account @ 3% annual return. $10,000 x 3% = $300.

CD @ 4% - 6% annual return. $10,000 x 4%/6% = $400 - $600.

Mutual Fund @ 7% - 12% annual return. $10,000 x 7%/12% = $700 - $1200.

Stocks @ 12% - 20% annual return. $10,000 x 12%/20% = $1200 - $2000.

You want to buy $200,000 worth of stock. A bank will never finance $190,000 for you to invest in stocks because there is no guarantee in them.

Real Estate Investing: Take the same $10,000 and go to your bank. A bank will finance all day long as opposed to stocks because the house is collateral for the bank. If you recall in the last article, if the home is destroyed, there is insurance and value in the land.

Purchase price: $200,000

Down Payment: $10,000

Finance: $190,000

Annual Appreciation 6.3% (national average)

1st year profit = $12,680. This equates to a 127% return on your investment. You will not see a return like that in the stock market. Even if the house appreciated 2% on $200,000, your return is still higher than a well performing stock at a 20% return.

What if you purchased 10? What if you were educated to buy homes no money down with equity already built in? There are ways to invest in real estate without using your cash or credit to purchase these types of properties.

In my next article we will discuss building a foundation to start your business.

Happy Investing!

Tony

Why Invest in Real Estate

The three basic needs of people are food, water and shelter. Everyone deserves to have a place to live they can call home. Whether they own or rent, people want safety in shelter. Real estate is an incredible vehicle to build your wealth and provide a basic need for an individual or a family. Real estate investing is not a get-rich-quick phenomenon and it takes a general understanding of how people have obtained their wealth through various investment strategies.

Here are some keys to understanding how people built their wealth in real estate. First, they treat it as a business and not get emotionally involved in a piece of property. Yes, everyone gets emotionally involved in their personal residence, but never feel this way while investing in it. Investors focus on the numbers and the deal first, then choose whether or not it will fit their criteria for their personal portfolio.

Second, real estate produces income if purchased correctly. There are two types of income, passive and massive. Passive income is money that is generated on a monthly basis from rentals. Once any debt is paid, whatever is left is positive cash flow, or passive income. Massive income is generated from working short sales, wholesales, and option contracts, where you receive larger lump sums of money at closing. Investing in real estate also provides excellent deductions, depreciation, and equity build-up through appreciation. Let's see how the wealthy got this way over a period of time.

The formula is quite simple when you get out of the mindset of wanting everything right now. Yes, you can close on deals and make nice lump sums of cash, however the wealthy became wealthy by investing in buy-and-hold properties. That's right, rentals! This is where equity build-up, appreciation, and renters come into play. Over extended periods of time, not only does the house appreciate, but the renter is paying down your mortgage. The market increases the value and the renter opens up more equity as they pay down your debt.

Imagine if you will owning ten rentals for 30 years. You purchased each one for $150,000. The national appreciation average over the past 40 years is around 6.3 percent. Factor that percentage every year for appreciation and your mortgage being paid off by someone else, and your portfolio's net worth is well over $1.5 million. Imagine having twenty. Imagine having 100 units in an apartment building. I'll repeat, you must treat this as a business in order for you to achieve this potential.

I'm sure you are asking yourself, how did they keep these properties for 30+ years when there were extended vacancies, rehabbing and going through a down market? Simple, they had a cash producing business to cover the debt when needed. A well-educated investor is not going to go in head first and overextend themselves. Education is a must, along with setting up business plans and building a support team to minimize their risk.

A cash producing business can be anything. You could start off by doing short sales, wholesales, and option contracts to build cash reserves to purchase buy-and-holds. Make sure you budget cash reserves for each buy-and-hold for both debt service and maintenance. You should factor a reserve amount depending on the monthly service of each property's debt.

Finally, investors maximize leverage. This is the biggest component of being successful as a real estate investor. They leverage everything! They use other people's knowledge, cash, credit, tools, resources, contacts, partners, anything and everything. No one knows it all and has all the answers. Leveraging these areas will increase your chance of success, minimize your losses and maximize your profits.

Real estate will never go away. It will never hit zero. You have insurance for disasters and there is always value in the land. Build up your wealth over time and start a cash producing business if you want to survive and play this game successfully. It takes hard work, long hours at times and some sacrifices to get started. If you prepare yourself and build your team you will grow and the feeling is very rewarding.

Happy Investing!

Tony

Test

Test