Real Estate Investing Webinars Now Available!

eRealtyInvestors has chosen to host online webinars for their investors. Seemingly, it makes the busy professional more inclined to learn more about real estate investing from the comfort of their home, business, or even while on vacation (must have internet connection).

Please refer to http://www.erealtyinvestors.com. eRealtyInvestors also holds in person real estate investing workshops in San Diego, CA and Concord, CA.

Instant Gratification Leads to Impatient Investors

Today’s lifestyle promotes people to receive instant gratification. Whether it be starting up the gas fireplace with a flick of the switch, or popping food into the microwave to sit down and watch your favorite recorded shows while skipping past the commercials. Of all things we can think of, unfortunately, real estate does not work that way.

Remember back in the 90’s when we had dial up internet? It took over 5 minutes sometimes to load pages. Could you imagine waiting that long to look at the weather, check your email, or even look at real estate listings? Google and Yahoo! take only milliseconds to find hundreds of thousands of results now. Shoot, back then it was easier and faster to wait and watch the news to hear the local forecast! Ok, maybe not, but with all the creative inventions and time saver products that are out there in the world, there is not a way to speed up time to make money in real estate.

Effectively building wealth takes time. There are no cheat codes for money, health, winning poker hands, and glamour in life. Wealth is not something you can turn on and off with a remote. It doesn’t happen overnight unless you inherited money from a rich uncle or you won the local sweepstakes. Considering the alternatives to making it rich overnight in real estate, you have rampant appreciation and flipping homes.

As a real estate investor, it is not only incredibly difficult to ride the appreciating wave or make it in the flipping game, but these niche investments take time, dedication, and precision. One minor calculation or market change, and the investment could be toast. Let alone if you put a few eggs in one basket. Comparing gains from losses in most speculative deals, if it were as easy as everyone said it was, why isn’t everyone rich? Easier said than done, right?

While looking at flipping houses and following the appreciating markets, there really are not many “wealthy” people who made their money flipping homes. Yes, most successful people have made their money in real estate, but they did so by not selling their equity. Holding real estate is part of true wealth, where your total assets (things that make you money, not just money alone) make more than your total liabilities (things that cost you money).

Over time, wealth can be achieved by any investor. Success rates can be attributed to the types of real estate markets that people invest. Area’s that forecast above average growth are markets that can yield better returns. Let your wealth gratification build with time. As much fun as it would be to create wealth overnight, for the majority of people, it is impossible and irrational. Furthermore, until Google, Yahoo! and Microsoft create a time machine, you should quit thinking of the get rich quick real estate investments, and begin building your wealth. Every day you keep looking for that killer deal is another day you could have added to your wealth creation. A day at a time seems like forever, but your payday will be here before you know it.

What’s The Big Deal With All The Deals?

Most people agree that buying something under priced is the name of the game. How much fat can you trim before you start getting to the muscle, bone, or until it’s severed off? Time will tell with today’s talk about foreclosures and REO's. Everyone I run into asks if they saw this week’s list of sold foreclosures. Or if I saw the latest listed properties that are priced so low, people are offering more than the asking price to purchase the property. Has it ever dawned on you that the banks understand the deal with deals? Price them low enough and people won't be able to resist the deal, bailing them out of the mess they created for themselves.

I have seen them. I have heard about them. I have thought about what those people are actually buying, and I figure that people are glad because they got a deal. The deal made it fun, not the fundamentally sound choice for purchasing, or the likelihood of the returns that property will make in time to come. Like Louie has said before, “When you go to Macy’s and the signs say 40% off, what does that really mean? It means that you are paying 40% less of the marked up price.” In other words, how much was that marked up in the first place?

Looking at home prices throughout the East Bay Area within the last few years, the markup was incredibly high. Although prices are becoming affordable again, the homes that are marked way down, even though they are still overpriced, are like the clothes you find at a Goodwill store. No one else wanted them so they get rid of the inventory at below clearance prices.

Be weary of missing fixtures, dead landscaping, broken windows, or holes in the wall because often, this is what people are buying. So the big deal about today’s deals is that you got a deal. The deal is to say to one another, I bought this home for only $__ thousand dollars is all most people can brag about. On the other hand, this is the correction of the over valuated housing market. And, it has provided some good buys for the few smart purchasers.

The point of all this is that don’t buy a foreclosure to say you’ve bought a foreclosure. Make sure the bank owned property fits your need; financially and not emotionally. Be sure that the property fits comfortably within your lifestyle and tolerance level. I sure know I don’t want the deal in one of America’s ghetto’s for $135,000…I can tell you that much right now. That might be a steal, but I don’t know if I would want to go there and sleep, let alone visit. Consider what you are buying, what you intend to do with the property; and if you have the tolerance to put up with your “deal.” Sometimes a deal isn’t the deal you’re looking for. Be selective and find the right purchase for you, albeit a new home, one a few years old, or a REO/foreclosure.

Friends, Family and Investing Don't Always Make A Good Combination

Horror stories tend to come up when people say investing, friends, or family in the same sentence. Okay, maybe its not that general, but most of us can say we have heard a story where investing with friends or loved ones went awry. Shoot, just look at Paul McCartney!

While getting together with those closest to us, we talk about investment opportunities and how great it would be to go into them together. Everything pencils out nicely and the commitment on the good ole’ fashioned handshake begins the new venture.

Before getting caught in the exciting thrill of a new investment, with real property or not, make sure you have a binding contract that spells out what is to happen when. A properly written agreement will ensure a peaceful exit of the investment opportunity, successful or not. Ventures dealing with substantial financial investment can often turn sour when forcasts and opinions conflict. Most importantly, a handshake will not hold up in court, so be sure to not only trust your partner but require all the interested parties (including you) bound to some agreement that you originally had planned. I figure that anyone worth going into business with would not mind spelling out who is to get what, at what point, and for how much initially, so on and so forth.

Like Paul McCartney, he unfortunately did not make a wise choice as he lost over $48 million to his now ex-wife. I don’t think Heather Mills contributed much to McCartney’s $800 million estate…but who really knows? Maybe she was a background singer, off camera and off stage…or singing at home even???? Oh, that’s right…she was there for moral support! (I do have to say, look at her return on investment….$48 million through only 9 years of marriage! Not too shabby)

The point of the example above is that even those that you love, at least at one point or another, can take advantage of you. Consider speaking with an attorney to see how you and your close business partner/friend should approach your venture. Having partners in a real estate deal should not be excluded.

Mortgage Relief Act of 2007

What is the Mortgage Forgiveness Debt Relief Act of 2007?
It was enacted on December 20, 2007 and allows homeowners to exclude income realized as a result of modification of the terms of your mortgage, or foreclosure of your principle residence.

What changed?
In the past debt that was forgiven or cancelled by your lender would have been included as income on your tax return, and would have been taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principle residence from income.

What about refinanced homes?
Debt used to refinance your home qualifies for this exclusion, buy only up to the extent that the principle balance of your old mortgage, immediately before refinancing, would have qualified.

Does this apply only for the 2007 tax year?
No. It applies to qualified debt forgiven in 2007, 2008, and 2009.

If the debt is forgiven from income, do I still have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and the form 982 must be attached to your tax return.

Can I exclude debt forgiven on my second home?
Not under this provision. Only cancelled debt used to buy, build or improve your principle residence or refinance debt incurred for those purposes qualifies for this exclusion.

How do I know or find out how much was forgiven?
Your lender should send you a Form 1009-C, Cancellation of debt, by January 31 of the year following your debt relief.

Is there anything else I should know?
Yes. Because The Mortgage Forgiveness Debt Relief Act of 2007 was passed so late in the year, the software systems used by tax preparers and the IRS needed to be updated to accept the revised Form 982. This occurred in the first week of March, 2008. If you filed earlier than that and are qualified to receive the debt forgiveness, you should speak with a tax professional as soon as possible about your options. For more information on this topic, log onto www.IRS.gov.

Happy Investing!

Information provided herein is deemed reliable but is not guaranteed. Please consult with an attorney or tax consultant before making any decisions.

Timing the Real Estate Market Can Be Like Casino Gambling

Trying to time the real estate market is similar to gambling at a casino. You sit around the edge of a table waiting for it to get “hot,” or you wait until someone leaves a slot machine after playing for hours on end. The fact of the matter is, when that table does get hot, you have no where to sit! People who recognized the opportunity began playing well before you, and now you are kicking yourself in the butt for not sitting down earlier.

The same generalization can be applied to real estate. Too many times do I hear investors that tried to time the market and regretting doing so. Sometimes they were not able to buy the property they wanted because someone else beat them to the punch, or because they realized it was going to get hot again a little too late while missing their window of opportunity. Furthermore, we all could say…”If I had only bought 10 years ago” or “I should have never sold that house.” Likewise, the gamble on timing real estate is almost always not worth it.

By purchasing real estate for the right reasons, there really is no need to time the market. When numbers work, they work in good times and in bad. When they don’t, that isn’t the property for you. It really is that simple. Today’s real estate opportunity stems from a mess created years prior. If you are financially healthy today, you can take advantage of the available inventory before everyone else does. If you secure a 30 year fixed mortgage, and the numbers work on the investment property, it will still work 5 or 25 years down the road. Real estate investing can be thought of like a mutual fund. You don’t worry about the short term up’s and down’s, but the upward potential it has over time. The greater benefit to owning real estate rather than a mutual fund is that you have leveraged funds doing more work for you while obtaining tax benefits.

Don’t be the one to sit on the sidelines and say “Shoulda, coulda, woulda.” This time be that person who takes initiative and buys at the bottoming real estate cycle, instead of on the rise. If the property value decreases it won’t hurt your cash flow because you were smart financially and secured a fixed rate loan.

My advice comes from all the stories I have heard about while growing up from people who have kicked themselves in the butt. It is just not worth it. Your reward will most definitely outweigh the risk when you purchase for the right reasons.

Easy Way to Attract Renters: "Wow Them"

Many of us have all gone new home shopping. Whether or not we planned on purchasing a home, or just wanted to dream about what it would be like living in the well-planned community. Most of us can say we have at least looked.

Remember walking through the model homes and distinctively thinking that one model stood out more than the others. The floor plan was just perfect for a new family. The house was large enough to raise school children in a nice neighborhood near the best schools in town. The master bedroom was large and tucked away from the rest of the house, instilling privacy and silence. The home was built in a growing neighborhood, near shopping and arterial freeways, making short trips to the store or the commute to work easier than ever.

The same things you think about as a home buyer run through renter’s head. Often, the people who rent your investment property will have similar likes and dislikes about the community, floor plan, privacy, and ease of incorporating the new home into their lives.



The next time you consider purchasing an investment property, think of things in a home that are important to you. Did you buy a home in the best school district in the city; county, or even the state? Will people enjoy their front yards with block parties and safe streets, or will people be utilizing that newly sodded front yard with an additional parking space for their run down vehicles? Will your home stand out from others in the neighborhood when it comes time to sell the property? Does carpet or hardwood floors better suit the home? How about it’s durability?

Considering these things can help you purchase a home that renters prefer. Most people make up their mind within 30 seconds of meeting someone. The same goes for homes that people choose to live. As the prospective renter drives up to your home, their decision is already half way made. Now it comes time for the renter to see the inside of the home. Having upgrades like tile instead of vinyl floors can help, along with blinds and, if customary, a rear yard fence. These little additions can make the world of difference for a renter, and the landlord. If anything, the emotional response can revert renters back to your house time and time again. The concepts are not new, not difficult, and most likely will not change for a long time.

When the renter drives up to your property, you want them to say “Wow!” Wow those with a quality home and you will attract a quality tenant.

Fear

“Of all the emotions that motivate us I believe that fear is near the top of the list. And so it goes with many real estate investors. Personally, fear was what motivated me to invest in real estate. My fear wasn’t “the home is 2000 miles away from my primary residence” or “what if it takes 3 months to rent the home” or “what if the tenants trash the house”. I understood there would be bumps along the way. My fear was that for the first time in my life I realized that my employer was in control of my life AND my retirement- that thought scared the hell out of me! When you approach your mid-forties you think about issues like that (too bad it takes most of us that long). What if I was in my fifties and I was downsized, outsourced or frankly I just didn’t want to do that job anymore? What if health became an issue & I couldn’t work? Bottom line, I needed the income from my job to live and support my family.

“FEAR COMES FROM NOT KNOWING WHAT YOU’RE DOING”
Warren Buffet

After researching different investment ideas I found that investing in real estate would be a good solution to resolve my fear of not having control of my future. The rents I collected would create a passive income stream! Over a period of time those rents could become my income, thereby replacing the income from my job!

Also at that time I realized - 1) that I was in a good financial position so the banks would loan me the money I needed to invest in real estate 2) I had the desire 3) I had all the information available to make good sound investment decisions. At any time my situation could have changed and the banks would not have loaned me the money (looking back it was the banks situation that changed). Like life insurance, you can’t buy it when you need it; you have to buy it while you’re healthy and at that time I was financially healthy. Fortunately I acted on my fear and haven’t looked back. I am now in control of my future”.

“Money lies on the other side of fear”
Gary Keller

This exert is from a newsletter I wrote 2/2007. Back in 2/2007 you could still finance non-owner single family properties with 5% down AND have positive cash flow. Now the minimum down payment is 10%. So, again let me make the same point I made before.

You know what the circumstances are today. If the numbers work, you have performed your due diligence, you have the ability, the desire and the investment fits your long term objective, then buy it. There is not anything to wait for. If you wait there are many external factors that can and usually will arise that will prevent you from making that investment in the future.

Happy Investing!

Economic Stimulus Package: Can We Really Stimulate The Economy?

From coast to coast people are talking about the economic stimulus payment. The purpose of this gifted money is to help stimulate the economy, right? That is supposed to relieve people of the downtrend economy and aid our view of the economy.

Get real…

Consumers will more than likely spend their money on credit card debt, foreign electronics, fancy food & entertainment, or might even gamble it all away on a Lotto ticket (you never know). Not even considering the additional debt that younger generations are taking on due to this move.

First and foremost, most constituents in the U.S. have accumulated some sort of debt, probably through overspending on credit cards. I would guestimate that a large portion of the monies allocated by the stimulus incentive will be used to pay down credit cards. Ask yourself, “Does this help stimulate the economy?” Not really. Why? Because whether or not the credit agencies receive “principal” payments or not, it will not increase jobs, it won’t help us get out of, dare I say, the recession. They just have more money to lend and some people will save a bit of money on their interest payments to the banks. However, with less money being allocated toward debt, consumers may be able spend more frequently on other goods. But beware, what goods might they buy?

How about a new HD flat panel television? Or a surround sound system, a new computer, or a Playstation 3 gaming console with the Blu-Ray DVD player already equipped. While consumers have created more spending room on their credit cards, do you think anyone might go and buy some sort of new electronics? And if so, price almost always is a major decision in the buying process. Foreign countries dominate in terms of price, quality, and popularity. What brand will you buy?

Next comes food and entertainment. We all could use some fine dining or a fancy weekend get-a-way. This, of all the alternatives, is most likely to help line our fellow American’s with additional revenue. However, the spending will be short lived and temporary at most.

Don’t forget about gasoline prices. As gasoline prices continue to rise, the only one benefiting is the oil companies, who year after year post record sales and earnings. On the other hand, it will pay some fuel bills for a month or so for most people.

If you plan on spending your stimulus money a new bluetooth headset, or those outdoor lights you wanted in your front yard, consider buying something made in the U.S. With millions of people buying American made goods and services, it can help. Stimulate our economy by not blowing it on something that is taking more money out of our country. Through the last few years, we have not retained our capital but instead, have borrowed from other countries. Do your part and help your fellow neighbor down the street. With the right attitude, things can get better. My recommendation: before you go spending your $600 or $1,200, think of ways that actually “would” help preserve our nation’s wealth.