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REAL ESTATE 101
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“With a rate of 125 BPTS over the 10 year T-bill and loan costs of zero points, plus title, escrow and junk fees I’d say you are getting a great deal.”
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REAL ESTATE 101
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You had a plan. It was simple. At least you thought it was. The goal was to build an apartment with six units in 12 months. Easy enough, but something happened — actually everything you did not count on happened.
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REAL ESTATE 101
When it comes to buying a house you should know what loan options exist. In the last few years many different types of “exotic” loans have come into existence, but residential real estate loans breakdown into three categories — “adjustable”, “fixed” or “hybrid”, with one exotic called “interest only” that needs mentioning.
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REAL ESTATE 101
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When you were in school you were given grades to reflect how you did. As an adult, the grades have turned into numbers called FICO scores, which reflect how timely you make payments. FICO scores ultimately determine your credit worthiness. The single most important item needed to attain a competitive mortgage rate is good credit. Nothing plays a more important role in getting a residential loan than your credit score. As a synopsis of your credit history, your credit report and score are made up of several elements, coming from three different bureaus, and reflecting up to 10 years of your credit history.
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REAL ESTATE 101
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When acquiring a property, knowing how to take title can save a lot of heartache down the road. The variety of vestings can have a variety of consequences, including legal and estate planning issues. California, along with several other states, is known as a “community property state.” Community property means anything you or your spouse own is assumed to be held in shared ownership by both of you. Title can be taken several different ways. Sole ownership, tenancy in common, joint tenancy, and an entity are the most common vestings today.
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REAL ESTATE 101
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When acquiring a property, knowing how to take title can save a lot of heartache down the road. The variety of vestings can have a variety of consequences, including legal and estate planning issues. California, along with several other states, is known as a community property state. Community property means anything you or your spouse own is assumed to be held in shared ownership by both of you. Title can be taken several different ways. Sole ownership, tenancy in common, joint tenancy, and an entity are the most common vestings today.
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REAL ESTATE 101
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As a land owner, you have many rights. Those rights are a theory known as the “bundle of rights.” The bundle of rights can be thought of as a bundle of paper with each sheet representing a separate right. The bundle of rights theory says that you have the right to sell, mortgage, bequeath, lease, use, occupy, grade, fill or excavate, install new roads, install new lake(s), occupy/use existing improvements, subdivide and develop, farm, etc.
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REAL ESTATE 101
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The quick and dirty answer is no. Real estate does not crash like the stock or bond market. However, the real estate market can and does correct itself. The one thing to keep in mind about real estate values is that price is relative to the rest of the economy. It is highly unlikely that a $750,000 house will ever be valued at $7,500 unless everything else is similarly devalued. This means if your 4,000 square foot house dropped to a value of $7,500, from $750,000, than the value of your $40,000 Hummer would drop to $400 or less.
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REAL ESTATE 101
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What is an AITD? What does it mean for a seller to carry paper? The real estate world is filled with interesting, creative concept financing, some of which become trendy when a real estate market begins to change. During slowing or lean times, many types of real estate financing become available, such as AITD, seller carry and lease option, just to name a few.
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REAL ESTATE 101
The world of real estate is filled with complex terminology. The loan documents prepared by the many lenders in the marketplace use many specific terms that have financial and legal consequences within their loan documents. When attaining a loan, you should be aware of each term and be a savvy consumer who understands what everything means.
Given the complexity of this world, I want to help you along the road toward the land of confidence and consistency. Thus, I am giving you — the smart investor that you are — a few real estate definitions and examples below:
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REAL ESTATE 101
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Every now and then, I get a phone call from a potential borrower who wants to buy a 100 percent financed apartment building. I try to explain that the property must support the loan by itself, without any help from the owner. I usually get one of two answers: the “Oh, OK, thanks,” with a hang-up, or the “Why? I don’t get it.” When they ask why, I usually run through a scenario with a hypothetical property.
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REAL ESTATE 101
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This may be intuitive, but I feel compelled to remind my readers that banks lend out money primarily to make additional money in the form of interest. Banks and other lenders are not in the business of owning or managing real estate. It may seem illogical that these entities would not want to own real estate, but, after I explain why, you will see that banks are not interested in holding real estate.
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REAL ESTATE 101
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People always want to know the secret to real estate investing. I do not know the secret, but I do know that one of the simplest ways to create wealth through real estate is to use the buy and hold method. The buy and hold method, as simple as it sounds, is purchasing property, such as an apartment, at any price and holding it for the long term, usually in excess of 10 years. After several years, the property should have appreciated, as long as it did not fall into disrepair. “Is this the only strategy?” you ask. No. I will explain another strategy later in the article. No matter the strategy, real estate should be looked at as a vehicle for wealth, with cash, in the form of a down payment, acting as a tool.
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REAL ESTATE 101
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How do you protect yourself from a lawsuit if you own real estate?
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REAL ESTATE 101
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Do you like the idea of owning real estate, but not actually doing any work aside from writing a check? If so investing in a REIT may be what you are looking for. A REIT —or real estate investment trust — is a type of company that is formed to exclusively invest in real estate. Most REITs invest in commercial properties. The company then sells shares, like a stock, to individual investors. REITs break down into three categories — equity, mortgage and hybrid. However, before you can understand the different types of REITs, it is important to know how they work.
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REAL ESTATE 101
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How can I start investing in real estate without any cash? I have been asked this by many people and to be honest the most important thing in real estate investing is knowledge. Second and third places go to financing and cash on hand. Because of this, you can use a strong knowledge base and identify opportunities other investors fail to see. One way to invest in real estate with little or no cash is to become a syndicate.
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REAL ESTATE 101
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So you finally did it, you purchased a rental property! If you purchased one in Los Angeles County, you know that you can not simply evict tenants because you want to increase the rents. However, other strategies exist to increase income while properly safeguarding tenants’ rights.
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