A couple of weeks ago, I received a phone call from a prospective seller. She owns a property that has been sitting vacant for quite some time. She has been trying to sell the property herself but to no avail. In the meantime, the city is threatening to condemn the building unless she repairs it – which she is unable/unwilling to do. So, the building is a tear-down and all she really has to sell is a vacant lot.

Listening to this story, I bluntly told her that, sadly, her property was only worth the price of vacant land. In fact, whoever buys it will also be faced with approximately $25,000 in demolition costs – so it is worth even less! Naturally, this did not make her happy.  She is not willing to sell the parcel for the price of vacant land.

I then asked if she had considered developing the lot: tear the existing structure down and build condos which would then sell. Some quick research showed that new construction condos are still selling very well in this location – even in this economy! Her reply was that she wouldn’t even know where to begin or how. So I proposed perhaps she could partner with a builder. She contributes the land, the builder contributes everything else. When the condos are sold, everyone gets paid back what they have contributed and then share in the profits.

She thought this sounded like a good idea. So I proceeded to put out some feelers to see if there were any builders interested in such an arrangement. Well! I had 3-4 different builders very much interested! So I began arranging meetings for her to meet the builders and explore a possible partnership.

Once the idea looked like it might actually happen, she became nervous. How was this going to work? She wanted to know if she was going to have to come up with money up front? Naturally, she had a million questions  - which was the point of the meetings: to explore the possibilities. Finally, the morning we were to meet, she called me and said,

“I don’t want to meet with any builders. I just want the builders to buy the building from me. I am willing to accept $450,000.”

(Now, mind you, this was a big drop in price. Previously, she had been asking $650,000 for the property! Which explains why she hadn’t been able to sell it.)

Me: “But the lot is only worth (maybe) $150,000 – max! No one will pay you $450,000 for a building that needs to be torn down!”

Seller: “No – I don’t care. If they will pay me $450,000, then I will sell it. Otherwise, I am not interested.”

BAM! Door shut. End of conversation.

Her attitude is a mystery to me. By doing what I am proposing, she would put something like $350,000 in her pocket – after expenses and closing costs! – for a property that is worth MAYBE $150,000 (and I think that is already pushing it). In essence, my solution creates an additional $200,000 for her!

But it’s easier and simpler to live with the fantasy that your $150,000 parcel will someday bring you $450,000. I noticed yesterday that there is another realtor’s For Sale sign on the property. And what is it listed for? Yup, you guessed it: $450,000…

“All Things With Exuberance!”
mary!

I wish I had bought a few more spaces!! It is been such a great investment! Even in this economy, it’s worth about 50% more than what I paid for it. I’ve had it for a little more than 6 years. Not a bad ROI - particularly when you consider that most people’s real estate is DOWN 25% – 30% in that time frame! Now, mind you, there’s no chance of retiring on the income. However, I’ve kept about 1/2 the rent checks this past year instead of putting them back into the fund to help out with my OTHER negative cash flow areas. (I like to keep a buffer in the fund to cover expenses in case I sit empty without a tenant for awhile.) 

About 2 years ago, because of the poor market and resulting losses in my brokerage business, I decided to convert the asset from a conventional IRA to a ROTH IRA. That sucked up my cash reserves. I had to pay a 10% penalty to withdraw the asset out of the conventional ROTH. However, I ended up getting all that money back (as I said, due to the heavy losses in my brokerage business.) And what’s WAY cool is I was able to do all that just from the income that the space generated. And now, with the conversion to a ROTH IRA, I have an asset that I can eventually sell or withdraw income from and not owe any taxes on! So I am very pleased with that outcome! 

In “Rich Dad, Poor Dad”, Kiyosaki said that your home is a liability. At the time (10 years ago?), it seemed to be quite an outrageous statement. People were quite upset about it (including me). He’s not against people owning their home – he just says that people are confused if they think their home is an asset. Your home is a place to LIVE. A home doesn’t generate income the way my parking space does - it generates EXPENSES! Well, with 10 years’ of hindsight, it’s pretty clear that Kiyosaki wasn’t so crazy. That’s why people are losing their homes - they can’t afford to meet the expenses of owning it!! Now – granted – you have to spend money to live SOMEWHERE…it may as well be in something that you own. But to think of something that costs money rather than pays you money as an asset… well, Kiyosaki would say that you don’t understand the definition of “asset”.

In one of Kiyosaki’s lastest books: ”Conspiracy of the Rich”, he compares his lifestyle with that of a high school buddy. The buddy and his wife have high paying jobs and good salaries. They focused on generating income through having good jobs. Instead, Kiyosaki and his wife focused on generating income through owning assets that create cash flow (i.e. income). And 30 – 40 years later, they are sitting in very different places. Kiyosaki went through some rough patches to get to where he is – but today, he is financially free. He doesn’t need to worry about retirement or losing his job or not having income. He is set for life – and beyond! When I read that, my thought was:

“I need to start figuring out ways I can generate more income-producing assets like my parking space!”

One final Kiyosaki thought: this can either be the best of times or the worst of times. How you approach it and what you do about it is what will determine which one it is for you. From my perspective of being in real estate for 30 years, I have not seen a better time to buy income-producing assets. These are not just limited to real estate – that just happens to be the one I know the most about. Let me know if I can be of help! 

“To Your Success!”
mary!

For more information on how you can profit from the current real estate market, download my free report now! >>>>>

How can I find an agent experienced in dealing with foreclosed, bank-owned properties?

“I own multiple properties and two of them were cited with violations such as the need to replace the porch in both buildings and a possible deconversion. These repairs will be way too costly for me and may not be a able to afford the repairs and possible deconversion. What are my options?”  

Q:  Should I just offer my highest offer on a Fannie Mae owned property because Fannie Mae doesn’t seem to negotiate much. Should I submit same offer amount each month?

This morning, I was re-reading Roberty Kiyosaki’s (“Rich Dad, Poor Dad”) book Conspiracy Of The Rich. At one point in the book, he makes the statement that when you invest in capital gains, you are actually gambling – gambling that prices will go up. Because if prices go down, you loose your investment.

5 years ago that statement would have been difficult to grasp. However, in today’s environment, it is clear: real estate prices do NOT always go up!  And although he does not limit his statement just to real estate, it is probably the easiest example to point to in today’s economy.

In real estate terms, investing in capital gains is “flipping” – buying low, fixing a property up a bit and selling high. I know several investors that are doing very well these days “flipping” foreclosures – and it is a formula I have taught both in my case studies (click here now to see those) and in my live teleseminars. You can even find my “Investment Formula For Success” in my free report “High Yield Returns In Wholesale Real Estate” available by filling in the form to the right >>>>.

However, Robert Kiyosaki warns against “flipping”. And he is not wrong. The SAFEST way to invest is to invest in cash flow. Now, any investment carries with it a certain degree of risk. But then life itself carries with it a certain amount of risk! As Mark Twain said: the only certainties are death and taxes. However, when you invest in cash flow, you are less concerned about what values are doing. To invest successfully in cash flow, it is important to be able to buy at a price that is low enough that the property can generate cash flow. And the less money you borrow to purchase the asset, the more likely you will be able to see cash flow from it.

Until recently, it was virtually impossible to buy apartment buildings at a price at which they would cash flow – unless you paid cash for it. Apartment buildings were not bought for cash flow – rather they were bought for their potential to earn capital gains: i.e. to convert into and then ”flip” as condos. Nowadays, that no longer is the case. With the huge inventory of broken condo developments, it is once again possible to purchase apartment buildings at a price at which they will cash flow.

If this is a subject that interests you, I invite you to call me. I would love to spend a few minutes over a cup of coffee discussing the opportunities available to investors in today’s economy. As Rich Dad says, this is an environment where fortunes can be made or lost. My goal is to help you succeed!

“To Your Success!”
mary!
888-834-7085

According to a report released by FICO* at the end of February, recent credit behavior has shifted significantly from historical trends. Dr. Mark Greene, CEO of FICO, says:

“We’re identifying situations that to our knowledge have never been seen before. Economic instability is creating unknown risk in lender’s credit portfolios as well as counter-intuitive trends in consumer behavior.”

In 2005, credit card accounts were 3 times more likely to become 90 days delinquent than mortgages.  In 2008, credit card accounts were 1.6 times more likely to become delinquent than mortgages. 

For the first time in 2009, 0.3% of consumers with FICO scores between 760-789 (generally considered by lenders to be an excellent score worthy of their best loans) defaulted on their mortgages vs. 0.1% that defaulted on their credit cards! It is difficult to speculate what is causing the shift in people with high FICO scores to default on their mortgages rather than on their credit cards. However, the more value a home loses, the more likely an owner will consider what’s known as a “strategic default”. (See my article: “Should You Default On Your Mortgage?”) One possible reason may be that if a homeowner is faced with losing their home anyway, there is little reason to continue paying the mortgage. However, keeping their credit cards intact allows them to use the money to buy groceries or keep the lights turned on.  

In addition, FICO uncovered evidence that lenders tightened their criteria for new loans in 2008-2009 and began to “cherry pick” the kinds of borrowers they would extend credit to. In 2005, nearly 46% of consumers who opened a new mortgage had FICO scores below 700. In 2008, this dropped to just 25%. The credit card industry experienced a similar shift: in 2005, 51 % of consumers with a new credit card had FICO scores below 700. That dropped to just 38% in 2008.

To learn how you can prevent losing your home, go to my “Foreclosure Prevention” section now.

“To Your Success!”
mary!

 (*FICO is a trademark of the Fair Isaac Corporation which first developed a credit scoring system in 1958 to assist lenders in determining the creditworthiness of consumers. Lenders use a consumer’s FICO score to determine how much to loan and at what interest rate. )

It has been nearly a year since the Treasury Dept issued their guidelines for lenders to offer struggling homeowners a loan modification under the Home Affordable Mortgage Program (HAMP). While it seemed like a real answer to the foreclosure crisis when it was first introduced, it has actually had a very minimal impact on the problem. The word out on the street is that only about 10% of all applications have been approved as a trial loan modification. And only 5% of all temporary loan applications have gone on to become permanent. 

The paperwork involved in a loan modification is similar to refinancing the loan. However, the borrower also needs to write a ‘hardship’ letter explaining how circumstances have changed since they were first approved for the loan and why the lender should agree to a loan modification.

It is almost certain that if a borrower is current with their payments, the lender will not even consider a modification. And while that may not make much sense, the banks are just so overwhelmed dealing with delinquent loans that they just cannot work with a borrower that is current.

To qualify under HAMP, the loan cannot be a jumbo loan (i.e. more than $417,000 when it was placed). It also must be owned or serviced by Fannie Mae or Freddie Mac. Should your loan not meet these criteria, you can still approach the lender about doing a custom modification. However, you are essentially asking the lender to cut off a huge hunk of principal – and the likelihood of them agreeing to that is anyone’s guess.

Most trial loan modifications reduce the interest the borrower is paying – thereby lowering the interest rate. Principal reductions are not being done. However, lenders may agree to a forbearance agreement where you simply don’t make payments for a period of time. Typically, those payments and the interest gets tacked on to the end of the loan.

Although an attorney can be helpful in explaining your rights and various options available to you, you do not need an attorney to negotiate with your lender. You can do that for yourself. And the money you spend on an attorney may be money you need to put food on the table or keep the heat and lights turned on. Utility companies tend to be far less lenient then lenders when it comes time to disconnect their services.

To review your other options in avoiding foreclosure, click here now.

“To Your Success!”
mary!

The Lorraine Hansberry House

 Last month, Chicago’s City Council declared the home of Lorraine Hansberry at 6140 S. Rhodes an historic landmark. She authored the acclaimed play “A Raisin In The Sun” – which was inspired in large part by her family’s three-year legal battle for the right to purchase this property.  At the time – during the late 1930′s - Woodlawn was a predominantly white neighborhood. The Hansberrys’ purchase of the property culminated in 1940 with a U.S. Supreme Court decision that helped end discriminatory housing covenants in the city. 

The home was granted landmark status as part of the city’s recognition of the city’s Black Renaissance Literary Movement of the mid-twentieth century. In addition to The Lorraine Hansberry House, Gwendolyn Brooks home at 7438 S. Evans Ave and The Richard Wright House at 4831 S. Vincennes were also recognized.

Properties given landmark status are protected from significant alterations and are eligible for preservation incentives.“To Your Success!”
mary!  

Underwater on your mortgage? Curious as to whether or not you should continue to make your payments? Click here now!