New Website Launched on Colorado Land Trusts

I have launched a new website for discussion of using title holding land trusts in Colorado (aka "Illinois Land Trust").

www.coloradolandtrust.com

The Truth About Investing in Foreclosures

Foreclosure investing is extremely different than what most people envision it to be. The easy lifestyle proposed in TV infomercials or magazine ads is, for many, just a dream. These get-rich-quick commercial spots sell better than the truth; hard work and a lot of time and money invested. Let’s take a brief look at how to invest in foreclosures.

Work

People who are big into foreclosure investing usually put a good deal of time into their research and preparation for buying a foreclosed house. Once the buying process is complete, it is time to put more work in fixing up the property and working with a realtor to get the house back on the market for sale.

Foreclosure investing is no walk in the park, but it can be extremely profitable if done correctly. The first thing to do when investing in foreclosures is to have a good estimate of time and work needed to complete the process because if you only plan to have everything tied up for one month and it ends up taking six, you have just cut your profit deep.

Money

The next issue to deal with is money. People who have been in the foreclosure investment business for a while do have their own set of funds saved to back up their purchases if needed. It is always good to have more than you think you need in case some of the renovations go over your budget.

While you don’t have to have all of the money yourself at the time of purchase, you should not let that stop you from searching out properties. If you can’t afford the purchase on your own dime, there are certainly ways to find investors to back you up. The only thing to keep in mind with investors is that if you have a good deal, it should be fairly easy to find investors, but if no one wants to invest, chances are it is not a good deal.

Knowledge

Without the proper knowledge of market values, you cannot do anything with a property. If you are not sure what a house should sell for, you cannot gauge if the asking price would be worth it, or if you will be able to make enough money on the sale of the house. Without the knowledge, you also do not know how much work you should put in to make it worthwhile.

It is also important to be aware of any foreclosure laws for your state, including what states are allowed to do with people who are defaulting on their loans. It is also important to understand the federal tax liens, how to find out if property information and descriptions are correct, what to do with unpaid property taxes, and even partial interest payments.

Basically, the key is to know what you know and understand where your strengths and weaknesses are. The following is a short list of the basic ingredients you’ll need before you attempt a foreclosure investing project:

• Understand your local market
• Have the money to invest
• Have investors to sell to or partner with
• Know the laws for your state

Foreclosure investing can be extremely difficult, if not impossible, if you don’t have those four items under your belt. If you have a good understanding of at least two of the three, you can spend a little time researching the others and learn as you go.

It is also good to network with other investors in your area and learn from them. Not everyone is looking to purchase the same things, so it is okay to mingle and learn from each other. Most investors like to share their stories so you can learn from their successes, as well as their mistakes.

Real Estate Parternships by Colorado Association of Real Estate Investors CAREI

If you are thinking about investing in real estate, you should know that you don't have to do it alone. There are several that are thinking of the same thing as you, but don't have the proper resources to begin the process. Building partnerships to invest in real estate is one of the great ways to start building an income off of owning property.

One of the benefits of having someone else investing in real estate with you is that it will allow for any missed parts of the process to be covered. This is especially important in the beginning of the process. If you are unsure of different parts to look at with the real estate investing or if you don't feel like you can cover all of the areas alone, a partner can help in determining what you are missing. Everything from contract work to needing a third person can be handled and put together from missing links. Two heads are always better than one, especially if you are just beginning.

Having a partner to help you with investing can also be beneficial because of organizational needs that will need to be met. Everything from basic paperwork to taxes and even procedures can be better when handled by two people. You will want to make sure that everything that is set for your profits is understood by both and whatever is missed will be picked up by your partner in order to keep the benefits coming in organized.

By having more than one person involved in the investment of real estate properties, you will be able to set your goals, keep standards and move forward in the business. Finding the right person who has the necessary tools will ensure that you will be successful. Having the right help will provide you the ability to continue to expand your business and make plenty of profit from real estate sales.

(NEXT POST... the bad side of partnerships)

Real Estate Negotiation - Time Power

One of the crucial elements of real estate negotiation is time. Understand and master the use of time, and you can buy a home for thousands less. Here is one of the most important aspects of time:

Deadlines In Real Estate Negotiation

Time is of the essence. It even says as much on most real estate contracts. What does this mean? It means that whoever controls or understands the elements of time has the better negotiating position.

When I bought my first piece of property, I asked the seller why he was selling. He said he was moving. I asked him when he was moving, and he said in a couple weeks. He also mentioned that he wanted to close the sale before he moved. I offered him 20% less than he was asking, and he accepted.

He gave away too much information. Specifically, he gave away his deadline. One of the most important things to understand in real estate negotiation is deadlines. The two specific things to remember are: 1. Don't give away your deadline(s), and 2. Find the other side's deadline(s).

Find out whatever you can about any relevant deadlines. Sometimes there isn't a clear deadline, or there are several deadlines for different parts of the negotiation. Whatever the case, the more information you can gather about those deadlines, the better.

How do you use that information once you have it? The crudest method is to simply delay and wait until the last moment to negotiate. This only works if the other side doesn't walk away, and if your own deadline permits it. It also requires that you don't violate any of the terms of your purchase offer, so the seller can't sell to someone else.

A bit of sophistication is required to use this information effectively. You may want to start by identifying what is most important to you in the negotiation. For example, is the price or the terms the crucial element for you?

Let's assume that price is most important to you. When you wrote the offer, you put some price on it, but you have inspections and other contingencies that allow for everything to be renegotiated. The process of inspections and negotiations ties up the property, so your competition is excluded for the moment. Then you learn that owner really wants to sell by the start of the school year, because he will be moving with his children.

Work on everything else in the negotiations except the price. Have inspections done, agree on what will be included with the property, etc. As the seller's "deadline" approaches, he will be getting anxious to close the deal. Then you let him know you're ready to close quickly. Of course, you'll need the price adjusted due to the results of the inspections.

At this point the seller has the choice of throwing away the whole deal. This means starting over, and not moving when he wanted to. Alternately, he can be happy that he got what he wants most - a quick close. This means giving you your price.

This points up the importance of getting information on the other's deadline, but also the importance of not revealing your own. When I was a real estate agent I heard the story of a man who sold his property for a large profit. He had to pay $80,000 in capital gains taxes unless he rolled the money into another property, as a "1031 exchange." He had 60 days to close on the new property.

Imagine the abuse he would open himself to if, with ten days to go, the seller learned of his deadline and the cost of missing it. He could threaten to delay closing unless the buyer paid $10,000 extra for some old coin-operated washing machines, for example. Overpay by a few thousand, or lose $80,000. What do you think he would do? You can see the power of time in real estate negotiation.

Does Staging Sell Houses?

There is something to be said about a neat and tidy house when you are sorting through house after house looking for the perfect home for you and your family. This is something that should be kept in mind when selling either a personal home or an investment property. There are a few other things you should keep in mind when it comes to selling real estate. One of those things is that staging sells homes.

Seriously, there is something cold about an empty house. It could be painted impeccably and meet every possible standard a family has and yet feel cold and anything but homey when walking through the home for a real estate tour or inspection. This can be easily overcome by contacting a local furniture rental store and picking out furniture that will match at least the primary rooms of the home in order to make the home appear leaved in and homelike.

The primary rooms that you will want to appear ‘lived in’ are the living room, dining room, master bedroom, and all bathrooms. These are the rooms that essentially sell homes and it is important to make them appear neat, orderly, and well cared for. If you have the funds for every room in the home then by all means do so. It is a huge selling point, particularly for those who are trying to sell homes quickly. If the home doesn’t sell after the first two weeks or month (you decide the time limit) then you may want to remove the ‘staging’ furniture in order to eliminate the expense. I would strongly encourage you to keep this furniture as long as the home is being shown fairly regularly though.

You will want to do so much more than simply putting furniture in the property you are trying to sell. You want to create an atmosphere or warmth and comfort. This means you want to have prints on the walls, mirrors, plants, and pillows. You do not have to purchase items particularly for this process. You can use things from your own home in order to establish this atmosphere of homelike comfort. Be sure not to use sentimental favorites or very valuable pieces, as not all people who will view the property being sold are honest. It’s a sad reality but something to consider all the same.

Other things that may help an empty home sell are scents. There is nothing quite like the smell of cookies in the oven or flowers in bloom to make a home feel ‘homey’. These scents can be easily accomplished with well placed scented candles, potpourri warmers, dry potpourri, fresh-cut flowers, and electric room air fresheners. There are few things that will turn off potential buyers more quickly than an overpowering fragrance however so keep this in mind when selecting the method of fragrance. Having some fragrance in the home also eliminates the problem of an empty house taking on the ‘empty house’ scent that so many do over time. In other words, this is yet another part of the staging process that works for many trying to sell homes.

The short answer to the question of whether or not staging sells real estate is “yes”. Staging a home can absolutely lead to a higher offer and a quicker sell.

Does Staging Sell Houses?

There is something to be said about a neat and tidy house when you are sorting through house after house looking for the perfect home for you and your family. This is something that should be kept in mind when selling either a personal home or an investment property. There are a few other things you should keep in mind when it comes to selling real estate. One of those things is that staging sells homes.

Seriously, there is something cold about an empty house. It could be painted impeccably and meet every possible standard a family has and yet feel cold and anything but homey when walking through the home for a real estate tour or inspection. This can be easily overcome by contacting a local furniture rental store and picking out furniture that will match at least the primary rooms of the home in order to make the home appear leaved in and homelike.

The primary rooms that you will want to appear ‘lived in’ are the living room, dining room, master bedroom, and all bathrooms. These are the rooms that essentially sell homes and it is important to make them appear neat, orderly, and well cared for. If you have the funds for every room in the home then by all means do so. It is a huge selling point, particularly for those who are trying to sell homes quickly. If the home doesn’t sell after the first two weeks or month (you decide the time limit) then you may want to remove the ‘staging’ furniture in order to eliminate the expense. I would strongly encourage you to keep this furniture as long as the home is being shown fairly regularly though.

You will want to do so much more than simply putting furniture in the property you are trying to sell. You want to create an atmosphere or warmth and comfort. This means you want to have prints on the walls, mirrors, plants, and pillows. You do not have to purchase items particularly for this process. You can use things from your own home in order to establish this atmosphere of homelike comfort. Be sure not to use sentimental favorites or very valuable pieces, as not all people who will view the property being sold are honest. It’s a sad reality but something to consider all the same.

Other things that may help an empty home sell are scents. There is nothing quite like the smell of cookies in the oven or flowers in bloom to make a home feel ‘homey’. These scents can be easily accomplished with well placed scented candles, potpourri warmers, dry potpourri, fresh-cut flowers, and electric room air fresheners. There are few things that will turn off potential buyers more quickly than an overpowering fragrance however so keep this in mind when selecting the method of fragrance. Having some fragrance in the home also eliminates the problem of an empty house taking on the ‘empty house’ scent that so many do over time. In other words, this is yet another part of the staging process that works for many trying to sell homes.

The short answer to the question of whether or not staging sells real estate is “yes”. Staging a home can absolutely lead to a higher offer and a quicker sell.

Don't Get Caught Up in Fraudulent or Illegal Scams in Real Estate

There are many ways to legitimately make money in real estate.  There are also many shortcuts that are illegal, fraudulent, or a downright scam.

Here's a few of them:

1. Lying on Your Loan Application.  Whether it be saying you will live in the property or overstating your income, these are lies that can get you caught up in legal trouble.  If you get caught, you go to Club Fed.

2. Cash Outside of Closing.  Giving the seller or buyer cash outside of closing not reported on the HUD is a violation of RESPA.  This can also land you in Club Fed,

3. Not Reporting Rental Income.  It's tempting to screw the Government by undereporting cash you receive, but why risk it?  Instead, be aggressive on your deductions.

4. Doing Work Without Proper Permits and Inspections.  Many investors will disturb lead paint, asbestos or hide hold.  All of these can get you sued, not to mention fined by the EPA.  Do the job right, and disclose it.  Also, don't do any life-threatening or health and safety repairs without a proper permit.

You can make an honest living in this business without breaking the rules.  Keep on the straight and narrow path and you will succeed.