Land Trusts are one of the tools of the real estate trade that are grossly underutilized.  This living, revocable trust allows an investor to hold title to a piece of real estate.  Since each individual property is represented by its own land trust, the investor can rest assured that he is maximizing his privacy and security, and not putting all of his investments at risk on every transaction.  There seem to be countless arguments in favor of possessing a land trust—here is an abbreviated version.

The most important benefit afforded by a land trust is investor privacy.  Any trust agreement is not public record.  This means that the average Joe can’t simply hop on the internet and find out who owns a certain property through land trust.  However, simple property ownership is public record, which means anyone can access sensitive information about an investor and all of the investment properties in his portfolio.  Although this in itself is a nasty adverse effect of ownership, it says nothing about the legal ramifications of making that information available.  If an investor owns a number of buildings in the same area, then the local government could easily track the accumulation of that owner’s violations (however minor), and eventually take him to court.  With a land trust, however, it is much more difficult to find the owner of a property; and it is infinitely more difficult to compile a comprehensive list of the owner’s properties.  This also makes it much more difficult (or perhaps just less appealing) to sue an owner bearing a land trust.  Successful litigation is based on the money made through suit, so lawyers aren’t likely to file a case against someone with no assets.  You could own 1,000 properties, but if they are all owned by a land trust, then a search of your name will not reveal a single one.  It seems a lawyer would be more inclined to take a case against the owner of 1,000 properties than against someone with no assets.

The other benefits of a land trust all deal with the security of the investment.  First, liens may not be applied to trust-owned properties.  That is to say, if an investor has a land trust, then all personal judgements or liens that have been applied to him, may not then be associated with the value of the property.  This secures the investor’s opportunity to profit from the investment, regardless of what else is happening with that investor.  The trust is also not subject to title claims, which means if there is any controversy over the title and a title claim is made, then these claims are applied not to the owner, but to the trust which is attempting to sell the property.  This means, once the property is sold, the trust has no remaining assets to which the claim or lien could be applied.  Alternatively, such a claim made against an investor who had signed his own warranty deed could be financially devastating.

There are many other specific benefits of holding title in a land trust rather than in the name of the investor.  Most are applied to specific scenarios (ways to avoid losing money in a homeowners’ association, transferring contracts, etc.).  While you don’t need to know every single benefit of a land trust, it is important to know that it is an extremely useful—though underutilized—tool of real estate investment which adds a layer of increased privacy for the investor, and security for his investments.

Let us know your thoughts.

SuperiorPrivateMoneyReturns.com

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Many investors are scared away from investing in real estate because of the sensational news stories that depict crying homeowners in front of their foreclosed homes and heated discussions about plummeting house prices, making it seem as though the real estate doomsday will never end. Although, yes, housing prices have declined, and yes, the number of foreclosures has risen, there are still opportunities in real estate to make money.

Signs indicate that the economy is stabilizing; unemployment is slowly starting to improve, and depending on what city you are in, fewer people are defaulting on loans than in 2008.  Although the economy is still slow and many people are still unemployed, growth is starting to pick up.  Slowly but steadily we are coming out of the recession, and there are ways to capitalize on this trend.

A great opportunity to sell a home in this market is through a lease- option contract.  This entails two separate contracts.  The first contract is the option contract which usually requires a non-refundable fee minimum of 3-5% of the purchase price of the property.  I usually require at least 5% of the purchase price of the home.  In my opinion, the more the resident can put down, the better. The option agreement allows the resident the exclusive right to purchase the property at a specified price within a specified time frame. The option fee is credited towards the purchase price of the home, but if the resident does not or cannot exercise their option within the specified time frame, the resident forfeits the option fee.

The second contract is a standard lease agreement for the same specified time frame as the option agreement.  The ability to exercise the option agreement is contingent upon the resident fulfilling all of the duties of the lease agreement- mainly paying rent on time and maintaining the property. Maintenance of the property is the responsibility of the resident and at their expense.

Any time during the option period, the resident has the exclusive right to purchase the home.  This approach allows the resident a specific time frame to clean up any issues preventing them from securing a bank loan, but still providing them the opportunity to secure the home they wish to purchase.

There are many nuances and variations of the lease-option approach. There are also potential pitfalls for both the resident and the investor that are beyond the scope of this post.  But if executed with specific metrics and standards in place, this strategy can provide a tremendous win-win for both parties involved.

This is a great approach for people who have tarnished credit due to job loss, bankruptcy, or a foreclosure who are now getting back on track and starting to show a positive history. This approach allows the resident to get into a home ownership position and provides the investor cash flow each month, with what I call, chunks of cash at the end.  A true win-win for both in my opinion.

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http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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If you are someone who is in the business of selling or renting property, and that business requires you to give prospective customers tours of that property (whether infrequently or multiple times per day), then you need to at least be considering video tours—if not relying fully upon them.  A video tour, sometimes called a talking brochure, is a perfect way to conserve your own precious resources while reaching a broad target audience.  Here is how it works.

Make a video of yourself (or whoever gives the tours for your business) giving a perfect tour through a listed property.  The video can simply be shot from the perspective of the tour-taker, following the presenter through the home.  This tour differs from a more conventional tour in that you will obviously have no interaction with your customer.  Think back on your previous tours—there have undoubtedly always been questions that interrupt your tour, and you are expected to provide that information to your customers.  In a video tour, your customer will still have all the same questions, but no way to stop the tour to ask you.  Therefore, this particular presentation needs to be very thorough; you need to sit down and come up with all of the relevant questions that a prospective buyer or renter would want to ask, and you need to be sure to answer them clearly and concisely in your tour.  I say concisely because—as in all matters which require acquiring and maintaining peoples’ attention—you can’t put out a 45 minute video and expect people to remain focused.  Keep it under five minutes, but pack it full of all the useful information you would want to know before moving forward with a major transaction.

Once you’ve made your five minute video, you’ll need to distribute it for viewing.  The easiest, cheapest, and most practical way to do this is using the internet.  Your business should already have a website, but if you don’t, that is the first step (we won’t deal with that here).  When you add the video to your website, don’t bury it behind links tabs and URLs and whatnot.  Present it up front, make your tours clearly visible and easy to click and play.  This is your product—advertise it!  Finally, be sure you make it very easy for your customer to contact you.  We all know the frustration of using the internet to search for an email address or phone number, only to click link after link finding no way to reach a human being.  Make your business email and phone readily available both on and around the video tour in your website.

Going through this one-day process will save you countless hours of meeting customers for tours, driving time and gas money, and where you could only do so many tours in one day before, with a video on the internet you can reach an unlimited number of people in any period of time.  It’s a marketer’s dream, and it’s a tool that must not be overlooked by real estate professionals.

Let us know if this article is helpful by leaving a comment.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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You’re ready to hire a property manager to handle your investment property but what should you look for in a property management company?  This choice is an important one. After all, you will be working closely with the people assigned to your rental property.  These folks will handle your investment and ensure your budgeted profit is met.  The key is to make a choice that best fits you as an investor.

First, you should feel the company’s representatives see this endeavor as a partnership.  After all, this real estate investment is important to you but it will also be important to the property management company.  If the property is managed well, you make a profit.  You’re happy with the company and the firm continues to renew their contract with you and in turn make their management fees.  The company could potentially see the relationship grow through additional investments and contracts if that is part of your investment plan.

Any property manager worth their weight realizes the benefits in working with the owner.  An ability to talk to your property manager and know he or she hears you is very important.  But, the reverse is true as well.  Remember, the folks that do this job every day know a lot about the ins and outs of managing a property and turning a profit. Listen to their advice.  When the property does well, the investor, the individual managers and the company do well.  It’s a team effort.

Then there are the practical things to look for in a firm.  Does the property management company offer all the services you need?  If you want a manager that will handle making plumbing repairs but can also advice you on additional investment opportunities in your market, you wouldn’t want a company whose manager is really a tenant relations type only.  The firm you will be looking for is one where the manager wears many hats or perhaps there are multiple people within the company; one to handle the leasing of your investment, one who maintains the property and an investment advisor to work with you on growing your investment portfolio.

Something else to consider is the location of the firm you choose.  Do you want your management firm to be local to you or just your investment?  While telecommunications has made keeping up with things from afar tremendously easy, you may be the type that prefers face to face meetings without a trip on a jet involved.  Then again, if you work well previewing budgets and communicating via email, finding the best firm possible may be your only priority.

While most property management companies offer similar services across the board, there are those that stray from mainstream.  Decide first what your needs are in a property manager.  Investigate your options and choose the one that best fits your needs.  The partnership you choose can be one of the most important decisions to your investment property.

 Jay Redding

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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Thinking with one’s emotions is rarely—if ever—a reliable way to earn a profit, in any industry.  In real estate specifically, trends tend to be more pronounced because any associated data relies heavily on a small number of very large transactions (as opposed to, say, the data pertaining to grocery store sales).  This means that any feature of a normal business transaction is going to be expanded and multiplied in a real estate transaction, where more money, more time, and therefore more emotions, are at stake.

When I say thinking emotionally, what I really mean is relying too heavily on whether or not you like the property, as opposed to whether or not this is the rightproperty for you.  For the first-time investor or home-buyer, perhaps the sheer excitement of going through the process for the first time will be enough to skew your opinions of the home.  Remember one thing: the first place you look at will only very rarely be the best option for you.  In order to make savvy business decisions that will result in profit rather than loss, you should expect to turn down far more offers  than you accept, which means you can pretty much expect that if you take 50 tours, the first one is not necessarily going to be the best one.

With that logic in mind, be wary of every tour, at every step of the way.  If you are excited about moving or home-ownership or the start of an investment career, remind yourself to look for reasons not to purchase the home, rather than the reasons to do so.  In any house you look at, you will find plenty of reasons to buy it.  Maybe you will imagine the color of the walls, or the arrangement of the furniture, or what it will look like with 3 kids and a dog running around.  These are dangerous sentiments, which all speak to an emotional involvement in your decision-making process.

Instead of the walls, furniture, and kids, why don’t you spend some time and energy coming up with all the features of the house that are going to inevitably result in not only a hassle for you, but also a significant cost.  Repairs, modifications, and updates are the big ones.  You almost never see a house sold in perfect, up-to-date condition, and it is of vital financial importance to know what you’re getting into before you sign the contract.  Basically, as you look at properties, try to talk yourself out of buying it.  You should be able to.  When you absolutely can’t come up with an argument against the property, and you are confident that is not the result of some arbitrary emotional attachment to the property, then you have found the right deal to pursue, and your next (or first) investment property!

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There is a class of investors out there who believe that, because they are investors and not lawyers, they don’t need to trouble themselves with the details of the real estate contract.  These investors couldn’t be more wrong.  The contract is what lays out exactly what you are buying, what you are bound to, and what is owed to you.  It is essential to know exactly what you are getting into on every deal that you make, so that you can plan accordingly and protect your profit margin.  The good news is, the real estate contract is pretty standard, simple, and easy to navigate and understand.  In simple terms, here is an explanation of a basic real estate contract.

The contract will clearly identify both (or all) parties involved, as well as the property in question.  This means an address and description of the property.  The main ingredient in the contract brew is mutual agreement, whereby both or all parties agree to the same terms of a deal, following an offer, usually a counteroffer, and finally acceptance of terms.  These must all be clearly laid out in the contract.

In addition to identifying parties and mutual agreement, here are some other elements which all real estate contracts should and in fact must possess.  It must be in writing in order to be enforceable.  An oral agreement is nice, but unfortunately if things go south, then the victimized party will be out of luck trying to cite the contract is binding.

A price for the property must be stipulated.  This does not necessarily mean a number of dollars that the buyer must pay (although it could); rather, it has to point to a value which can be reasonably ascertained at a later date, such as an appraisal value.  This, like everything else in the contract, must be as specific as possible: not just “an appraisal value”, but a specific appraisal done by an agreed-upon appraiser at an agreed-upon time.

Usually, a contract will include some consideration.  Consideration is essentially the value of the agreement itself (as opposed to the transaction), and it comes in the form of a small good-faith fee paid by the buyer to instill confidence in both parties.

Finally, signatures are required, as in all contracts.  No third parties or notaries have to be used, but both parties (or representatives thereof) must ink the contract.  Beyond that, it’s just about filling in the particular details of your transaction.  As stated above, the real estate contract is standard and simple, but you need to know what you are looking for when reviewing a contract.

Tell us what you think by leaving a comment.  If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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So you found a multi-unit property you like? Perhaps you found a single-family home that you could foresee as a multi-unit.  Either way, there are some key considerations to keep in mind before you purchase a multi-unit property.  Multi-units are a wonderful investments, but there are a few caveats unique to multi-units that can tie you up and prevent you from realizing the full profit they can offer.

1) Zoning

Multi-units are subject to zoning laws, which are determined by each community.  Communities generally want multi-units to be in certain areas and prohibit the conversion of new multi-unit buildings in other areas.  They also regulate what features a multi-unit must have. They control the location and structure of multi-units through zoning permits, which a building must have if it is a multi-unit, similar to a driver needing a driver’s license.  If a multi-unit violates the zoning law, it is subject to steep fines that can be in the thousands of dollars.   Unfortunately, the permit system is not perfect and many multi-units exist that violate zoning regulations.  If they are sold, the new owner is responsible for the fees and construction involved to comply with the standards, even though that owner did not build or initially create the multi-unit complex.  That is why it is imperative that you make sure your building is in compliance with zoning laws, even if it has existed for quite a while.

2) Costs

Maintenance in a multi-unit building is often more labor intensive than in a single-family home, because you have a larger number of appliances, more people to deal with and often a yard or a common area that no one is responsible for.  A safe way to determine maintenance costs is to set aside a minimum of 5% of the gross scheduled income per unit.  This is not your total cost, however–vacancy should also be a minimum of 5% of the gross scheduled income per unit.  If it is an older building, bump the numbers up to a minimum of 10%.   If you figure in taxes and insurance, your gross operating costs should accumulate to about 30% to 40% of the gross income. If you hire a property management group, obviously the costs are going to be a little bit higher.  If the multi-unit has a yard and you don’t feel like making the trek to manage it, it is always possible to ask a tenant to do this in exchange for lower rent, or just pay him or her. Again, this would add on to your expenses.

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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Owning or managing property for rent is a relatively reliable and time-tested means of establishing lucrative cash flow.  However, no facet of real estate investment puts investors closer to the consumer than being a landlord—and that means taking risks.  Anywhere you go, there is no shortage of people looking to take advantage of those around them, and in property rentals that means tenants looking for a free ride.  The biggest headaches for the average landlord are brought on by dealing with these troublesome tenants, and that means confrontations, evictions, collections, even legal action.  This is not a reason to turn tail and run, however; prudent and thorough landlords have every opportunity and advantage to protect themselves—if they have the knowledge to do so.

It is important for landlords to hope for the best, but expect the worst.  That means going into every new tenant relationship with an open and optimistic mindset, but at the same time making preparations on the assumption that this is going to be the worst tenant you’ve ever dealt with.  It is practically a universal standard that new tenant applicants must provide a verified bank account at the time of application, but most tenants believe that is enough to protect themselves and collect their assets in the long-term.  One of the oldest tricks in the book, however, is tenants’ applying for and moving into an apartment, and then immediately switching bank accounts to avoid collections.  The best defense against this ploy is for the landlord or manager to check everycollected rent check against the account listed on the application, and investigate any differences.  This will be invaluable in the event of any legal action down the road.

If things fall apart, and a landlord finds himself having to evict a bad tenant, the strongest and most effective legal recourse is a bank levy.  After a money judgment has been issued as a result of the eviction, a bank levy is the judicial process by which funds are seized from a bank account to satisfy that judgment.  First a writ of execution must be requested from the same court where the eviction was implemented.  That writ must be served personally by the sheriff or proper process server to the bank that maintains the account in question, and is most effective when brought directly to the same branch used by the evicted tenant.

The bank is required to honor the levy, but only if they can definitively identify the holder of the account.  Usually this is not a problem, but in some cases it is not enough to have the name of your tenant; the more information you can provide on your evicted tenant, the better the chances of his being correctly identified at the bank for a levy—which is why it is so essential to keep accurate account records for all tenants, even while their checks are clearing without incident.

Owning and renting property is still a great way to maintain a steady income, even in the face of deadbeat tenants looking to take advantage of your willingness to put yourself at risk.  To ensure that your experience as a landlord is a generally pleasant one, the best thing to do is carefully screen new tenants.  Of course, sometimes a bad apple will find its way into the bunch, and so it is of vital importance to conscientiously and thoroughly keep up-to-date records and notes on all tenants, in the event that your relationship with one becomes a legal one.

Tell us what you think by leaving a comment.  If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.superiorprivatemoneyreturns.com

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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If you are interested in purchasing and repairing a property for resale at a higher price (or rehabbing), then you’ll want to avoid each of these mistakes commonly made by unsuccessful rehabbers.  Most are the result of trying to save too much time or too much money.  Remember, rehabbing is neither instantaneous nor sure—it requires time, money, and effort to eventually turn a profit.  The first mistake is not understanding this fact; but if you can overcome that, then the rest will be easy to avoid.

The second killer is failing to do proper research.  The bulk of the rehabber’s work is not in fixing a home, but in searching for a home to be fixed.  To lay down that kind of capital, an investment property should meet all of your business’ needs (location, design, price, size, type, etc.).  You need to find the right size and style of home, in a proper neighborhood, and in a good location with access to shopping, culture, and transportation.  As much as 90% of your time should be spent not on your current property, but on your next one.

Another major mistake is assuming you can cut corners, and do repair work yourself in order to save money.  This is like the owner that sells a house themselves to forego the  listing fee—they often end up getting screwed.  Buckle down and spend the money to hire a certified professional to make repairs.  Not only will avoiding the shoddy repairs save you money down the road, but having that certified work on record will increase the value of your property for resale, and it will also free up the time you would otherwise have spent doing manual labor, to pursue your next investment opportunity or to line up your backend buyer.

Be mindful of your cash flow.  Too many start-up investors find a great deal and jump on it, not realizing that sometimes even a great deal is simply too big.  If you can’t afford to pay the bills while you own the place, then the possibility of selling the property for a $100,000 profit is pretty much worthless.  Make sure you go into the process with enough cash reserves to cover your costs of ownership, etc.  If you don’t have these reserves, then you must understand that, and avoid deals that will be too expensive and crippling for you to own.  Instead, do a couple of small deals until you’ve built up the proper reserves to sustain you through a bigger one.  Investing success is about moderate growth and consistent work; it is only very rarely the product of a one-time, major deal for a brand new investor.  Understand this, and the strategies to avoid, and it can be a tremendous chance to profit!

Tell us what you think by leaving a comment.  If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.superiorprivatemoneyreturns.com

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

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Wholesaling investment properties entails a high degree of trust, more so than in other areas of real estate.  What accounts for this emphasis on trust?  The nature of wholesaling involves spotting a good deal before anybody else does, getting the deal under contract, and then assigning the contract to another investor.  The investor must trust in your abilities as a wholesaler to know what will sell and how much potential profit there is to be made with perhaps minor renovations.  If you pick out properties that make the investors’ profit, you will start to build a name for yourself.  However, if you take advantage of investors, word will spread and your reputation will be tarnished.  The real estate world can be very close knit and investors know to ask about wholesalers.  The most important thing you can do to promote long term wholesaling is to earn a great reputation of supplying good deals.

The investor believes in your foresight and responsible work-up of properties when he or she agrees to buy a property that you’ve found.  It is vitally important that you provide the evidence that the property you are selling to an investor will indeed make a profit.  Falsely leading an investor to the conclusion that a poor performing property is actually good is not only unethical, but will come back to bite you.  Of course, you do not have to be a magic genie: it is entirely understandable if your predictions do not come true, because after all, they are only predictions.  This is the assumed risk the investor takes in listening to your advice.  However, as a wholesaler, those predictions need to be based in evidence and not wishful thinking.

If you find yourself with a property that is not as profitable as you once believed, it is better to assume the loss yourself or back out of the contract than to pass it on to your investor.  If you sell a property to an investor that tanks, other investors are going to know what happened. Word travels on the street! Investors understand assessing future potential is risky, but they also know when a wholesaler takes advantage of a new and inexperienced investor.  Investors have access to the same data that you do, and if they come to the conclusion that your property work-up was negligent or misleading, you’re done.  They will no longer trust your judgments and no longer buy your properties, leaving you no choice but to go out of business. Before you go into wholesaling, make sure to understand the importance of reputation to owning a long-term business and don’t sell anything unethically.

Tell us what you think by leaving a comment.  If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.

http://www.superiorprivatemoneyreturns.com

http://www.indianainvestmentpropertygroup.com

http://www.practicallyfreehouses.com

Based out of Indiana, Jay Redding is a real estate entrepreneur, consultant and educator with experience in residential and commercial investing.

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