I don’t want a bumper sticker that reads “Proud to be an American,” although I am proud of what my country has accomplished.  I didn’t earn my citizenship – I was given it as a gift at birth.  The best gift I have ever received.  What I feel is gratitude.

Think of the people who came here over the last 233 years, including my ancestors and maybe yours.  Many of them didn’t come because they wanted to vote or to run for office.  They came here because the United States, more than any other country founded before or since, offers opportunity.  The opportunity to work, to create, to achieve, to provide a better life for themselves and their children.

My grandfather Jim Hickey came from Ireland in the 1930s.  At that time Ireland was a mostly independent, mostly free country, but desperately poor.  There was little industry in his area and no chance for an uneducated young man to succeed.

Gammuck Jim worked at backbreaking jobs until he was finally hired on by U.S. Steel in Worcester, Massachusetts.  His efforts led to a promotion to foreman.  When he retired, he owned three houses.  Had he stayed in Ireland, he might never have owned one.

My wife’s grandfather Erminio Ricci came to the United States in 1919 as a teenager, settling in Portsmouth, NH.  He worked as a construction laborer and as a “sandhog” – incredibly dangerous work digging the foundation for one of the bridges connecting Portsmouth to Maine.

In those days, little attention was paid to worker safety in any industry.  Fatal accidents were commonplace.  Sandhog work was considered so dangerous, however, that the projects did have at least one safety regulation – workers could not work more than a set number of hours.  Exhausted workers could easily commit deadly mistakes.

Erminio Ricci, saving money to open his own contracting company, punched in under two different names so that he could work double shifts.  He was smart as well as hardworking, and no accidents resulted.  However, the two companies he founded, Ricci Construction and Ricci Lumber, are still in business today.

The United States attracts hard workers because it provides opportunity.  Ricci could have worked his whole life as a laborer in Italy.  In the United States, however, he could develop into a businessman – making deals, initiating projects, and building success for himself.  With discipline, hard work and time, he could become a “real American.”

The wheel turned again in 2005

The newest member of our family immigrated in January 2005.  My daughter Gianna was an 14-month-old orphan in China.  Years ago – things may be different now – Chinese girls who were not adopted faced an uncertain future.  Parentless and poorly educated, they often grew up to become maids, peasants or even prostitutes.

Opportunities in China, even now, are limited to all but a select few.  One reason for this is the “hukuo” or residency permit system.  Just as in our country, some areas are much more prosperous than others.  People from rural areas (as Gianna was) cannot get permits to live in modern cities like Beijing or Shanghai.  In those rural areas, the schools are worse, the jobs are worse, and the chances for long-term success are much less.  College is unlikely.  Business ownership is next to impossible.

Please understand that we didn’t adopt Gianna out of a selfless desire to give a foreign child a better chance.  We wanted another child and did not want to go through another pregnancy – my wife’s first had been challenging and risky.

Gianna will have a better life here because her opportunities are so much greater.  She knows she’s from China, but she doesn’t think of herself as Chinese – she’s an American.  And like most five-year-old girls, she has a million different ideas for what she might do when she grows up.  She wants to fly helicopters, be a doctor, and be a mommy.  Who knows what her future might hold?

The only job not open to her is President of the United States, and we’re working on that minor Constitutional issue.  If that doesn’t work out, I suspect she’ll become president of something else.

Erminio Ricci and Jim Hickey would have liked Gianna a lot.  They would have recognized something in her that they possessed themselves.  One difference is that they had a perspective that she may never develop – they knew in their bones what life was like in the old country, and why life was better in the new one.  They knew they were lucky to be Americans.  As are we all.

Welcome to Our Blog!
Welcome to the Real Estate Dispatch from BiggerPockets.com. Our blog brings together experts in various fields of real estate with the goal of keeping our readers informed and up to speed. Whether you're a real estate professional (lender, Realtor, banker, etc), investor (landlord, flipper, wholesaler, etc.), or simply a consumer, renter or homeowner interested in the world of real estate, this blog is the place for you to get involved!

You can subscribe to our RSS feed, get blog updates by email, join our free mailing list, or best of all, join our social network along with 35,000 others interested in real estate education, dealmaking, networking, and marketing.

Tags: immigration, opportunity, real estate, United States

Think the big banks would be at least a little grateful to American taxpayers for bailing them out with their money? Yeah, right!

A published report the other day says these “too big to fail” institutions are doing everything in their taxpayer fueled power to head off a proposal by President Obama for a consumer protection agency.

The proposed agency would, among other things, regulate home loans.

Did I say “regulate?” Now, there’s a word banks don’t like very much.

But regulation was exactly what was needed–stricter regulation–when banks and other lending institutions were helping create the worst economic disaster in this country since the Great Depression.

The New York Times quotes the president of the American Bankers Association as saying, “It’s going to be a huge fight. This agency would have broad powers that go beyond every consumer law that has ever been enacted.”

Well, that sort of sounds like a good thing to me!

The fact is, the banks, and many real estate brokers, have and are getting away with fiscal murder….and, they know it. That is why they are fighting so hard to head off anything that might get in their way of business as usual.

We may or may not be at the very beginning of a modest,at best, real estate recovery—declines in home prices in some places are slowing–and prices actually are up in cities like Denver, apparently.

But lending institutions can’t be allowed to simply pretend that nothing really bad has gone down…that would only set everyone up for yet another real estate bubble followed by another real estate burst.

Tags: American Bankers Association, barack obama, Consumer protection, real-estate-bubble, United States

No fewer than three times in the past week I heard someone use the expression “when life hands you a lemon, make lemonade.” Twice it was used in the context of real estate and the other in reference to the economy in general. What that says to me is that people have, for the most part, come to the realization that things will never return to the way they were.

image via Flikr

 Last week I discussed revisiting your business plan, getting back to basics, and remembering why you went into this business in the first place (article). Often that is easier said than done. Everyone understands that there are going to be setbacks, or lemons, along the way. But now it seems as if the lemon harvest has been a bumper crop. How much lemonade can we drink?

The Carnegie Solution

I remember reading a book by Dale Carnegie many years ago. He had a fairly simple process for dealing with problems and it’s one that I’ve always remembered. He suggested following three simple steps:

1. Determine the worst possible outcome
2. Accept that outcome if necessary
3. Take steps to improve on the worst case

People have a tendency to let things get out of hand by ignoring problems altogether. The worry and stress impacts every area of your life including your business, family life and your health. Stress takes an enormous toll and there is certainly no shortage of it today.

Facing Trouble Head On

Let’s look at a typical problem facing real estate investors. Tyler Tycoon gets caught up in the buying frenzy of a few years ago. He purchases an investment property in 2005 using an Option ARM and very little money down. He rents the property for enough to cover the teaser rate on the loan with very little left over to cover other expenses. He isn’t worried because prices are appreciating rapidly and he was assured that he would easily be able to refinance into a better loan before the teaser rate resets and caused the payments to jump by 50%. What could go wrong?

It’s now 2009 and prices have dropped significantly from the purchase price. Worse yet, the teaser rate is about to reset to a rate that will cause the payment to jump to a point that puts the payment much higher than the rental income, never mind the other expenses. Tyler has no reserves and is faced with foreclosure and is considering just walking away from the property.

Using the three step process:

1. The worst case is that he loses the home to foreclosure and the lender obtains a deficiency judgement forcing him to declare bankruptcy. His credit is now ruined for ten years as a result of the bankruptcy.
2. Instead of worrying about it, accept that this could very well happen and mentally prepare for it.
3. Look for ways that will improve the situation. You may not be able to solve the problem but you may be able to lessen the impact. Perhaps a short sale or modification of the loan or a deed in lieu of foreclosure with an agreement that there will be no deficiency judgement.

Ignoring problems won’t make them go away but it can make them worse. Those who prefer to cry over spilt milk will, no doubt, be signing the blues for a long time to come. Those who choose to make lemonade out of life’s lemons will wind up whistling a happier tune.

“When we have accepted the worst, we have nothing more to lose. And that automatically means- we have everything to gain!” - Dale Carnegie

Tags: Dale Carnegie, Deed in lieu of foreclosure, real estate

When landlords sit down with prospective tenants, they typically say something like this:

“You’re signing a one-year lease.  This is a contract for you to pay $9000 in 12 monthly installments for the use of the apartment.  In other words, it’s a one-year commitment.  You are responsible for the entire amount, even if you leave before the year is up.  If you don’t pay the full amount, your credit will be affected and you’ll have trouble borrowing money or renting another apartment in the future.

“Are we clear?”

“Yes, of course I understand,” says the prospective tenant.  But he may be thinking: blah blah blah.

Prospects don’t pay attention to the “commitment” speech because many landlords don’t follow up on their threats.  If a tenant splits before the lease is up, too often the landlord simply lets him go with no followup – even if the tenant is already behind on his rent payments.  I’ve been guilty of this many times myself.

However, we have the same rights as any other businesspeople to enforce our contracts.  We can use collection agencies and the courts, get judgments against deadbeats, and report them to credit bureaus.

How to do it

If you don’t know how to arrange a court-ordered eviction, learn now so you’ll be ready.  The laws are different in every state and even in many cities.  Not only that, if you screw up the procedure, all your efforts may be in vain.  Here’s an example: in New Hampshire, there are two documents: the Demand for Rent and the Notice to Quit.  The first says “you have to pay the rent.”  The second says, “you have to go.”  The state requires that you give the tenant the Demand for Rent first.

However, often a late tenant is impossible to find, so instead you can post the notices on the door.  Here’s where things get weird.  The Demand for Rent must be posted on the upper left of the door.  The Notice to Quit must be posted below it and to the right.  The idea is that since people typically read left to right and up to down, the tenant will see the Demand for Rent first, and the Notice to Quit second.

That’s how things work in New Hampshire.  I have no idea how things work in, say, Minneapolis, so if I ever buy property there, I’ll get in touch with a Minneapolis real estate attorney first.

Collection agencies and credit reporting have their own set of rules.  We cannot submit information to credit reporting agencies such as Equifax ourselves; the information must be submitted by a licensed collection agency or a court.  In either case, you will incur costs.

With a collection agency, you pay either a flat fee or a percentage of the debt owed on contingency (only if they collect).  You must submit documentation such as the lease and any written attempts to collect.  To get a legal judgment from a court, you will again have to submit documentation.

When you shouldn’t enforce the contract

There are many times when you will not insist on strict enforcement of the contract.  If your tenant isn’t paying because he simply can’t afford it, you may want to try the “let’s part friends” option: the tenant leaves the unit in broom-clean condition by a certain day and you will not pursue him.

Another reason not to pursue the tenant is if you haven’t been an angel yourself.  Review the lease and your own behavior with the tenant.  Has your maintenance fallen short?  Could the tenant make a legitimate case that you haven’t lived up to your own obligations?  If so, then pursuing him in court or through collection will probably waste your time.

Sometimes you’ll let a tenant out just to be a nice guy.  I did this a few years back when my excellent tenant fell in love with a woman from Vermont.  The two got married and naturally wanted to live together – in the Green Mountain State.  Who was I to stand in their way?

I hear they are now divorced.  Maybe I should have held Bob to his lease - it would have saved a lot of trouble later.

Image by Getty Images via Daylife

Tags: Credit and Collection, Equifax, eviction, landlord, rental, tenant

It’s the battle of new home sales vs. existing home sales. Existing home sales are thus far winning.

Seems sales of new homes fell last month 0.6 percent, according to the Commerce Department—-that apparently came as a surprise to some “experts” who had predicted the rate of new home sales would actually rise. Oh well.

Over the course of the past year, new home sales are now down 32.8 percent, in fact.

This is in contrast with the sale of existing homes–the sales rate there actually went up in May by 2.4 percent.

Pretty easy to see what is going on here.

Most of the existing homes are foreclosed properties and cheaper, therefore, than they would otherwise be.

But sales of such homes do not bring with them increased employment–at least not to the degree that newly constructed homes do.

Those who see “hope” for an economic recovery in the sales of existing homes are chasing a false dream.

The real sign of a turnaround will come when we start seeing sales of newly constructed homes increase on a steady and monthly basis.

Clearly, we are not there as yet!

Tags: Economy, New Home Sales, United States, United States Department of Commerce

In the current economy subject-to’s are the best way to make money. Yes, a lot of people have terrible loans that you can’t do anything with. However, remember this business is simply a numbers game. If you do the proper marketing you will still find the 5% of people who have loans that you can take over and make a healthy cash flow.

So, today I decided to do something a little different. I’m working with a new investor who just had his first ever meeting with a seller concerning a potential sub-2 deal. When that investor got home from the meeting he was unsure of the answers to several of the objections the seller raised. I answered his questions and since they are similar to the questions that many new investors ask, I’ve given you the questions and answers below to help you close more sub-2 deals this year:

Subject-To Answers that will Help You Close More Deals

Q–What can a seller do if a buyer purchases sellers house subject-to and buyer stops paying mortgage? If seller does not have deed what can they do?

A–If a buyer stops making the payments the seller can take back the house. I had my lawyer create a special clause for me to help overcome sellers objections. Basically, if a buyer is ever 30 days past due, the seller gets the house back. Here’s the clause (of course we will never not make a payment, but this is an awesome clause to show sellers to make them feel safer about working with you):

“With regard to the existing mortgage(s), if Buyer fails to make any payment on any such mortgage when such payment is due, and such failure continues for more than 30 days after the due date, then Seller shall have the right to require Buyer to convey Property back to the Seller upon written request. At settlement, the Parties shall execute and deliver to the settlement agent documents and funds sufficient to re-convey the Property to the Seller, together with an appropriate escrow agreement.”

Q–What do you say to a seller when pitching a subject-to and they say why don’t you just get a new loan?

A–If a seller asks me why I don’t get a new loan here’s what I tell them: Mr. Seller when we have to get financing it costs us a great deal of money in fees. The only reason we are able to help you and buy the house is because we get to take over your existing loan. If we had to get our own financing then there would not be any profit for us in buying your house…and obviously we are a company that has to make a little bit of money. Also, in today’s current economy since people have very little equity, this is how we are helping 99% of sellers we are working with these days.(This will usually satisfy them. If they need more convincing, explain that when you pay with cash, you have to buy at a significant discount of 60% of the house value, and they do not have enough equity for you to pay cash).

Q–When sellers sell a home subject-to, can a seller then go and get a new owner occupant loan? Or how do they show previous house is sold?

A–Yes, when a seller sells they can go get a new owner occupant loan. What happens is that when they are applying for their new loan, the loan officer will make you send a written letter that states your company is making the payments on the loan and the seller is not responsible.(I send this letter all the time and a seller has never had a problem getting a loan…obviously make sure its a professional letter on your company letterhead).

Q–What do you do on subject-to about a escrow refund or shortage?

A–Everything is negotiable and this changes on a case by case basis. Try and keep as much money as you can, and get the seller to cover a shortage if they have the money to do so. You can just write a simple addendum for whatever you wish (nothing is set in stone in a contract, anything can be changed). Whatever you do, don’t get greedy and kill the deal over a few bucks

Tags: business, cash-flow, Financial services, loan, Loan officer, real estate investing

Remember those days when you had the first ideas for your real estate business? For some that seems like eons ago while others may just now be in the beginning stages of their business. For many those ideas never escape the confines of the cranium and some will scribble ideas on a napkin as they sit at their favorite watering hole. Hopefully those plans eventually made it to paper or, better yet, became a formal business plan.

Unfortunately for many, those plans that were so carefully crafted are soon forgotten. The mission statement, goals and objectives, strategy and such are collecting dust somewhere. Unless it is needed for some proposal or financing it is never looked at again. What happened?

Reality Strikes

People will often start out methodically following the steps in their business plan. They begin with the ultimate goal in mind and set off on the journey to realize their dreams. If they are committed to their goals they keep going while experiencing the ups and downs and challenges that come their way. Things move along as expected for a time but soon enough something happens. Reality enters the picture.

Somewhere along the line we seem to go from the relentless pursuit of our goals to putting out the little fires that pop up at every turn. Those fires are simply the reality of everyday life. They have always been there and will always be pulling you away from your intended path. In the recent real estate environment those fires have been roaring blazes. Foreclosures, falling prices, and difficult to obtain credit have wreaked havoc with business plans everywhere. What now batman?

Reevaluate & Revise

A good business plan is not a static document, it is a living, breathing organism. As such it needs to be nurtured, fed and cared for. If you have a written business plan, take it out and look at it. Have your goals and objectives changed? Odds are that your strategy has, have you adapted your strategy to fit today’s reality? If you haven’t put a plan to paper what are you waiting for?

A typical plan has the following elements:

• Mission Statement
• Executive Summary
• Goals & Objective
• Market Analysis
• Strategy
• Financials

Without a doubt the most important step is taking those elements and implementing them. If you don’t put the plan into action it’s just a bunch of wasted ink and dead trees.

You’ve got to be very careful if you don’t know where you’re going, because you might not get there. - Yogi Berra

Tags: business plan, real estate