Community First Financial talks to many of investors every day and there are some thoughts I would like to share with you on our experiences with investors, particularly first time investors.

One of the top questions I hear from investors is, What would you do?

If I could start my investing life all over again I would buy a FOUR PLEX as my first home. And when I say first home I mean first home. Most people buy their single family house, live in it as their primary house, then look to buy their first investment property. For those that are flexible and motivated I suggest you buy a 4 plex as your first primary home and investment property.

Here is why owner occupied 4 plex makes sense:

1. Qualifying for a first time home buyers loan on a primary residence easier.
2. You need less money down.
3. Rental income helps qualify.
4. You now have a primary home and an investment in one transaction.
5. Potential cash-flow or you could pay for your primary unit with the other three units cash-flow.
6. When you decide to move you have a 4th unit that becomes a rental.
7. On site property manager.

Highlights of the loans available on a 4 plex (primary residence):

• Up to 80% financing
• Rates start at 5.875% on a 30 year fixed
• Loan amounts to $801,950
• Seller can contribute 6% to closig costs
• Credit scores down to 575
• 2 month asset reserve minimum requirement

This is also a great idea for individuals that have kids that are in need of an idea on how to get started in real estate.

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Tags: financing investment properties, fourplex, investment loans, investment property, landlord, real estate, real estate investing, state income loans

I talk to hundreds of investors every month and there are some thoughts I would like to share with you on my experiences with investors, particularly first time investors.

The question I hear the most for our investors is, How do I to get ready to start investing?

The answer for me is two parts.

1. Are you ready to invest?
2. Are you patient?

The key to investing is to be prepared financially, physically and emotionally.

• Financially - Make sure you have your credit in order and you have an understanding of the financial commitment in order to invest. Understand cash flow, entry strategies and exit strategies for real estate. Have your financial advisor’s in place, loan officer, CPA and real estate attorney.
• Physically - Can you move into your investment at any time? Do you have a property manager? Will there be any work that needs to be done to your property? If you are not ready to get physically invovled with your investment do you have the people in place to help? Have the individuals like property mangers, general contractors, and handyman’s ready to go.
• Emotionally - Does finding a renter stress you out? Do you trust a good deal when you find one? Are you missing all the great deals because you think about it one day too long? The very best real estate deal do not hang around for long. They sell and move quickly because other investors that are better prepared or willing to take more risk move quickly. Investors do not need to be cold as ice to make a deal, having help and advise is valueable. Talk to other investors, Realtors, and loan officers use their experience if your unsure. From a mental stand point investing is not easy. If it was there would be no room for you and me.

Remember to be ready financially, physically and emotionally you have to be patient.

Tags: landlord, lease, real estate, real estate investing, Real Estate Investing, real estate investor, renter

I have often found that many homebuyers lack a fundamental understanding about title insurance. While most past clients have admitted to briefly discussing the topic with their real estate agent, they don’t seem to understand its purpose or function–only that it will be an additional expense on the settlement sheet for which they are responsible.

What is Title Insurance?
Title insurance is a policy of insurance that protects against losses arising from defects in and/or claims against the title to property. Examples of such defects and/or claims include tax liens, easements, mechanic’s liens and ownership claims by third parties.

Lender’s Policy/Owner’s Policy
There is no legal requirement to purchase title insurance prior to acquiring a property. In practice, any lender will require you to obtain, at a minimum, a Lender’s policy of title insurance for an amount equal to the loan. This protects the lender’s investment in the event of a third-party claim. The insurance remains effective until the loan is repaid.

A homebuyer will also want to obtain its own protection of the equity in the property since a Lender’s only policy extends solely to the loan amount. This requires an Owner’s title policy for the full value of the home. Typically, the additional cost to add Owner’s coverage to the cost of the Lender’s policy is small; all the more reason for any homebuyer to get the necessary coverage. By way of example: If the sale price of a home is $500,000.00 and the homebuyer is borrowing $400,000.00—the title insurance policy would include Lender’s coverage in the amount of $400,000.00 and Owner’s coverage in the amount of $500,000.00.

Is title insurance similar to other types of insurance?
No. Most insurance policies protect against events that happen after the policy is issued, such as a car accident that happens 6 months after purchasing a new car. Title insurance in most cases protects against losses arising from events that occurred prior to the issuance of the policy. The coverage afforded by these policies typically does not extend into the future. The exception to this is certain enhanced title insurance policies, which offer coverage of a limited amount of future occurrences that are spelled out. All homebuyers should check the state in which they are buying in order to determine if such policies are available.

Is title insurance required for a refinance of the existing loan?
Yes. The lender will require you to purchase a new lender’s policy because 1.) the existing policy terminates upon the full payment of the mortgage and 2.) the lender wants to protect itself from any title issues that have arisen since you took title to the property. The good news is that you won’t need to obtain a new owner’s policy and title companies generally offer a discounted premium if your last policy was acquired within a certain amount of time.

What can I expect to pay for title insurance?
The premiums for title insurance policies are state specific. In some states, title insurance premiums include the actual insurance as well as the costs for a title search and title examination (to determine if there are any defects in the chain of title). In other states, the premium covers the insurance only and the homebuyer must also pay a third party company and/or attorney to provide the search and examination services.

Some states such as Pennsylvania and New Jersey strictly regulate rates and the premiums are the same regardless of the insurance carrier selected by the homebuyer. Other states do not regulate premiums and the homebuyer is wise to shop for the best available price.

Tags: insurance, real estate insurance, Real Estate Law, real estate title, title, title-insurance

Many people want to invest in real estate but have one small problem – they have a full-time job. While they may prefer to be a full-time real estate investor, they need the income from a job to survive. While real estate investing may provide a great income, it is difficult to make enough to live on right away. The obvious solution is to start part-time while continuing to work.

It should be noted that part-time does not mean spare time. Who among us has any spare time? Our free time always seems to be consumed by this, that and the other thing. Investing part-time requires that we set aside specific hours to pursue our real estate ambitions. If you took a second job working somewhere a few hours a week you would be expected to be there at specified times. Part-time investing is no different. Set specific hours that will be devoted to your investment business.

Set Goals

Determine what form of real estate investing you want to do. After you have made your selection be sure to set specific goals. Set a time by which you intend to achieve those goals. In his book, The One-Minute Manager, Ken Blanchard laid out a method for goal setting that he called the SMART system.

S-Specific

M-Meaningful

A-Attainable

R-Realistic

T-Trackable

Specific in that they are detailed. Meaningful in that they are important to you. Attainable means that they can be achieved with effort. Realistic in the sense that your life situation will allow you to work towards them. Trackable in that you can measure or track your progress. There are several versions of this system but they are all basically the same.

Be Patient

Many people have a need for instant gratification. They start something new and expect to see immediate results. Real estate, like most things, does not work that way. You need to take the time to educate yourself and learn the various aspects of the business. You need to get your own financial house in order (article) before taking on additional obligations. Very few real estate investors become wealthy overnight, it takes years of consistent effort.

Make a Commitment

Not only is it important that you make a commitment to your real estate goals, but you need to make a commitment to yourself. Outside of those close to you, who really cares if you succeed or fail? It is up to you to make things happen, others will not do it for you. While the hours may only be part-time, the effort needs to be full-time and consistent. If you are truly commited, you can make it happen.

Tags: goal-setting, investor, real estate, real estate goals, real estate investing

We have all heard the classic saying: It’s not what you know, but who you know. It’s true in life, it’s true in business and it’s certainly true in real estate. The people you know and the connections that you make have a profound impact on all aspects of your life. This was something that I discovered fairly early in my business career.

When I started in the financial services industry as a stockbroker I spent the majority of my time dialing for dollars. I spent countless hours calling people I didn’t know in the hope that they might be willing to have a conversation with me, let alone become a client. I was sure, or at least I hoped, that there had to be a better way. I asked successful veterans for tips on building a business and what they had done to achieve the degree of success that they had.

Two answers were constantly thrown back at me: networking and referrals. I was told to join the Chamber of Commerce and other business groups in order to build relationships that would lead to a steady stream of referrals. I was also warned that there is no instant gratification, relationships take time to develop. It is important to remember that it is called net-work-ing because you have to work at it.

Stage One

The first step in networking is to get out there. Have plenty of business cards and develop a 30-second commercial that clearly explains what you do. You need to develop your listening skills, you have two ears and one mouth – use them in that proportion. It is easy to spot the novices at networking events, they’re the ones running around trying to sell their product or service to anyone with a pulse. They usually go home empty handed.

At this stage you should be focusing on building relationships. Ask people what they do or what they need, then shut up and listen. In his book, The 7 Habits of Highly Effective People, Stephen Covey calls the 5^th habit: “Seek first to understand, then to be understood.” If you understand what other people want and help them get it, you will wind up getting what you want as well.

Stage Two

By now you’ve met a bunch of people and collected a lot of business cards. What do you do with them? This is where the real work begins. Many people do all of the stage one activities and stop there. They’ll say that networking is useless or ineffective, for them it is. Many people you meet will be nothing more than contacts, you’ll wind up seeing them at other events but rarely will you go beyond a casual greeting. That’s to be expected and there is nothing wrong with that.

However, you will also meet people that you are truly able to connect with. Perhaps your life objectives are similar or your businesses overlap in some way. These are the relationships that you need to nurture. Grab a cup of coffee or share a meal and get to know this person. Focus more on developing the relationship than on any one transaction. People tend to do business with people that they like.

Stage Three

In stage three you have reached the point where people come to you. When you strive to help other people they will work to return the favor in kind. You become known as someone who is well connected and is a good source of information. This does not happen overnight, but it is well worth the effort.

In real estate you need to clearly define your goals and clarify your message. Go to real estate investment clubs and become known to others. Don’t ignore other groups just because they are not real estate related. If you are looking to buy distressed properties or pre-foreclosures, you can find leads just about anywhere. You may find that you are the only real estate investor in attendance and that certainly gives you an edge.

I have built several businesses over the years using the power of networking. It is an incredible tool when you learn how to use it.

One secret of success in life is for a man to be ready for his opportunity when it comes.
Benjamin Disraeli

Tags: networking, real estate, real estate investing

In the 60s, Sonny & Cher (before Sonny crashed into a tree while skiing) had a big hit with the song “And The Beat Goes On”–or something like that. Now, in real estate, 2008, a good song title might be “And The Debate Goes On!”

The “debate” is whether or not this is or isn’t a good time to invest in real estate. There are those who argue that real estate is always a good investment (see “Gone With The Wind” Chapter 6, page 147, paragraph 4, sentence 7, Scarlett’s dad to Scarlett : “There is always the land, Scarlett.”) And, as we know, in the end, it was the land that Scarlett returned to after the South got the s–t kicked out of it by the North (okay, I’m from New York, so I am partial to this version of reality..which happens also to be …well…reality!)

Now, the cool thing about fictional characters is–they are fictional. They don’t really have to feed their families or save for retirement or worry about paying for their kids’ education. Heck, all Scarlett had to do was hope that Rhett would come back one day and wisk her away to an even better chunk of real estate.

Time To Get Real. This Ain’t No Novel

That’s right. This is the real world. No authors to help us along our way by dreaming up another chapter or another character to save the day.

In the real world, a bad investment–and, yes, there is a Santa and, yes, there are real bad real estate deals–can actually hurt you. The point being, if you are going to invest in real estate in the current climate, you had better do your homework and know what you are up against.

The economic picture is bleak and seemingly getting bleaker each day.

Just this week, The National Association of Realtors said sales of existing single-family homes tumbled last month by 2 percent,while the median price of a home declined 7.7 percent from a year before.

Yes, there are pockets in the country where this is not the case. But, that is the exception and most certainly not the rule.

What began as a subprime mortgage crisis has ignited an economic fire burning around the world and devastating all sorts of different businesses…from banks, to brokers, to airlines (three of the biggest U.S. airlines this week reported large quarterly losses pegged to soaring fuel costs), to automakers, to newspapers, to broadcasting, to resorts, to …..well, you get the idea.

No one…no one…really knows where this recessionary train is taking us and how many stops there might be till we get to the terminal?

Conventional wisdom…not so wise

The “conventional wisdom” is to buy real estate when there are bargins to be had. And, under normal times, this makes total sense. But, the point is—these are far from “normal” times.

When times are not “normal”–so-called conventional wisdom gets tossed out the window.

This is not to say that no one should invest in real estate at this time. Someone has to. But, as I said before, this is NOT the time to learn on the job.

Tags: and the beat goes on, gone with the wind, home prices, median home prices, national association of realtors, real estate investing, Real Estate Market, recession, sonny & cher, subprime mortgage crisis

People invest in real estate for a myriad of different reasons. Some people have a very clear plan for what they want to accomplish, while others jump in on a whim. It can be very seductive to see the amount of wealth that can be created in real estate. With so many different avenues available to a new investor, which one is right for you?

Do you start by being a bird dog or wholesaler? Many people choose this road because they do not have the access to capital that is required to follow other paths. Do you try your hand at being a landlord? This can be a fantastic way to amass wealth over the long-term but it can be a source of frustration as well. Perhaps you are looking to flip-and-grow-rich. There are a plethora of great deals to be had. The obvious challenge is being able to flip them to a willing buyer at a decent profit.

My Chosen Route

My path was to follow the rehab road. I was led in that direction by circumstance, not by an overwhelming desire to find my fortune in real estate. I was at a point in my life when I was looking to purchase a home for myself. I bought a “fixer” because I was able to buy a house in a better neighborhood by using my own sweat equity. I soon discovered three things about rehabbing houses:

Do What you Enjoy

With so many different aspects of real estate investing, there is sure to be something that you are good at and enjoy. Many people who invest in rental properties find that they are not cut out for it. Dealing with tenants can be very difficult and stressful. You can avoid a lot of that by using a property manager, but that has its own set of problems. Then you have to deal with repairs and vacancies. However, many others have no problem with those issues.

Nothing in life is perfect, but you need to choose what is best for you. Spend time investigating different aspects of investing until you find something that you think you would enjoy. Proceed slowly until you find out if you are suited to that particular investment style. When you discover your niche, run with it.

Finding Your “Why”

In order to achieve any significant goal in life it has to have meaning. New Year’s resolutions are a great example. Most people who make resolutions at the start of the year will break them quickly. They stop smoking for a short time, stick to a diet until they get a whiff of a fresh sticky bun, or they work to get out of debt until they see something on sale that they absolutely have to have.

If you are able to get in touch with your “why” you have a much greater chance of reaching your goal. You may think of investing as a great way to make money, but what will that money do for you? Perhaps it means more time with your family or time to pursue activities that you enjoy. Maybe you have a desire to get out of the rat race that is your typical 9-5 corporate job. Whatever it is, if you keep sight of why you are doing something, you have a much greater chance of following through with it.

What you get by achieving your goals is not as important as what you become by achieving your goals. - Zig Ziglar

Tags: goal-setting, real estate, real estate investing, rehab, Rehabbing, Richard Warren