First, go to your favorite office supply store and buy:

1. A box of manila file folders
2. Pendaflex folders
3. Some two or four drawer filing cabinet
4. One or two filing storage boxes
5. A fire proof safe

Now prepare to dive in and organize your financial records. In your new filing cabinets you will label your file folders with the following categories:

• Bank Statements
• Credit Card Statements
• Credit Line Statements
• Expenses**
• Auto Insurance
• Homeowners Insurance**
• Life Insurance
• IRA’s or Money Market Accounts
• Living Trust
• Premaritial Agreements
• Mortgage Statements
• Current Year Tax Relevant documents
• Home Warranties
• Other relevant categories

**One for each property you own

Put the file folders in the pendaflex folders and put the pendaflex folders in the filing cabinet. Take the file storage boxes and label them TAXES, and write what years you are putting into that box (I can usually get many years in one box). Put this box in your fire proof safe, along with your living trust, birth certificates, social security cards, and passports, etc.

Which leads me to a good point - clean out your financial filing cabinet once in a while. You do not need to keep some of these financial records forever. You’ll run out of room if you try. Ask your CPA which ones you need to keep and for how long, and the rest shred after the appropriate amount of time has passed. Being organized is pointless if you’re cluttered.

In no time, your financial records will be organized, you’ll feel like a huge weight has been lifted off your shoulders, and you’ll be ready to tackle the all important business of investing in real estate - which is what you really want to be doing, right?

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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• When’s the last time you balanced your check book?
• If someone asked you for your latest bank statement, paycheck stub or credit card bill, could you find it?
• Do you keep your mortgage statements if you have one?
• What about tax returns, insurance policies, living trusts, mutual fund and money market accounts?
• Could you immediately put your hands on any of these things, if you needed to?

No successful investor can afford to be caught searching for any of these things when asked. You will soon find out that time is money. Every precious minute you spend looking for a document or statement is time you could be spending researching or closing your next deal.

You don’t want to cringe every time you have to apply for a loan, or find a document for your tax strategist. And at tax time, the more organized you are, the more tax write offs you will have.

Also, all investors have current, up-to-date profit and loss statements that they analyze on a frequent basis to track their progress and their goals. How can you have a tight P & L if you don’t even know what your current bank or mortgage balance on your rental property is?

Tomorrow, I’ll go into detail on how to set up a working Financial Filing Cabinet for any successful Real Estate Investor.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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More than 800 MLS’ (Multiple Listing Services) nationwide will be instructed to open their database to all Real Estate Brokers, traditional and online. For years, many Internet based brokers have accused the National Association of Realtors (NAR) of unfair competition by locking them out of the database.

More home buyers use the Internet for their searches than for sale signs. By allowing all buyers to see all listings, true competition between real estate brokers can take place. Online brokers have been offering fee for service type commission models for years to their seller clients, however, because they could not expose those homes to the entire buyer market, they were placed at a disadvantage.

Now, sellers can save money by ensuring their property reaches the broadest market possible, and buyers will have more choices presented to them, whether they use a traditional or internet broker.

While the Justice Department Tuesday has ordered this new industry policy, the tentative settlement still requires court approval.

Having access to all MLS Real Estate Listings will change the face of home buying and selling completely, and the more choices we investors have, the better.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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1. Location, Location, Location: The holy grail of home buying is even more important in a depressed market. Look around and determine how many other homes in that area are also bank owned or short sales. This will severely depress the price for quite a while until things recover. If you plan on renting the house out for a while, then you may still end up with a good deal.
2. When in Doubt, see Rule #1: Just because you can buy a home for $.60 on the dollar, remember to buy in a safe neighborhood with low crime and good amenities. Buying near an airport or freeway, or in a horrible area, will make your exit plan very tough!
3. Condition: Homeowners who have not been able to pay their mortgage probably have not been able to perform upkeep on the house. Many houses will have a lot of deferred maintenance. Whenever possible perform your due diligence and bring in a home inspector or contractor. Paint, carpet and appliances is one thing. A new roof or subfloor is quite another and can make that great deal a nightmare.
4. Comps & Rents: Just because you’re getting a steal on home, don’t forget to find out what you will be able to sell it or rent it out for, depending on your strategy. Try to use comps no older than 3 months. And look for areas where you can charge at least 1% of the purchase price in rents (unless you’re in an area with high property taxes, then that percentage will have to be higher). This will safeguard you from losing money when it’s all said and done.

By using the above Real Estate Investing Criteria, you can be sure to get a good price when you buy, and be able to easily sell when you’re ready to exit.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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In theory, the bank already knows it is facing a Short Sale situation if they try to sell the property either at auction or on the open market, so you will be saving them time and hassle of doing that by offering to pay off the loans. But not the face value. This is how you regain some of the equity in a property, and this is why Short Sales can be profitable to real estate investors.

Let’s say you’ve found a homeowner who has two mortgages on their property for a total of $100K. The 1st is for $80,000, and the 2nd is for $20,000. The house, however, now has a fair market value of $85,000. So you offer the 1st lender $70,000 and the 2nd lender $5,000 and they accept. You’ve just made an instant $10,000 in equity (paid $75K, house worth $85K), the homeowner can walk away from their property free and clear without damage to their credit and no more mounting bills, and the lenders have at least recovered some of their original loan amount. WIN-WIN-WIN.

Now you might be saying there is no way the 2nd lender would discount their note by $15,000. But remember, if this property goes to a foreclosure auction and sells for $80,000 or less, the 2nd lender will get nothing (the 1st lender always gets paid first)! So $5,000 is better than zero!

How much you can discount a note is going to vary by state and area and will depend on the overall market conditions (remember supply and demand), but start low and work you’re way up to an amount you can live with. Or just walk away and move on to the next property if you can’t get an amount that will make you money - there’s always another property waiting out there.

Again, this is too complex of a subject to try to tackle without some education, so do some research if you are considering this strategy. For someone with persistence, a willingness to put up with the agonizingly slow bureaucracy of lending institutions, and a lot of motivation, there are very good profits to be made with Short Sales!

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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When a homeowner finds themselves in this situation, they have very little recourse. If they place the home on the market, and they owe more than it is worth, then they will have to make up the difference between what they sell it for and what they owe the bank out of their own pocket. Also, they must pay the realtor if they sell it the traditional way. Obviously people who are losing their homes because they can’t afford the mortgage don’t have the money to do this.

This is where an investor can come in and help a homeowner. With the Foreclosure Buying Method, you were dealing directly and only with the homeowner. The technique used was that there was some equity left in the property to either give the seller money to walk away with or split 50/50 with them. In a Short Sale, there is no equity, so you will be dealing directly with banks that hold the mortgage notes on these properties.

If the bank ends up foreclosing on a property, then that situation is called an REO (Real Estate Owned) - owned by the bank. Bank’s don’t want to own property - they’re in the business of selling mortgages. When a home ends up being REO’d, the bank now has to sell the property, a time consuming and costly venture for them if the home doesn’t sell quickly and sells for less than the mortgage balance they had on the property. Banks are ending up taking huge losses right now with the large amount of foreclosures that are occurring in the marketplace.

So what this means for an investor is when you find a seller in pre-foreclosure, you will ask them to sign an Authorization to Release Form so that you may speak directly with their bank(s) and review their loans.

Now that you know what a short sale is, my next post will deal with how to negotiate one.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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1. Offer the seller “Cash to Walk”. Simply ask the seller, “What do you need to walk away with?” You’d be surprised how little some people want just to be rid of the headache and heartache. They know they don’t have a lot of equity anyway in some cases, so you would be doing them a favor, and at the same time saving their credit.

2. Propose an “Equity Split,”. This is the most common way these deals are structured. For example, the seller has a $260K mortgage that is $15K behind in payments and fees, so they owe the bank $275K. The home could be listed and sold for $415K. Realtor commission and closing costs would equal $30K. This is how it would work:

$415K Sale Price

-275K Mortgage Balance/Late Fees

- 30K Commission/Closing Costs

$110K Net Equity - split 50/50 = $55K to seller and $55K to investor

The bank gets their money, the seller gets out of a horrible situation, and the investor gets a house with $55K instant equity. WIN-WIN-WIN

Now you’re probably asking if there’s $110K in equity in the house, why wouldn’t the homeowner just list and sell it themselves? First, because in order to make a deal of this type work, the homeowner deeds the property legally to the investor. The investor immediately brings the property current in its payments and stops the bleeding. Then the home is put up for sale, all the while the investor is paying for everything, something the homeowner could not do. If the property didn’t sell quickly, the homeowner for sure would have had their house sold at auction. So getting out of trouble and walking away with $55K is a dream come true for most of these folks. Remember, in the first 90 days the homeowner normally does nothing. So by the time you find out about them, there is little time left for them to do anything to help themselves.

Knowing how to structure a successful Foreclosure deal and which option to use depending on the circumstances will be a learning process. This is an extremely complex Buying Method, and one I definitely recommend you purchase a book, take a course, or even better, find a mentor to help you with the first couple of deals so you are confident you know how to do these transactions correctly.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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Typically not in the First 90 Days. That’s because finding these homeowners at this stage is next to impossible, and mentally they are not ready to accept the loss they are potentially facing.

The Second 90 Days is the absolute best time to find these homeowners, because remember, the 90 Day Notice of Default has been posted publicly. You can sign up for services, for a small monthly fee, that will send you a list of these Notices on a daily basis so you know who to contact. Also, the homeowner’s situation is much more desperate in this phase. A percentage of them at this point may be looking for a way out and will be more receptive to talking to you (some never will, so don’t be surprised).

This Final 21 Days is more risky. At this point you are bidding on the Courthouse steps (literally). You are not allowed to inspect the home, so you will be buying it as is. Also, you must show up with all cash or a cashier’s check to purchase the property, which many investors can not hope to do. If you buy the home and it is mold infested, you’re stuck with it, because there’s no one to turn to for recourse - Buyer Beware!

In the Second 90 Day period it is a much different experience. Normally, you will be approaching the homeowners at the house in question, so you have an opportunity to let them show you around. You can ask them if there are any problems you should be aware of. They may not tell you the full truth, but you’ll have a much better idea of condition than you would sight unseen. You will also have time during negotiations with the homeowner to run a preliminary title report, and possibly bring in a property inspector or your contractor.

Understanding when to approach a property owner in foreclosure is the best way to Add to Your Real Estate Portfolio. Tomorrow, we’ll cover the two different type of deal structures when purchasing foreclosed homes.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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First 90 Days: During this time, no payments are being made on the mortgage. More than likely the homeowner has either had a life altering event (job loss or reduction of income, divorce, death in the family), or their adjustable rate mortgage has reset, and now their monthly payment is more than they can afford. Now someone never having been in this position might think that the logical thing to do would be to take some kind of action right away and call the lender to negotiate. But it may surprise you to learn that 3 out of 4 people in this situation never do that!

Why? Because they are scared. Literally scared into inaction. Most people in this situation create a shield of denial so strong that they actually convince themselves the problem will disappear on its own. Obviously that doesn’t happen.

Second 90 Days: At this time, three months of mortgage payments have been missed, and the lender will now issue a 90 Day Notice of Default to the homeowner. This notice will also be publicly recorded at the County Office. Basically, the lender is saying either bring your mortgage current or lose your home! It’s an extremely stressful situation, and one that most people don’t know how to get out of, so again, they do nothing.

Final 21 Days: This is the final stage. Foreclosure is imminent. If the mortgage and late fees are not paid and brought current, then the home will be sold at a public auction. And once the title is transferred, the sale is final - no Right of Redemption period exists for the homeowner. There is no more time for solutions, the home has been lost! It’s a devastating blow to anyone. They have no where to live and their credit has been destroyed for years to come.

So now that you understand the Foreclosure Process Timeline, how can you, the real estate investor, help someone save themselves from Foreclosure while at the same time adding to your real estate portfolio? In my next post I will explain.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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A couple of days ago it was reported that Freddie Mac will not refinance a property that has been held in an LLC at any time in the previous 6 months. Fannie Mae is expected to follow suit. And of course, this may require your lender to do the same. While it’s frustrating for those of us who invest in a responsible manner and in no way caused this mortgage debacle, we are now having to sit back and accept policy from a government backed organization that basically paints all of us with the same brush.

However, don’t panic. All real estate investors have some options. They are:

• Unless you have an ARM that really needs to be refinanced, you can leave the property where it is. The LLC will continue to give you the benefits you expected when you set it up. Stay with the same mortgage until you sell the property.
• You can pull the property out of the LLC seven months before you set out to refinance it, and put the property back in after the refinance is complete. Yes, you will have liability exposure during those seven months, so make sure your insurance is paid up and get an umbrella policy.
• You can find a lender who is willing to refinance the property inside an LLC and pay the higher interest rate.
• You can move the property from your LLC to a trust, with the beneficial interest in the trust held by your LLC.

Any of these options will allow you to accomplish your goal of Refinancing a Property that you currently hold in an LLC. And in Real Estate Investing, knowing what your options are is half the battle.

For more real estate investing information, visit the realestator’s website at www.real-estate-investing-support.com

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