The Real Estate Investing Journey

Private Lending: How it Can Boost your Real Estate Investing Business

noreply@blogger.com (JCL) — Mon, 12 Oct 2009 12:00:00 +0000

To say that the US mortgage market has changed in the last year is a huge understatement! We have seen the end of easy money financing, and it will be some time before we see sub-prime loans, no-doc loans or hard money lending in many areas. Even traditional mortgage lending will require much higher credit standards and much larger down payments for real estate investors.

So how are you going to fund your real estate deals in this new environment?

Few individuals have enough of their own cash to purchase real estate investments, and those who do, generally know better than to use their own cash in their real estate investing business.

It is a common story, though, for new real estate investors to start out with lots of cash and little experience — only to lose all their cash in the learning process. Then they have to learn how to do things the right way the second time around.

Even if you have a flush bank account, or a home equity line of credit, you'll eventually run out of money and need a consistent and dependable source of new money to buy real estate investments.

So how do you get this cash?

You can go to a bank and try to qualify for a loan — then wait to be approved. If approved, you will need to put up a 20% to 30% down payment for each and every deal, along with paying all the bank's closing cost fees. How long will your cash last doing that?

Or, you can go to a hard money lender, but they will only lend you 65% loan-to-value (LTV) and you must fund the balance with your personal funds. Not to mention, hard money lenders charge 5 to 10 points as an upfront fee. Ouch!

So what is the answer? The answer is using private lenders to fund your real estate deals. Private lending offers a consistent source of funds to purchase real estate deals that you can go back to again and again and again. In fact, the more you use, the more will become available as you develop relationships with more private lenders.

What is private lending and who are private lenders?

The definition of a private lender is an individual that you can negotiate directly with on a personal basis to borrow money for real estate investments. The money can be used to purchase rental real estate investments or to supplement funds borrowed from a bank to cover down payments.

Private lenders come from all walks of life and may not know the first thing about the real estate business. But what they do have is extra cash or assets that they can invest in your real estate deals. These individuals are generally middle class people, who have some extra funds to lend. They can be retired business people, corporate executives, professionals such as doctors, lawyers, or business owners or even blue collar workers.

Private lenders are looking for returns substantially above the 3% to 5% they get at the bank with CD's or money markets. Most private lenders are looking for investment returns in the 9% to 15% range and secured by local rental real estate.

Private lenders generally come in two forms. First mortgage lenders, who will lend 90% to 95% of the purchase price — or 70% of the after repaired value (ARV) — and expect you to fund the balance or use another private lender to fund the balance. Or second mortgage lenders who will lend you the 20% to 30% down payment you need, after you have arranged a bank loan for the first 70% to 80% of the purchase price.

So the concept of "private lending" can be defined as the process of borrowing real estate investment funds from private individuals at rates higher than what these lenders can normally achieve using conventional investing institutions like banks, or conventional investment vehicles like stocks, bonds, CDs, or money markets — secured by real estate.

Image courtesy The Clarion Group LLC

Preparing for inflation even if it's not imminent

noreply@blogger.com (JCL) — Mon, 05 Oct 2009 12:00:00 +0000

By KATHY KRISTOF
kathy.kristof@latimes.com

Do you need to worry about inflation?

Prices for goods and services have been relatively tame for the last three decades, but billionaire investor Warren Buffett recently voiced the fear of many market professionals. Inflation may not be around the corner. But, he said in a recent opinion piece, unless something is done to curb government deficits, inflation could hit with a vengeance when the economy starts to gain steam.

Those who lived through the 1970s know that inflation can be crippling, vastly boosting the cost of living without improving the quality of life. But you can reduce the potential effect on your finances by assessing and mitigating your inflation risk.

Your first step is to assess your inflation risk, said Judi Martindale, a certified financial planner in San Luis Obispo, Calif.

Not everyone is hit by inflation in the same way or with the same magnitude. Retirees may welcome inflationary times because Social Security income is inflation-adjusted and many of their costs are fixed, she said.

Inflation is likely to boost market interest rates, which could land retirees more generous investment returns on their certificates of deposit and other savings accounts.
On the other hand, young renters who owe significant sums on variable-rate credit cards could be savaged.

The only way to assess the effect on you is to figure out which items in your annual budget would and wouldn’t be subject to rising costs.

For instance, the average family spends about one-third of its budget on housing, according to the Labor Department, which tracks household expenditures. But that expense is broken into several pieces. Your rent or mortgage would be the biggest piece, followed by property taxes (for owners), household furnishings, maintenance, utilities and housekeeping.

If you’re a homeowner with a fixed-rate mortgage, the biggest piece of your housing expense is exempt from inflation. But the smaller pieces are not. And, of course, if you’ve financed with an adjustable mortgage or a home equity line of credit, the cost of your home loan would probably rise steeply with inflation.

As for renters, even in rent-controlled areas, rent hikes are often indexed to inflation. So if inflation rises sharply, so can the cost of keeping a roof overhead.

The same holds true with the average person’s second-largest cost: transportation. If you have a fixed payment for your auto loan, you’ve stopped inflation on that part of your budget. If you’ve financed your car purchase with a home equity line of credit, your rate is probably variable and could rise. So could the costs for gasoline and repairs.

Food, clothing and healthcare are affected by inflation. But you can control the amount you spend on discretionary items.

Add up the amounts that you’ve tagged as being either fixed or discretionary and compare those with the total to determine how vulnerable you are to inflation.

If most of your costs are exempt from inflation, there’s no reason to do more. But more than half of your budget could be affected by rising costs, you might want to make some changes.
The most obvious would be to refinance variable-rate debt into fixed-rate, or simply pay off variable-rate loans.

Because inflation is a risk and not yet a reality, there’s no need to be rash, she said. Just look for opportunities to refinance when rates are cheap. In the meantime, you might want to pare back spending to pay down debt when refinancing is impractical.

Your investment portfolio should also have an inflation-fighting component, said Marilyn Cohen, president of Envision Capital Management in Beverly Hills, Calif.

Popular inflation-fighting investments are gold and commodities, real estate and Treasury Inflation-Protected Securities.

The interest rate on TIPS floats above the consumer price index, ensuring investors that their value will keep pace with inflation, but it never exceeds inflation by much. Cohen thinks you can do better.

The other investments don’t move in lock step with inflation. But the demand for gold and commodities rises when people are concerned about maintaining their buying power, Cohen noted.

Exchange-traded funds in gold and commodities have more "bounce for the ounce" than TIPS, she said. They’re also far more volatile, however, so investors need to be quick on their feet, getting out when it appears that inflation is under control.

Image courtesy Seeking Alpha

Savvy buyers use self-directed IRA to buy homes

noreply@blogger.com (JCL) — Tue, 29 Sep 2009 19:42:00 +0000

Tuesday, September 1, 2009 (SF Chronicle)
Savvy buyers use self-directed IRA to buy homes
Carolyn Said, Chronicle Staff Writer

Nathan Foran used his self-directed IRA to buy a dilapidated foreclosed house in Richmond for $25,000 cash. Another $25,000 to $35,000 from the retirement account will go toward fixing up the property. He then hopes to rent it out for about $1,000 a month, money that will go straight into his retirement account.

Foran, 40, a San Anselmo real estate broker and investor, sees a lot of advantages in investing in real estate through his individual retirement account.

"The net rental income goes into the IRA, so it's generating money tax deferred," he said. "Once I sell, the money also goes directly into the IRA without capital gains tax. If I hold onto it for five to seven years, it probably will be worth in the low $200,000s, so I'll get a sizable gain. If I find another property I think will appreciate faster, I can sell this and use the funds to invest in that one. The IRA is a good long-term investment tool."

With many properties at bargain-basement prices, more people have been turning to their self-directed IRAs as a ready source of capital to make real estate investments. Companies that manage self-directed IRAs say real estate investments by their clients are up as much as 30 percent over the past year.

But experts caution there are a range of potential issues and gotchas - including ones that could even disqualify the entire IRA. Self-directed IRAs account for just 2 percent of the $4.2 trillion IRA market, but are among its fastest- growing segments. They allow access to a variety of investment vehicles beyond just stocks and bonds. The IRS closely regulates them, and any real estate investments must be handled by IRA custodian firms that hold the property inside the IRA. Can't live in property

IRA owners can invest in any kind of real estate - raw land, commercial properties or residential rental properties. They cannot invest in a property they already own or plan to live in, however.

The retirement funds "represent a large amount of untapped capital for investors that they can more actively manage," said Brad Hemstreet, vice president of sales and marketing for Equity Trust Co., a Cleveland company with $8 billion of IRA funds under management.

After the recent stock market downturn, "people are pulling out of Wall Street and want investments they understand and are comfortable with," he said. "Many people look at owning a property as a far better investment than owning a stock or bond."

Mary Kay Foss, a CPA and director of the Danville office for accounting firm Greenstein, Rogoff, Olsen and Co., said using IRAs to buy real estate can negate many tax advantages.

"Real estate is already one of the best investments you can have, tax-wise, because you can deduct all of your expenses, and when you sell it, you pay long-term capital gains (at 15 percent, much lower than income tax)," she said. "But if you have it in an IRA, none of the expenses are
deductible. When it's sold, any profit is taxed when you take it out (of the IRA) as ordinary income."

Investing in real estate with a Roth IRA has fewer drawbacks, she said, because distributions are tax-free once the account has been in place for at least five years, although "you still have the downside that you can't deduct any expenses." Must follow IRS rules

People who invest in real estate through an IRA have to make sure they adhere to IRS rules or they risk disqualifying the account, which carries heavy tax penalties. Neither they nor their relatives can live in the property. They cannot pay any expenses directly; everything from repairs to property taxes must be funded from the IRA. That means they must make
sure their IRA has enough liquidity to handle expenses. If they have to add money, they pay a penalty.

"At this price point, I'm able to do the entire transaction with my IRA," Foran said about his $25,000 property. "I wanted to be very safe and make sure I have plenty of buffer in there so I won't have to do a capital contribution to keep that property afloat."

Companies that manage self-directed IRAs said they fully disclose all rules and recommend that investors educate themselves and consult their own accountants.

"Generally people in the real estate IRA business are very savvy about the market and investment properties," said Hugh Bromma, CEO of Oakland's Entrust Group, which has $4 billion in IRA funds under management. "They're picking up selected properties in areas that will be conducive to long-term appreciation."

About 30 percent of Entrust's clients invest in real estate, he said. Foran is among them. Entrust charges $250 a year to manage a single property, plus fees for purchasing the property.

Most IRA real estate investors buy properties with all cash, the simplest approach. If they don't have enough funds to do that, they can partner with other IRA account owners, or even partner with themselves, for instance paying half from their IRA and half from their personal savings.
30% down required

A handful of banks offer mortgages to IRA investors, but they must put down at least 30 percent, and they pay a higher interest rate because the loans must be nonrecourse, meaning the banks cannot go after other assets. Once IRA account holders reach age 70 1/2, they must start taking minimum required distributions from their account. What if they have a house held
in the account and can't sell it? "You can take a portion of it and transfer it to yourself," said Kathy Holcomb, business development officer at Pensco Trust Corp., a San Francisco IRA management company. Suzanne Gregg, an agent with Paragon Real Estate Group in San Francisco, has bought and flipped a couple of properties through her IRA and said she
tripled her money.

"It's not like you just buy a stock online and forget about it; it's a little more hands on," she said. "It's a tangible asset you can see and manage."

Image courtesy boston.com

Tithing on Real Estate Investments - Part II

noreply@blogger.com (JCL) — Tue, 11 Aug 2009 14:35:00 +0000

In the first part of this series, we talked about how to figure out your tithe from rental income and we spoke about Gross vs. Net issues. I was not prepared for the response that came from that article... I don't want to put words in people's mouths, but the spirit of some of the comments came across to me as: 'to talk about tithing is legalism!' What ever happened to *wanting* to serve Christ with *excellence*? You are not saved by tithing... you are saved by the finished work of Christ alone on the Cross. But when someone has sacrificed so much for you, don't you *want* to please them? Don't you *want* to seek them out and find out what they want and do it? Or if someone pulls you out of a burning car just before it explodes, are you then going to thumb your nose at them and walk away?

Or do some people think something far more insidious, such as: If I *do* tithe, then I'm not saved?

Don't get me wrong, I'm thankful for the comments and welcome open discussion... I'm just surprised that some people think this way.

Image courtesy One Year Bible Blog

Conflict Between Landlording and 'Turn the Other Cheek' and Other Scriptures

noreply@blogger.com (JCL) — Tue, 28 Jul 2009 12:00:00 +0000

Please note, I am not a 'legalistic Christian'... Salvation is by grace alone, through faith alone in Christ alone. However, because Christ has sacrificed so much for me, my heart-felt desire is to serve Him with as much excellence as I can - "run the race!" Serving Him is not bondage, but joy!

So, one issue I've grappled with as a Christ servant landlord is how to relate to tenants when things aren't going so well (i.e. they aren't paying rent, disturbing neighbors, etc) in the light of Christ's commandments like:

But I say to you, love your enemies, bless those who curse you, do good to those who hate you, and pray for those who spitefully use you and persecute you, that you may be sons of your Father in heaven. - Matt 5:44-45a

How should a Christ follower act when court action is needed (i.e. eviction)? I found this article on Christians and Lawsuits.

Discuss.
Image courtesy OhioLandlordTenant.com

Foundation Issues? Love Them or Run Away From Them?

noreply@blogger.com (JCL) — Mon, 02 Mar 2009 13:00:00 +0000

Our current focus is on houses without foundation problems simply because we don't have a comfort level in dealing with foundation issues - *yet*. We will freely admit that our trepidation toward buying houses with existing foundation issues is grounded more in irrational fear than in rationality. Having said that, we want to ease into investing in houses with foundation issues because they present an opportunity to buy the house very cheaply, thus giving us an edge over most owner occupant buyers and probably even most investors.

Over at Equity Scout they have a good discourse on foundation issues and investing.

Not all foundation problems are created equal

I agree with him that foundation issues can present opportunities to buy low if you have experience and a comfort level to deal with them. In our area, the vast majority of homes built from the mid to late 1960's on are concrete slabs. In the late 1980's the building code was changed so that when the slabs were poured they had post-tension cables embedded within them. These cables help hold the foundation together a little better, but it does not prevent all problems.

Right now, our parameters for what we look for do not include houses with foundation issues. In the future though we would like to start, but as Chris illustrates, a structural engineer would need to take a look at it. Our first foundation issue to deal with will ideally be a house with one corner of a bedroom settling a little... an area of the slab where there are no pipes running to have to deal with slab leaks. Once the issue is solved our comfort level will hopefully go up. Key to all of this will be a good foundation contractor on our team that works with investors and is recommended by investors. These foundation companies that advertise on the radio don't interest me - way too much markup.

It may work out that we never buy a house with foundation issues, and that's OK with me as there are plenty of deals out there with no issues. But how nice would it be to gain that extra edge?

Of course, once you have a house you want to maintain the foundation. The primary means of keeping a foundation sound is to keep a steady supply of water applied especially during the hot/dry months of July/August/September in our area. The preferred method to do so is with soaker hoses strung around the perimeter of the house at about 18 inches away from the slab and buried a few inches below the ground. Here is a good diagram on how to build an automated soaker hose system:

Do-It-Yourself Foundation Watering System

The next preferred method is to have an automatic sprinkler system installed, so you can set it and forget it. A rain/freeze sensor will help so you don't have to remember to turn the system off during nights when it gets below freezing.

This article is open for comments, we would like to hear from you landlords on how you handle maintaining your foundations on your long-term rentals and how your tenants respond to it.

Utility Hookups/Disconnects Between Tenants

noreply@blogger.com (JCL) — Wed, 18 Feb 2009 13:00:00 +0000

Ok, this post is more of a question to landlords out there who have more experience. Is there an easy way to deal with the transition of utilites (water/electric/gas) when a tenant moves out other than calling each one to arrange service again? This is a tedious process and one I would like to refine/automate in some way to streamline the process. I asked the electric company once about this and they do have some program, which I don't remember the name of it, where the power will automatically be switched over to your name when the tenant switches it off. I was warned however that in the event your tenant gets behind on bills and is disconnected for non-payment, guess what? Power stays on but is now in your name. Don't want that!

So right now this isn't that big of a deal for us because we don't have that many houses yet. But let's say you have 20 houses: it could become a logistical nightmare. We also haven't posed the question to our property manager yet, could be that they will handle it. But we haven't been in the situation where a tenant has left and the PM gets ready for another tenant. Last time a tenant left on us, we fired the property manager due to poor performance. We did the utilities manually then.

Any input from landlords who have found a way to streamline this will definitely be welcome!

The Fallacy Of Science

noreply@blogger.com (JCL) — Mon, 09 Feb 2009 13:18:00 +0000

I've been thinking a lot lately about the movement that has been going on about how science is continually advancing and disproving God. This same science that does an about face and reverses itself every 10 years or so? Folks, we are imperfect/finite beings... just because a large group observes something and comes together to form a consensus does not (at all) mean that they have found 'truth'.

Let me backtrack a minute, just what is science and how does it come about? The scientific method happens when a group of people (mostly with good intentions) individually study and observe (many times through experiments) a particular thing, then they come together and form a consensus based on their findings. A good analogy would be if 10 people were placed in a very dark stadium with no lights but each gets a flashlight, then they come to an agreement on the nature of where they are based on what they've seen. It's doubtful that their little flashlight will not shine bright enough to see the top of the stadium, nor will it be able to take in enough at one time to get any type of idea on how many seats there are. They will not be able to see the forest because all they will see will be the trees (if you'll allow me a little cliche here).

Science has come up with good advances, I don't deny that... but those advances are in small fields such as medicine or other more 'useful' branches of science. I submit that the few advancements that we've been able to accomplish are purely by accident (I use the word 'accident' tongue in cheek, there are no accidents or coincidences, these accidents - or trial and error - are bits of knowledge handed to us by God, technologically we are just where He wants us to be to serve His own purposes). When it comes to the branches of science that try to tackle the big questions like cosmology or evolution, they come up woefully short. A scientist who studies medicine will take their flashlight and focus in extreme detail on one seat in the stadium - thus coming up with useful things to know. The cosmologist tries to see the whole stadium with their low powered flashlight (an analogy for our finiteness) which will be impossible to see the intricate details on how the stadium was made or it's nature.

There *is* an absolute truth out there, but it will not come to us through science. It is good that we want to know the truth, but we need to know the One who is Truth. We as humans can only see the trees, tap into God and ask Him for truth. He is the one that knows the nature of the forest!

Image courtesy I.D.E.A.

Good Idea For Worn Countertops

noreply@blogger.com (JCL) — Mon, 02 Feb 2009 13:00:00 +0000

If your counter tops are structurally OK, just worn out looking, and you don't want to go to the expense of installing granite countertops (especially for a rental unit) - instead of replacing them consider just tiling over them. We recently had a white Formica top get stained from a tenant and since we were tiling the floor anyway (more permanent that replacing the carpet from the dog urine) we just had our handyman take the same floor tiles and tile the counter tops.

It gives it a nice upscale look for cheap, just have your guys use the same tile with smaller grout lines and dark grout. Then use grout sealer to seal the grout lines (although I have a question about grout sealer's effectiveness... I've sealed grout before just to have it become stained.) The main way you will keep stains from showing up is to use dark grout, but the sealer helps a little I suppose.

Image courtesy Wallflower Designs

Need Experience? Volunteer!

noreply@blogger.com (JCL) — Wed, 28 Jan 2009 13:00:00 +0000

This relates to all areas, not just real estate... but if you desire to 'break' into a certain area of real estate but can't because of lack of experience, then consider volunteering.

Obviously we can't list all volunteering opportunities out there, you need to get creative in looking for areas to volunteer that are in the skill sets you want to develop. Perhaps your volunteer position doesn't even exist, but with your desire you can convince one to be created.

For example, a few months ago an opportunity to serve on our city's Planning and Zoning Commission came up. Before that I had no idea really that all you had to do to get involved in city government was just volunteer. In this case I had to apply and interview, but that may be different in your city. Check with your city secretary about the various boards and commissions your city has and how you can serve.

What are we learning on Planning & Zoning? We are learning how city governments work, which indirectly affect our real estate investments. How certain zoning changes affect residential areas positively or negatively. How knowing a city's future plans for itself can factor in your decision to invest in that area.

Most of the lessons learned are indirect lessons related to investing in single family houses, but we are directly learning things which can help us in the future if we decide to switch our focus from holding single family homes to real estate developing. We're learning what one has to go through to get things to happen on the city level. Example, you buy a parcel of land and want to develop it but need to change the zoning, or ask for a variance on the current zoning. But perhaps most important, we're making contacts. Contacts which we may not know right now how they can help us or we help them, but may become more apparent in the future.

Plus, giving of yourself feels good/right. If you have accepted Christ's gift of forgiveness, you have been saved *for* good works, not *because* of good works.

Teaching Your Kids About Money Part II: The Scouting Factor

noreply@blogger.com (JCL) — Mon, 26 Jan 2009 13:00:00 +0000

In part I we talked about playing games as a valuable tool in teaching kids about money. We've just had our first experience with Girl Scout Cookie sales and I'm very impressed with the number of lessons that have come from the experience.

Goal setting/sticking with it - This our first year, we weren't aware of the amount of work it would take to reach X number of boxes. So our daughter set her goal based on the prize she wanted. One of two things can happen, the realization that it isn't worth it and stopping short can teach a valuable lesson on counting the cost before entering in. Or, after digging in and seeing how much work it is, tenacity can kick in and keep her going which is an obvious good lesson.

Public speaking - Speaking with/answering questions with people you don't know and aren't familiar with. Much of a child's life is spent with those they are familiar with and can talk up a storm... but it isn't so easy with those they don't know.

Exchange of money for a product - why are people giving us green paper or other colored pieces of paper (checks) for these cookies? Ah, those green pieces of paper have different numbers on them and when they give us higher numbers on those papers, we give them more cookies (value). Sometimes we give them cookies and more pieces of paper with smaller numbers on them back (change).

Counting money/making change/accounting - They owe us $10.50 but they gave me a $20, what do I do? Oh, that's why math is useful! Wow, at the end we have lots of these green papers and checks, we have to add them all up? They have to match what's on the sheet? If it doesn't match, we have to go back through it - ah there's the problem. Admittedly, for us this lesson will probably come in later years... the accounting piece is a little big for a girl just starting out. But at least they have some exposure to why their parents work so hard with numbers at tax time.

Finding/planning good areas to sell and how to identify/avoid the not so good areas - In picking which streets to work, the customers will give you clues. In the case of these cookies, those clues were obvious. If we heard at the first house or two: 'someone has already come by, but we'll buy a box from you'... not a good street, change. If we heard: 'man, we've been waiting for someone to sell us cookies'... ding ding, you have a winner.

I think getting involved in GS cookie sales is very valuable and an experience for that age group you can't get many other places. These cookies sell themselves and in going door to door we have rarely been rejected (maybe one in ten times)... I am of the feeling that when you first start any venture, you should set yourself up for some successes so discouragement won't overwhelm you. Yes our kids will need to learn about rejection, but not too much too young...

Image courtesy Quail Ridge Country Club Realty.

Get Rich Quick Is For Fools: Seed Time vs. Harvest Time

noreply@blogger.com (JCL) — Fri, 23 Jan 2009 13:00:00 +0000

Mar 4:26
He also said, "This is what the kingdom of God is like. A man scatters seed on the ground.

Mar 4:27
Night and day, whether he sleeps or gets up, the seed sprouts and grows, though he does not know how.

Mar 4:28
All by itself the soil produces grain-first the stalk, then the head, then the full kernel in the head.

Mar 4:29
As soon as the grain is ripe, he puts the sickle to it, because the harvest has come."

This is very appropriate to real estate investing. A little action - a lot of waiting.

From Seed Time And Harvest:

SOWING, RESTING AND REAPING

1. We can sow the seeds.
2. We then must rest.
3. Growth is a process.
4. Ripening precedes harvest.
5. We reap at the appropriate time.

We don’t know how the seed sprouts and grows. For the earth yields crops by itself: first the blade, then the head, after that the grain in the head. What is the mystery? How does this happen? God gives the increase!

You must have patience to invest in real estate, impatience and wanting riches too early will cause you to make wrong decisions. If you will look at buying houses as seeds that will produce crops for you for the rest of your life, then you will have a proper perspective. The returns are low in the beginning, but you are building to larger returns in your future.

This goes for any other business venture as well. There is a time of toil and careful attention, then after time the business starts to operate on it's own and needs less attention.

Although we are new to blogging here at TREIJ, we can see how a majority of new bloggers get discouraged and quit due to lack of traffic. BlogAdviser states that a new blog needs to persevere through at least the first 6 months to a year with little to no blog traffic. You need to focus on creating content and almost ignore the results, put your head down and charge on.

You do your little bit of work *first* then relax and let God do the supernatural work behind the scenes.

Jeff Allen, One Of Our Favorite Comedians

noreply@blogger.com (JCL) — Wed, 21 Jan 2009 13:00:00 +0000

Hey folks, we have a treat for you today. For some time we've known how funny Jeff Allen is but today we stumbled on a video of him giving his testimony. We wanted to put together this tribute post to give you a glimpse at him.

Watch this one first

Then watch this one - powerful stuff!

Image courtesy Jeff Allen Comedy

If 9 Out Of Every 10 Buisnesses Fail, Why Even Try?

noreply@blogger.com (JCL) — Mon, 19 Jan 2009 13:00:00 +0000

Everyone has heard the statistic that 9 out of 10 businesses fail. What a horrible statistic! That's a 90% failure rate! But wait - what if we looked at it this way:

All you need to do is fail 9 small times to get to the one giant success.

OK, so that may be over-simplifying things a bit. No one wants to fail, failure is painful. Emotional pain, financial hardship etc etc. When you listen to most successful businessmen you hear one common thread: yes, they are successful today beyond what they could even imagine when they started, but they have a trail of financial messes and failed start ups behind them. Perhaps it has happened, but I would venture that it is *very* rare for someone to succeed in business their first time.

Let me ask you a question: would you rather have (relatively) small failures in your story-line yet one day be wildly successful? Or would you rather avoid the failures and live small your whole life, no failures to have to re-live and no successes to enjoy?

Image courtesy How to Bankrupt a Start up

Lull Time Waiting For New Tenants

noreply@blogger.com (JCL) — Fri, 16 Jan 2009 13:00:00 +0000

An update to our situation: we're still waiting for tenants in the house mentioned here and here. And in our other house we've just had to evict our previous tenant due to non-payment of rent... Sounds bad eh? I'm not worried... we built in to our plans on the front end consideration for situations like this. That is a major key to success in real estate, being able to foresee all of your expenses and 'gotchas' and account and plan for them. Part of our short term goal is to survive, weathering down times like this is a part of that survival. Our long term goal is more rosy, but you can't get to the long term goal if the short term cuts you off at the knees.

You must have reserves to draw upon to get you through these times and still make your mortgage payments.

Most of all, God is our provider and these are really His houses. There is great freedom (i.e. not losing sleep at night and constant worrying about stuff) when we're able to say: "God, these are your houses, you will fill them (or not fill them) when you want to. You haven't brought us this far to fail and since we've earnestly sought you (for years in our case) on investing in real estate, and used wisdom before making any moves... you will bring us through."

Also, I must say that blogging here has been a nice diversion from time to time to get my mind off of the situation, if you don't manage your mind the waiting can get to you. Lots of what happens in RE is a process... if you can't wait properly, your head will get the best of you.

Image courtesy Pilgrim's Progress

Expectations Kill Happiness, So Kill Your Expectations

noreply@blogger.com (JCL) — Wed, 14 Jan 2009 13:00:00 +0000

All I Want For Christmas is an excellent sermon about how your expectations are making your life miserable. In How To Succeed In The Face Of Failure And Discouragement we show how expectations can derail your real estate ambitions before you even get a chance to start. Another reason why mentors are absolutely necessary, they will keep your expectations in check and help keep you emotionally on track in your beginning years.

The following statements were made in the above video which are absolute gems:

In the presence of expectations, gratitude is minimised.
Expectations are desires that turn into demands.
What you expect can ruin what you receive.
I deserve nothing - I deserve death - everything else is gravy
A wise man knows that the reason for his anger is not the failure of others to meet his unrealistic expectations, rather he is angry because his expectations are unrealistic... it's not their fault, it's his. And when it's your fault - it's easy to not be mad.
The starting line to the happiness you've always dreamed of is the killing of your expectations

Image courtesy Raanan

Is Inflation Actually Good For Holding Real Estate As An Investment?

noreply@blogger.com (JCL) — Mon, 12 Jan 2009 13:00:00 +0000

We read this article about Bernanke's outlook on the economy and the danger of inflation coming up. It got me to thinking about how that will affect rental units going forward and found this good article on inflation as related to real estate specifically.

So let's say you buy a house that is marginally in positive cash flow territory. You buy a house and your costs are $900/mo and your rents are $1000/mo. You have $100 positive cash flow. Inflation hits, everything goes up - market rent on your house is now $1100/mo. A relatively small increase in rents (10%) actually doubles your cash flow from $100/mo to $200/mo (a 100% increase). Yet another reason why you should consider investing in real estate.

Image courtesy 1440 Wall Street

A New Way To Buy A Summer Home? (Chicago Example)

noreply@blogger.com (JCL) — Fri, 09 Jan 2009 13:00:00 +0000

We recently took our first vacation trip to Chicago, and we had a fun time. Since we live in the blazing hot part of the country in the summer I thought it would be nice to do a reverse 'snow bird' type of thing (i.e. like people come down here from the north to overwinter, we go up there to 'oversummer'). So, what if we find a good deal on a property in Chicago (or any other city) in a university area and rent the place out over the school year. If it becomes vacant for the summer, then just 'move in' and spend the summer up there while looking for a tenant for the coming school year. This only applies if you find a place cheap enough, otherwise I don't see that it would be worth the trouble - just rent out a place for however long you want to be there.

This takes into assumption that we know next to nothing about the market up there, so we would have to make a whole new set of 'Chicago contacts'. Assuming you have a good team up there though, this seems like it may work. Thoughts?

Image courtesy Brendan Ciecko

Buying Bank Owned Propertys (REO)

noreply@blogger.com (JCL) — Wed, 07 Jan 2009 13:00:00 +0000

Came across this article: Buying Bank-Owned Property and found it interesting. Presenting a little of what happens on the 'inside' at the bank when it is time for them to sell an REO (bank owned) property. The interesting thing to me though was the person asking the question submitted an offer on an REO and was rejected and it seemed to put them off. One guideline we try to adhere to is to not get too emotional or wrapped-up in one house. In this case, the question asker should not have let the rejection get to them, but submit multiple offers on multiple houses.

Multiple offers will actually have the side benefit of being an emotional buffer to keep you from getting disappointed at rejection. Of course not all buyers agents will be receptive to throwing multiple low offers out there, this is why you need to be selective and find a good 'investor' buyers agent who understands how the buying process works for an investor (which is totally different from buying to live in a house). Read more about selecting a good agent here.

The Power of Totally Focusing on One Goal at a Time

noreply@blogger.com (JCL) — Fri, 02 Jan 2009 13:00:00 +0000

We came across this article at The Prospering Servant: The Power of Totally Focusing on One Goal at a Time which is a great commentary on focus. We too have fallen prey to the 'shotgun' approach to financial independence, not knowing what will work and what won't- just try everything and see what sticks.

The danger to this approach is not giving enough focus to any one task which causes them all to die on the vine and nothing sticks. In turn, frustration leads to discouragement and burnout. This is why it is so crucial to pray and seek God on what He wants you to do, then when you have His mandate - focus like a laser beam - accomplish - seek Him again and get new 'marching orders' - focus again.

Happy New Year! Blogtipping 2009 Style

noreply@blogger.com (JCL) — Thu, 01 Jan 2009 13:00:00 +0000

May God bless you in this new year. We would like to start it off by pointing out some useful articles we've found.

Ethics and mortgages presents differing points of view on the ethics of walking away from a mortgage in default.

The Opportunity in the Financial Crisis speaks of the importance of us remembering Christ's resurrection during the midst of this financial crisis.

5 things home buyers should be doing in this market outlines ways home buyers should be thinking towards when considering buying a house in this changing market.

The People of the Book: Why the Bible is The Bible gives an apologetics view on the authority and inerrancy of the Bible.

True Christianity gives a view on how the modern Church errs in presenting the Gospel.

Santa Christ? gives advice on how to view Jesus at Christmastime.

jephthah: the son of a harlot is a good article on how we label others and overcoming those labels.

How far should I go with Greek? is an interesting article on the reasons to learn Greek if you want to study the New Testament more in-depth. A subject I've wondered about myself from time to time.

Real Estate Marketing Strategies presents the myriad ways you can market real estate.

5 Lessons Monopoly Can Teach Us About Real Estate Investing ... what can I say, one of my favorite games comes to real life in this article!

Moving out of a rental property gives a good checklist for tenants who are moving out.

Avoiding Home Pests is a good reference for 'pest proofing' your house.

Business Cards: Paper or Electronic? has some great alternatives to carrying around paper cards with you all the time.

Well, it’s official - it’s a Recession!! What does it mean for Mortgage Rates? comments on how the current economic climate could affect mortgage rates going forward.

Greater Revenue Means Greater Income Property Appreciation outlines how property appreciation should enter into your calculations when considering an investment property.

What Is A Rental Property Tax Deduction is a good article on the tax advantages of owning investment real estate.

Merry Christmas is a Christmas message with an interesting view on the media's reporting of the current real estate market.

Photo courtesy: What happens if we seek His kingdom first?

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Wed, 31 Dec 2008 00:00:00 PST

ידיעה: רישיונות creative commons במבחן בית המשפט

Submitting Offers On Investment Properties

noreply@blogger.com (JCL) — Mon, 29 Dec 2008 13:00:00 +0000

This is part two in a two part series on finding and acquiring investment properties. Part one deals with the process of looking for and finding the right investment properties.

In order to find a good deal on an investment house, you will need to look at and submit offers on many houses. You first need to have an understanding and relationship with your buyers agent to know what they need from you and what you expect from them. Having everything communicated and understood up-front can save a lot of misunderstandings and problems down the road. You want to let your agent know that you will be submitting offers on more than one property at a time and that you will sometimes be offering substantially below the asking price. Most agents will probably not like this arrangement, those are not the agents for you- find that out at the beginning before you sign a buyers agreement thus contractually binding you to that agent. Once you do find an agent you like, you will want to sign their buyers agreement giving them piece of mind that you intend to stick with them and make sure they get paid for their efforts. Take care of them and they will take care of you.

If you don't understand the process, don't be afraid to ask your agent questions. Again, a good knowledgeable agent will be patient and stick in there with you because they will realize that if you are successful they will have a repeat customer. If you've found a not so knowledgeable agent, of course they won't tell you so - they will answer your questions as an authority and give you bad advice but package it as "the truth". They also tend to get snippy or impatient when you tread into areas they don't know much about. This is why it is important to find an agent that works *primarily* with investors as they have a different mindset that most typical agents.

As mentioned in our house hunting article, we don't like to drive around looking at a bunch of houses all at once like many agents do. We let our agent know that we will call him when we are ready to submit an offer (we do a quick outside drive-by first, then submit offer, then on acceptance see the inside). Our agent actually appreciates that as we aren't wasting his time and gas driving around looking.

The first few offers you submit there is this gut wrenching feeling of "what did I just do?!?!". The best way to get over that offer fear is to submit a few ridiculously low (i.e. 50%) offers and get rejected a few times, then submitting offers becomes no big deal. The more you do it, the less afraid you will be to "pull the trigger".

One thing to keep in mind- if you are submitting your offers right, you will have a number of rejections because one of your main aims is to buy low. We look at the list price as a suggestion, we may submit a little lower or a lot lower depending on how high the asking price is to start with. Have the attitude that deals are made and not found- you may buy a house really low that was initially listed on the high side and others have passed it up.

One phrase we have heard a number of times when submitting offers on bank foreclosed houses is: "We have a multiple offer situation, please submit your highest and best offer before ______". We do not enter bidding wars, if someone wants the house more than us - let them have it. There are plenty of houses out there. So when we hear that, we stand pat. Our initial offer was our 'highest and best' offer or we wouldn't have submitted it in the first place. In fact, the latest house we bought they told us this after we submitted the offer. We stood pat and we now own the house. Don't let them intimidate you into doing something you don't want to.

Get out there and start submitting offers and make something happen. Submit low enough so that if the offer gets accepted, it's a slam-dunk. That way you won't have to worry about your offers getting accepted! Even if you do submit too high and it gets accepted, know that your clauses are in place to allow you to back out of the deal and you won't have to worry. The more you do it, the easier it gets.

Image courtesy Maryland REO Real Estate

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Sat, 27 Dec 2008 00:00:00 PST

How to Fix a Slab Leak | eHow.com
fix a slab leak yourself
Delong Services Inc - Dallas Slab Leak Repair and Leak Detection

Our Christian Christmas Herritage

noreply@blogger.com (JCL) — Thu, 25 Dec 2008 15:00:00 +0000

Merry Christmas everyone! We would like to take time to pray blessings over your family during this time when we celebrate the birth of our Lord and Savior Jesus Christ.

We would like to take a moment to draw attention to the beginnings of the celebration of the Christmas holiday in America. David Barton in Sermon - Christmas - 1844 takes a look at a time when sentiment was not unified as to whether Christmas should be celebrated.

Also, some more good reading about our current Christmas traditions under attack at Christmas Under Attack. "The yearly attacks made against Nativity scenes and Christmas displays violates the rights of Christian Americans to freely express their beliefs. But who cares about the rights of the majority right?"

Photo courtesy The Homeschool Ministry Connection and Wall Builders

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Wed, 24 Dec 2008 00:00:00 PST

The Real Estate Investing Journey
A Real Estate Blog Focusing on Christ, Christian Ethics, Emotional Issues and Encouragement as it Relates to Real Estate.
Brother To Brother

Househunting For Invesment Properties

noreply@blogger.com (JCL) — Mon, 22 Dec 2008 13:00:00 +0000

This is part one of a two part series on finding and acquiring investment properties. Part two deals with submitting offers.

One of the reasons we like real estate investing so much is that we love houses. Even if we weren't buying houses, we still find it fun to drive around and look at them - in almost any price range. We like looking at houses from your blue collar bread and butter houses all the way up to the McMansions. Why not take that positive energy and harness it in a way for business. That same principal can be applied to many areas, not just real estate... do what you're passionate about and the money will take care of itself.

Having said that though, looking at houses takes a lot of time and energy. We do not like driving around looking at 10 houses a day - it's draining and you don't remember at which house you saw what when it's all over (if you do look at houses this way - taking a camera and notepad will help with this). We work best when going to see one house at a time on the way going somewhere else (i.e. on the way to grocery shop, pop by and see _____).

We know our parameters for investment houses and can mostly judge whether a house is a deal by the numbers online before even leaving the house. There are many tools online these days to see quite a lot about a neighborhood from satellite views to Google maps street view. Also, once you work an area long enough, you know if the numbers look good on a house just by instinct- but when you're getting started you need to take extra time to verify home values and rents etc. Look at too many houses which don't meet your criteria and you risk burnout. Once a house looks like a deal by the numbers, you must look at the house to judge condition/repairs/neighborhood etc.

Now here is where we depart from the norm- when we find a candidate online we like to quickly shoot by and do a drive-by (if it is a true candidate, it won't last long so quick action is necessary- at least in our market). From that drive-by we can get a quick and dirty assessment on neighborhood/repairs/etc. Repair estimates will not be precise, but good enough at this point. We then submit our offer (you heard that correct, we have not seen the inside yet) to judge the interest of the seller in our offer. Why do we do it this way? Because it takes time to coordinate meeting with your agent to let you in the house. We will cover submitting offers in more detail in a future post. If our offer is accepted, *then* we take the time to go see inside the house. If there are unforeseen problems we can always back out of the offer (there are clauses in the offer to allow this). Some agents may balk at this approach because they don't like to submit multiple offers- we speak of this in Your Real Estate Investing Team in finding the right agent. If they balk, find a different agent. Once you find the right agent, cultivate and keep that relationship.

However you choose to do your investment house hunting, you must find a way to look at lots of houses and avoid burnout at the same time.

Photo courtesy So, You Want to Buy a House...

Work 9 To 5, Or Pursue Another Path In Service Of Christ? Read With An Open Mind And Prayerful Heart.

noreply@blogger.com (JCL) — Fri, 19 Dec 2008 13:00:00 +0000

I commend Paul over at How To Become A Missionary for broaching an often controversial subject especially in the American church. He has a series of two articles on the role of your "J-O-B" (i.e. the 9 to 5 grind) and your calling in service to Christ: Do I Have To Quit My Job? and Do I Have To Quit My Job - Part 2 . Whether you agree with him or not (which I think we put much too high of a value on our own opinions), it definitely gave me pause and caused me to think and pray about my own life and how it is currently structured.

Admittedly, I have a *LONG* way to go in these areas, and it encourages me to hear from another brother his thoughts/experiences in this area. I also commend him, not for whether he has or has not accomplished anything, but for the fact that he has a teachable spirit and is willing to share not only the good, but the bad and the ugly as well. To me, these are indicators of humility which is one of the things that God prizes very highly. God knows when we are going to fail, he also knows when we are going to succeed- both sides of that coin are equal to Him. He doesn't want our successes or failures, he wants *us*. And if we have *Him* then nothing else matters.

Paul, keep up the good fight brother! Wear your scars from this battle with honour and dignity!