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August 31, 2007

FHA to implement new “FHASecure” refinancing product

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BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES
FHA to implement new “FHASecure” refinancing product

President George W. Bush today (08/31/07) announced that HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing…

To read the entire press release, please visit: http://www.hud.gov/news/release.cfm?content=pr07-123.cfm

LENDERS PLEASE NOTE: FHA WILL PUBLISH A NEW MORTGAGEE LETTER WITH GUIDANCE ON THE NEW FHASecure PROGRAM ON OR ABOUT TUESDAY SEPTEMBER 4th, 2007 at: http://www.hud.gov/offices/hsg/mltrmenu.cfm

AND

FHASecure Initiative information for HUD Housing Counseling Agencies:

The Federal Housing Administration (FHA) is pleased to announce a new initiative that will enable homeowners to refinance various types of adjustable rate mortgages (ARMs) that have recently “reset.” 

Under FHASecure, borrowers that are delinquent on their mortgages as a result of interest rate resets will now be able to refinance using an FHA-insured mortgage.  In many cases homeowners may be permitted to include mortgage payment arrearages into the new loan amount, subject to existing geographical mortgage limits and the loan-to-value limit shown below. Before today, only borrowers who were current on their existing loan were allowed to re-finance into an FHA-insured mortgage. 

Highlights of the FHASecure Initiative:

1. The mortgage being refinanced must be a non-FHA ARM that has reset.

2. The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments.

3. If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.

4. Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2), the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing. 

5. Lenders must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage.

Additional Information about the FHASecure Initiative:

What May be Included in the FHASecure Mortgage Amount: FHA will permit the inclusion of the existing first lien, any purchase money second mortgage, closing costs, prepaid expenses, discount points, prepayment penalties, and late charges.  FHA will also permit arrearages (principal, interest, taxes and insurance) to be added into the new loan amount.

Subordinate Financing under the FHASecure Initiative: If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgage and any subordinate lien may exceed the applicable FHA loan-to-value ratio and geographical maximum mortgage amount. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for no less than 36 months to not be considered in the qualifying ratios.

Educate Borrowers Regarding FHASecure: The FHASecure initiative will take effect almost immediately through administrative action.  Counselors should understand this new opportunity and knowledgeably present it as a viable alternative for delinquent borrowers struggling to pay higher interest rates.  HUD will soon publish a Mortgagee Letter providing additional and more detailed information regarding the new initiative.

AND

Implementation of Pay.gov for Upfront MIP Payments

Beginning September 4, 2007, FHA-approved lending institutions may begin submitting upfront mortgage insurance premium (MIP) payments using https://www.pay.gov   Payments may be submitted directly to HUD online via the FHA Connection or through CPU to CPU batch file transmissions.  Between September 4 and September 28, 2007, lenders may submit upfront MIP payments using either the new Pay.gov process or the current Mellon Bank or PNC Bank process.  September 28, 2007 is the last business day that HUD will accept payments made through Mellon Bank or PNC Bank. See Mortgagee Letter 2007-10.

For more information on submitting payments using Pay.gov, see Pay.gov Implementation Information, located on HUD’s Homes & Communities website at: http://www.hud.gov/offices/hsg/comp/premiums/sfpaygov.cfm  

HUD is also providing a training demonstration on submitting and tracking payments via the FHA Connection that consists of short targeted topics that can be selectively viewed and revisited as often as needed. The “Training Demonstration of the Upfront Mortgage Insurance Premium (MIP) Payment Process on the FHA Connection” is accessible on HUD’s Homes & Communities website at:

http://www.hud.gov/offices/hsg/comp/premiums/sfudemo.cfm

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Best Practices

Best Practices
NPV Review
Understanding these net present value functions aids the real estate decision-making process.
By Robert L. Ward, CCIM

One of the most useful economic decision-making tools for commercial real estate users and investors is discounted cash flow analysis. The first step in the DCF process is to reduce each alternative being analyzed to the amounts and timing of all the cash flows. Once each of the alternatives has been reduced, the net present value can be calculated. The analysis can be done on a before- or after-tax basis. This article focuses only on the applications of the NPV function, which is a key consideration for determining users’ occupancy costs.

The NPV function has many applications for user and investor decision making. The NPV function simply discounts all cash flows to present values using an appropriate discount rate and totals all of the present values to a single sum. The single sum resulting from performing the NPV function has different meanings and interpretations depending on the application and the decision being made.

The following examples demonstrate the NPV function calculation and how it is used for various real estate decisions. The four user application examples and the two investor application examples that follow are by no means inclusive of all real estate applications of the NPV function for economic decision making. In addition, the use of the NPV function for economic decision making is not limited to real estate — many businesses also use the NPV function to analyze the profitability of potential capital expenditures.

1. Comparative Lease Analysis
The NPV function may be used to compare lease alternatives with the same projected occupancy period using the appropriate discount rate to determine which alternative is the most economically favorable. The largest NPV, which indicates the lowest occupancy cost for the projected occupancy period, is the best economic decision. In most cases, the NPV calculation for each lease alternative results in a negative number, indicating a liability (cost of occupancy). In this case, the largest NPV is the smallest negative number, which indicates the lowest cost of occupancy for the projected occupancy period and the best economic decision. (See Table 1, Comparative Lease Analysis: User Cost of Occupancy.)

2. Lease vs. Purchase Analysis
The NPV function may be used to compare buying versus leasing space for a given time period using the appropriate discount rate to determine the most economically favorable alternative. The purchase alternative may be analyzed with or without using debt financing. The largest NPV, which indicates the lowest occupancy cost for the projected occupancy period, is the best economic decision. The NPV calculation for the lease alternative and the purchase alternative results in negative numbers, indicating that a liability (cost of occupancy) will be incurred for each alternative. In this case, the largest NPV is the smallest negative number, indicating the lowest cost of occupancy for the projected occupancy period. (See Table 2, After-Tax Lease vs. Purchase Analysis.)


3. Sale-Leaseback Analysis
The NPV function may be used to compare the economic impact of a sale-
leaseback decision: determining whether it is more economically sound to continue owning space or to sell and lease back the space. This example illustrates owner alternatives with and without financing. The largest NPV, which indicates the lowest occupancy cost for the projected occupancy period, is the best economic decision. The possible outcomes for the NPV calculations for the sale-leaseback analysis are more complicated than most of the other user NPV applications. The calculations could result in two positive numbers or two negative numbers, or either alternative could be a positive number and the other alternative a negative number. The latter would indicate that either or both alternatives could produce a positive financial benefit (positive NPV) of occupancy or a liability (negative NPV). The multiple results of the NPV calculations largely are due to whether there is debt financing in place on the property, which is illustrated in Table 3, After-Tax Sale-Leaseback Analysis. The best economic decision is still the alternative that produces the largest NPV — regardless of whether the largest NPV is the smallest negative number or the largest positive number.

4. Lease Buyout Analysis
The NPV function may be used to calculate the present value of all lease payments for the remaining lease term using the appropriate discount rate. The discounted value calculated is the maximum price the user should pay to be released from all future lease obligations. There are times when users no longer need the space they currently have leased. The decision these users face is whether to continue to make the periodic lease payments until the lease expires or pay the owner a lump sum to be relieved of all future lease obligations. (See Table 4, User Lease Buyout.)


5. Profitability at a Given Discount Rate
The NPV function may be used to measure the profitability of a potential investment at a given discount rate and/or determine the price adjustment needed to achieve a target yield. When the NPV calculation results in a positive number it means that the investor will achieve a higher yield than required if the investor pays the listed or asking price for the investment. The positive NPV also tells the investor how much more they could pay for the investment and still achieve the target or required yield. When the NPV calculation results in a negative number it means the investor will not achieve the required yield if they pay the listed or asking price. The negative NPV also demonstrates how much less the investor must pay for the investment to achieve the target or required yield. When the NPV calculation results in a zero value it means the investor will achieve exactly the target or required yield if they pay the listed or asking price. In Table 5, Investment Profitability at a Given Discount Rate, the investor could pay $107,148 ($100,000 + the positive NPV of $7,148) and achieve the target or required yield of 9 percent.

6. Investment Value
The NPV function may be used to establish the value of a future income stream for a specific investor with a specific target yield. Investment value is defined as the price a specific investor will pay for a specific investment. Investment value varies from investor to investor based on their individual investment criteria. The NPV function can be used to determine the value of a future income stream (investment value) using the specific investor’s target yield. (See Table 6, Investment Value at a Given Target Yield.)

 


Robert L. Ward, CCIM, owner of Ward Consulting Services in Oviedo, Fla., is a CCIM Institute senior instructor and consultant to the CCIM curriculum redesign. Contact him at (407) 365-3240 or bowada@bellsouth.net.

Copyright © 2007 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    

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New Rules for Retail

Cover Story
New Rules for Retail
Saturated markets and deep-pocket competitors are prompting changes in this once by-the-book investment sector.
By Sara Drummond

The rules for retail are changing across America, almost as quickly as the holiday lights come down and the racks of valentines go up on Jan. 2. Wal-Mart has morphed from the feared competitor into the good neighbor that attracts a slew of national credit tenants that flourish in its demographic pull. The world’s largest retailer also is a pioneer, staking out territory in small markets and moving into inner cities. However, it reported the lowest same-store sales in 10 years last November and ended its fiscal year on Jan. 31 with the lowest annual same-store sales gain in 27 years, according to a Wall Street Journal Online report. As a result, Wal-Mart is slowing expansion plans this year, and when Wal-Mart hiccups, the rest of the retail world scrambles either to gain market share or rewrite pro forma numbers.

The Changing Game
Such dependency on the actions of a single retailer is one of retail’s revised rules. And while Wal-Mart remains every leasing manager’s favorite shopping center anchor, today’s rules question if developers and owners even care about the anchor concept. Investors aren’t too concerned: In Orlando, Fla., a top Southeast retail market, unanchored centers were last year’s most favored retail investment. “Unanchored retail centers are so popular because purchasing one is within reach of a much larger pool of investors,” says Jeffrey Pocklington, director of Investment Services for GVA Advantis and a partner in the company’s Pocklington, Pocklington, and Forster Retail Investment Group in Orlando. “However, in recent years, a few institutional investors have begun to show interest in unanchored retail, causing more competition and increasing prices.”

And that’s a problem for many of today’s smaller, private investors. While the American shopper will have no trouble finding something new to buy this year, those who buy big — in particular retail property investors — may not find the right property at the right price. Competition in hot markets such as Orlando and Fort Lauderdale, Fla., Phoenix, and California’s Orange County has driven prices up and capitalization rates down. Now that real estate investment trusts rule the mall world, institutional and large private investors are amassing portfolios of smaller shopping center properties. The influx of capital chasing core assets is tremendous; but big buyers are very particular, as competition for top-tier assets in top markets is very tight, says Joseph French, CCIM, Sperry Van Ness’ national retail director in White Plains, N.Y. However, in less-stellar markets, cap rates are rising as sellers set more realistic prices. “It’s tough in Bethlehem, Pa., to sell a Big Lots shopping center for a 7 cap rate,” French said in an interview with GlobeStRetail.com. “It may be good credit, but it’s a second-tier center in a tertiary market and it’s not going to command the same price as it would have two years ago.”

Overall, retail sales are expected to grow 4 percent to 4.5 percent this year, still healthy but not as strong as 6 percent and 7 percent in the last two years, according to Marcus & Millichap. In reaction to a slowing housing market, national tenants are pulling back expansion plans, and retail development this year will add about 120 million square feet, approximately 10 million less than last year.

Despite a slower national outlook, retailers still are searching for new markets to enter, but they are not necessarily following traditional rules. For example, Swedish home furnishings giant IKEA opened a store in Austin, Texas, which is much smaller than its usual target market of 2 million people. Whole Foods is settling into a food-filled neighborhood in Jacksonville, Fla., in 2008, across the street from a Publix and within a half-mile of three other grocery stores — despite the fact that nationally it is facing increased competition as traditional grocers beef up their organic offerings. In what some experts see as a defensive move, Whole Foods recently bought its closest natural-foods competitor, Wild Oats, in part to keep the chain out of the hands of traditional grocers.

Such moves indicate the retail industry’s ever-evolving nature. In response, investors seeking retail real estate are looking at alternative opportunities. For example, as proof of today’s reconfigured retail landscape, once-risky projects such as shadow-anchored centers now catch large investors’ attention. A little off the beaten path, power centers are popping up in small markets, as retailers widen demographic rings and seek former competitors as neighbors. Infill projects in secondary markets are under development, as cities such as St. Paul, Minn., try to replicate the new urbanism of major metropolitan areas. And some retailers and developers are pushing into inner cities, which many experts call the next big retail frontier.

For developers, brokers, and investors, retail projects are out there. While they may be a little edgier and riskier than predictable grocery-anchored centers, not even safe bets are safe given retail’s changing rules.


Caption: With stores such as Target competing for food shoppers, grocery-anchored centers look less appetizing to investors.
Credit: Target Corp.

Shadowing the Big Boys
When it comes to leasing retail real estate, there is no bigger guarantee of usual success than Wal-Mart. “Where a Wal-Mart Supercenter goes, so goes about 20,000 sf of tag-along tenants,” says Tom Rohde, CCIM, of Rohde, Ottmers, Siegel Commercial Real Estate in San Antonio. Rohde finds the attraction even in the smallest markets, such as Hondo, Texas, population 5,000. Wal-Mart vacated a 46,000-sf space and built a new 200,000-sf Supercenter right behind it. Rohde listed the former Wal-Mart in early January and had enough leasing prospects to fill it in 30 days. In contrast, he has a listing for a vacant Albertson’s in Victoria, Texas, a town of about 50,000. But “it has sat vacant for three years with few prospects because it is not in the shadow of a major new anchor,” he says.

Investors have traded nearly $2 billion in shadow-anchored space in each of the last four years, according to Real Capital Analytics, indicating both lender and investor acceptance of this once-risky product. Cap rates have dropped to 6.8 percent on the average shadow-anchored transaction, down from an average rate of 9.8 percent five years ago. “The problem was the shadow centers located next to the older, smaller Wal-Marts,” Rohde says. For a number of years Wal-Mart abandoned smaller leased spaces in favor of building larger supercenters. Today, space in the shadows of more than 900 Wal-Mart Supercenters is pretty secure, because Wal-Mart never has relocated a Supercenter, Rohde says. “They can’t find large tracts of land [on which to build].”

But Wal-Mart’s sluggish performance late last year is curtailing its expansion plans, although it is expected to focus on the supercenter format almost exclusively, according to Marcus & Millichap. The retailer blames store remodeling for keeping shoppers away, but retail analysts say Wal-Mart’s entry into markets with stiffer competition may be more the cause for lower sales.

Last April, REIT Kimco Realty Corp. and Michigan-based Schostak Bros. paid more than $100 million for a portfolio of 28 shopping centers shadow-anchored by new Wal-Mart Supercenters. The transaction indicates the range of interest in shadow-anchored centers: Kimco owns more than 1,000 community and neighborhood centers, where as regional Schostak has a portfolio of 50 properties, according to Shopping Centers Today.

Home Depot, Lowe’s, Kohl’s, and JCPenney also are effective shadow anchors. And in Texas markets, HEB Grocery also attracts tag-along tenants, Rohde says, indicating its strength as a regional retailer.

Won’t You Be My Neighbor?
While Wal-Mart is the prime shadow anchor, some retail leasing specialists favor Target as a center anchor because “it attracts a higher-level fashion group of tenants that pay higher rents,” Rohde says. “Most of the apparel stores want to be next to [Target] because it draws women — Ross, T.J. Maxx, and even Penney’s are larger stores from 30,000 to 90,000 sf. You can build a lifestyle center around a Target.” In contrast, a Wal-Mart anchor attracts more service-oriented tenants and lower-priced apparel retailers in smaller stores. “CATO, Dots, Shoe Dept., and Dollar Tree are typical for a Wal-Mart center,” Rohde says.

Wal-Mart remains a prime magnet for new retail development in very small markets. When the retail giant landed in an industrial-zoned corridor outside of Ankeny, Iowa, — population 30,000 — retailers that Barbara K. Hokel, CCIM, had hounded for years suddenly returned her calls. “Every six months I was in touch with Target. I’d call, they’d say no, and that went on for several years.” After Wal-Mart agreed to a location across from Hokel’s property, “I called Target immediately and they said, ‘We think you have an excellent site!’ At that time, they bought enough land to build a Home Depot next to them. From there I asked Target who they liked as neighbors. They said one of them was Kohl’s, so I called Kohl’s and the rest is history.”

Hokel, who now does retail leasing with NAI Ruhl & Ruhl Commercial in West Des Moines, Iowa, was working with a local developer when the retail corridor began to develop along Interstate 35. The combination of interstate access and isolation from other retail competition was key to its success, she says. “The power center caught the attention of other big-box retailers who like to neighbor together: Pier 1, Michaels, Dress Barn, Starbucks, and PetSmart. This also sparked the development of a couple of retail strip centers that attracted more national retailers such as Tuesday Morning and Jimmy John’s.”

Making retail connections at International Council of Shopping Centers conventions also proved very beneficial. “In one trip we landed T.J.Maxx, Factory Card & Party Outlet, and Shoe Carnival,” Hokel says. “The conversion from an industrial site to retail was phenomenal and it continues to be a very successful place to shop.”

Rohde sees similar interest from retailers in small Texas markets. Since many retail chains have saturated major markets they are looking at smaller countywide trade areas. Rohde cites a project in Bastrop, Texas, a town of only 6,500. “Being a county seat with many intersecting highways, we are working on a retail project of more than 700,000 sf. The county is over 80,000 in population and the anchor tenants are looking at that countywide trade area because it has become the crossroads of central Texas.”


Caption: Retail space in secondary market urban infill projects such as Straus Building in St. Paul, Minn., faces density and parking challenges.
Credit: Sherman Associates

Small-Scale Mixed-Use
In other parts of the country, infill development and mixed-use are trickling down to secondary and tertiary markets. Retail is a component of these projects, which have had great success in larger metro areas. But it’s not as easy as it looks, says Robert A. Kost, CCIM, commercial leasing manager and project manager for Sherman Associates in Minneapolis. “You have to keep the pro forma rent low and stretch out the leasing schedule to two or three years” in smaller urban markets, he says.

Kost has two projects in downtown St. Paul’s older warehouse district bordering the city’s financial district. Sibley Park Plaza is a new residential building and the Straus Building is an adaptive reuse of a knitting factory. Each project contains about 10,000 sf of first-floor retail that Kost is leasing at $12 to $16 per square foot net.

St. Paul city officials have embraced urban development but Kost says the city lacks the urban density of larger cities and new residential neighborhoods have not reached critical mass. As a result, leasing managers need to be flexible, he says. He has leased part of the Straus Building retail space as headquarters for EQLife, a small Best Buy spin-off company. Now he’s getting more interest from local law firms that are looking for innovative spaces and is advertising the rest of Straus’ space as retail/office.

At Sibley Place Plaza, the end caps leased easily, but in-line space is harder to rent. Kost targets national credit tenants, as well as franchises, which “at least have a business process in place.” The neighborhood residents clamor for local businesses as tenants. “What they don’t understand is that if a local restaurant decides to open another location that’s a huge increase in the overhead; they can’t afford to keep going until the neighborhood picks up.”

Parking is another issue that dogs retail leasing in urban neighborhoods. While there is metered parking in front of Sibley Park Plaza, one of his in-line tenants, Wireless Toyz, complains that on weekends and evenings when the meters don’t need to be fed, residents park in the spaces instead of shoppers. Developers need to work with city planners to provide 30-minute meters or free parking in local garages to alleviate such problems.

While Kost discounts the possibility of leasing to local businesses, Regina Emberton, CCIM, director of corporate services with CB Richard Ellis in South Bend, Ind., is concentrating on them in her attempts to lease retail in a redeveloped industrial building in Benton Harbor, Mich. She also advertises the space as retail/office at a lease rate of $10 psf.

Located in the heart of Benton Harbor’s developing arts district, the building has had several showings for the retail space but no interest from national retailers, she says. “Instead, we have focused on marketing regionally to entrepreneurs and unique niche businesses and that seems to be where the primary interest has come from — arts-related groups, restaurants, caterers, photographers.” Other tenants in the area include a microbrewery, restaurants and bars, a cooperative art studio, a glass-blowing studio and gallery, and a wine-tasting room.

Situated next to twin city St. Joseph, Mich., Benton Harbor is about 90 miles east of Chicago on Lake Michigan in the center of a large tourist and second-home market. Benton Harbor “is really the only city along the lake that has not turned into a tourist community,” Emberton says. However, that is beginning to change now that Whirlpool acquired Maytag and is bringing 400 executive jobs to its Benton Harbor headquarters.

The Final Frontier
Since the 1980s urban planners have promoted inner cities as the most under-retailed U.S. neighborhoods. And it’s true. Inner-city neighborhoods represent more than $85 billion in retail spending per year and contain an average of $76 million retail dollars per square mile, compared with $8 million psm for the rest of metro areas, according to the Initiative for Competitive Inner Cities report. Yet almost 60 percent of those retail needs are unmet in some neighborhoods. In addition, 38 percent of inner-city families fall into the moderate income category with annual incomes between $20,000 and $50,000.

These statistics have caught the eye of national retailers running out of suburban markets. As major retailers have made forays into more upscale urban markets, they have become more familiar with the challenges of urban development. That experience combined with the need for expansion is convincing retailers to explore inner-city locations.

Some pioneers are already there. For its first store in the Pittsburgh market in 2002, Whole Foods settled in the declining East Liberty neighborhood right between the railroad tracks and a taxicab barn. Home Depot followed, and the next year Walgreens and Starbucks also located along the Centre Avenue corridor. This year Trader Joe’s located there. A Borders and Target are on the drawing board, along with multifamily and condominium projects.

A once-thriving neighborhood, East Liberty declined in the 1980s and 1990s after misguided urban renewal attempts cut it off from other parts of Pittsburgh. Surrounded by wealthier neighborhoods, East Liberty has shopper demographics that any suburban mall would envy, and along with national tenants, it supports shops and restaurants that are owned and operated by residents of the largely African-American neighborhood.

Milwaukee boasts a similar success story. The almost-vacant Capitol Court Shopping Center near one of Milwaukee’s poorest neighborhoods generated no interest among local developers and investors. Even when Wal-Mart came to town with the numbers in its back pocket, local lenders still weren’t too interested. But more than 200,000 people with median household incomes of $38,000 live within three miles of the shopping center. They were spending almost $1 billion annually but the nearest mall was seven miles away. Eventually Boulder Ventures LLC with partners bought the mall for $8 million in 2001, demolished it, and built a 454,000-sf open-air center. With Wal-Mart as the first major tenant, the center attracted more than 20 national tenants including Walgreens, Starbucks, and Lowe’s. Boulder sold the nearly fully leased center in 2004 to Inland Western Retail REIT for $53 million — after entertaining 13 offers for the property.

Wal-Mart continues to pursue such opportunities, opening its first Chicago store last September on the economically depressed West Side. Wal-Mart plans to roll out 50 such stores in the next two years and recently announced plans to open inner-city stores in Indianapolis, East Hills, Pa., Cleveland, Decatur, Ga., El Mirage, Ariz., Landover Hills, Md., Portsmouth, Va., and Richmond and Sanger, Calif.

Along with retailers, developers such as General Growth Properties are starting to focus on inner cities. GGP has committed to begin development of two to three $70 to $100 million retail projects annually in under-retailed city neighborhoods, according to Lyneir Richardson, GGP’s executive vice president of urban retail development. Inner-city retail is an “evolutionary process,” Richardson said at last year’s ICSC convention. “First, fast-food eateries got it, then drugstores got it, and now big-box and mass market retailers are getting it.”

As retailers chase rooftops in diverse markets, property investors continue to add retail to their investment portfolios; however, many may need to temper their investment projections. While population growth and consumer confidence continue to feed retail growth, “it will be a challenge for retail to continue to perform at the high levels and high returns that we have been seeing,” says Kenneth P. Riggs, CCIM, president of Real Estate Research Corp. in Chicago. “However, our investment-conditions rating places neighborhood/community retail above either power centers or regional malls. Community retail, where people stop in to get a haircut or grab a sandwich, or do their banking and other personal services in their neighborhoods, should continue to do well if supply does not get ahead of demand.”

 


Sara Drummond is managing editor of Commercial Investment Real Estate.

Copyright © 2007 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    

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Moving Into Multifamily


Moving Into Multifamily
Investors relocate capital to attractive apartment sector as fundamentals improve.
By David Baird

Although recent media attention has focused on the ups and downs of single-family residential housing, last year's biggest real estate deal - in fact the world's biggest real estate deal to date - actually took place in the multifamily sector. Tishman Speyer offered MetLife $5.4 billion for Manhattan's Stuyvesant Town - an 11,000-unit, 110-building multifamily complex housing about 25,000 people.

Although the multifamily sector often flies beneath the radar of many investors, its combination of stability and upside has made apartment properties one of the best and most tempting real estate investments. And today's combination of high single-family home prices, limited multifamily stock, and burgeoning demand demographics points to improving multifamily fundamentals for many markets.

As an investment, apartment properties have outperformed the stock market for the last five years, according to both the National Association of Real Estate Investment Trusts and the National Council of Real Estate Investment Fiduciaries. In 2005 the apartment sector achieved its best annual return since 1984 - 21.15 percent compared to the market's 20.06 percent. During that same year, $86.9 billion of apartments traded, a 72 percent increase compared to 2004, according to the National Association of Realtors.


Photo caption: The 276-unit Alexan Miramount luxury apartment complex located nine miles southeast of Austin, Texas, was completed last summer.
Photo credit: Opus West Corp.


Last year apartment investors reaped returns at about 17 percent, which was similar to other property types, according to NCREIF. Preliminary reports indicate that far more apartment properties changed hands than any other property type except for office. During the first 10 months of 2006, nearly $70 billion worth of apartment properties traded, with institutional acquisitions already surpassing the total for all of 2005, according to Real Capital Analytics, a New York-based research firm. About 30 institutional investors each acquired $100 million or more in apartment properties in 2006.

Although rental-housing niches such as student and seniors housing continue to grow, few investors are pursuing them. Instead, many traditional multifamily investors are focused on developing mixed-use projects in infill locations and will continue to do so throughout this year. Since some cities make affordable housing a condition of the zoning approval, some of these properties will include an affordable-housing component.

The value-added strategy of acquiring and repositioning class B and class C apartment properties has been extremely popular for the past three years and is not expected to wane this year. However, the condominium conversions that ignited many markets, particularly in Florida, have slowed significantly, and the absence of condo converters has made room for conventional apartment investors in markets such as Tampa and Orlando, Fla., and Miami.

While the conversion slowdown is returning some units to the market, cities with strong population growth will not be affected greatly, according to industry experts. In fact most commercial real estate experts give multifamily a thumbs up for 2007 based on its all-around improving fundamentals. As a result investor interest in apartment assets should continue to grow stronger this year, as the sector benefits from an expanding renter population, strong job growth, and slowdowns in single-family housing.

Improving Fundamentals
Confidence in the current rental market is strong and expectations for this year are even higher, according to the National Association of Home Builders/Fannie Mae Multifamily Rental Market Index released in late November 2006.

More than 60 percent of MRMI respondents said that apartment demand rose during 3Q06, and 70 percent said that effective rental rates increased. Additionally, almost 70 percent of multifamily developers and owners said they felt good about continued demand due to a large volume of calls from prospective renters.

Strong fundamentals are evident in nearly every U.S. apartment market. Out of the 75 markets tracked by the New York-based research company Reis, 60 markets boasted positive absorption and 55 noted falling vacancy rates. A whopping 73 markets recorded effective rent gains.

Vacancy during 3Q06 fell by 20 basis points to 5.4 percent - the lowest level since 4Q01, according to Reis. Vacancies are expected to continue to decrease despite the fact that development has strengthened and condo conversions have slowed.

During 3Q06, 16,300 rental units came online, but all of them and more were absorbed as net absorption reached nearly 22,000 units. During that same period, only 7,400 units were converted to condos, far below the 1Q06 and 2Q06 levels of 29,800 units and 19,300 units, respectively. Further comparison shows that the 3Q06 conversion rate was scant in comparison with the market's peak of 54,700 units in 3Q05, according to Reis.

The decrease in conversions, coupled with a muted development pipeline in comparison to previous development cycles, is impacting asking rents and effective rents. Asking rents and effective rents grew at their fastest rates in 2006 since the national market's peak in 2000, according to Reis. Third-quarter 2006 marked the sector's 18th consecutive quarter of asking rent gains, which rose 1.3 percent, according to Reis, while effective rents climbed 1.4 percent as landlords reduced concessions. Asking rents will increase 3.4 percent and effective rents will grow by 3.6 percent this year, Reis forecasts.


Rendering caption: After slightly more than three years of construction, Scottsdale Waterfront, the first condominium tower in Scottsdale, Ariz., was ready for occupancy in Feburary.
rendering credit: Opus West Corp.


Coastal Markets Attract Investors

Location is a crucial investment factor and continues to be a tricky matter. High-barrier-

to-entry markets such as Baltimore, Boston, Washington, D.C., Fort Lauderdale, Fla., Los Angeles, Long Island, N.Y., Miami, New York, Orange County, Calif., San Diego, Seattle, and San Francisco historically have produced higher rental growth and lower vacancies when compared to low-barrier-to-entry markets such as Atlanta, Dallas, Denver, Phoenix, Raleigh-Durham, N.C., and San Antonio, according to a RREEF study.

From 1990 to 2006, for example, the average vacancy rate for high-barrier markets was just 3.8 percent compared to 6.9 percent for low-barrier markets. Similarly, high-barrier markets achieved rental rate growth of 3.8 percent, while low-barrier markets achieved 3.3 percent, according to RREEF. Capitalization rates in high-barrier markets averaged 5 percent compared to an average cap rate of 5.6 percent in low-barrier markets, the study also shows.

Having four of RREEF's top high-barrier markets located in California provides a reason why the state's cap rates are among the lowest in the country, according to Real Capital Analytics. Apartment transactions that closed during 3Q06 in Orange County, for example, had an average cap rate of 4.9 percent and sold for an average of $195,882 per unit. Farther east toward the desert, the Inland Empire has had an average cap rate of 5.4 percent and an average price per unit of $147,151.

Despite the low cap rates and high unit prices, there's still a lot of upside to be found in Southern California. For example, the Inland Empire's apartment market is expected to see occupancy and rental rate growth increases in 2007 as the population expands by 3.2 percent - the largest amount of all markets evaluated - and job growth will top 3.2 percent according to Sperry Van Ness' multifamily Top 10 Markets to Watch report. Vacancy is predicted to drop to 4.2 percent as rents grow 4.7 percent to reach an average of $1,053 per month.

Orange County's vacancy rate is expected to drop to a countrywide low of 3.2 percent and effective rents are forecast to grow 5.1 percent to $1,481, which is the biggest increase for all markets evaluated in SVN reports. Like the Inland Empire, Orange County will add more than 22,000 jobs and 22,000 new residents. Investors should look to Fullerton, Calif., for significant upside as renters in Buena Park, Calif., and North Anaheim, Calif., are priced out of the market and move to Fullerton.

Northern California's apartment market also has strong momentum. For example, cap rates in both San Francisco and San Jose averaged 5 percent at the end of 3Q06, according to Real Capital Analytics, with an average price psf of $286,867 and $183,715, respectively.

San Jose and San Francisco posted the strongest gains in asking and effective rents for most of 2006, according to Reis. And in terms of asking rents during 3Q06, San Jose led the nation with an increase of 2.6 percent.

Both San Jose and San Francisco's downtowns are undergoing significant revitalization and a number of mixed-use infill projects are under construction. At the same time, job growth has returned to the region. San Jose will add 10,000 new jobs - most of them in the service and professional sectors - and welcome 8,500 new residents, according to SVN. The high cost of living in the Bay Area bodes well for apartment owners. A decreased vacancy of 3.7 percent over the coming months will allow owners to boost asking rents by 4.9 percent, bringing the average rent to $1,380 per month.

San Francisco also has rebounded from the dot-com bust and many people have returned to jobs in the city, seeking homes near transit lines or close to downtown. Rental signs are coming down, as are vacancies and concessions. The city's marketwide occupancy is expected to reach 3.8 percent by mid-2007, while effective rents will jump 5.4 percent to $1,668 per month, according to SVN.


Rendering caption: Edgewater, a San Francisco multifamily property will break ground this spring.
Rendering credit: Michael Sechman and Associates


Investors Warm to Sun Belt Opportunities

Many investors consider the coastal markets, especially those in California and Florida, to be seriously overheated and have gravitated to Las Vegas and Phoenix in hopes of getting quality assets at higher cap rates.

In Las Vegas, for example, the average cap rate for deals closed in 3Q06 was 6 percent, according to Real Capital Analytics, while the price per unit was $94,522. Phoenix's average cap rate was slightly lower at 5.9 percent, with the average price per unit of $89,533.

Las Vegas ranks as No. 3 on SVN's top apartment markets list, while Phoenix and Tucson, Ariz., fill spots nine and 10 on the list. All three markets are appealing because they will continue to experience significant population and job growth. Las Vegas, for one, is expected to add 57,000 new residents over the next six months and lead the nation in employment growth of 3.8 percent. Development in the city is limited primarily to high-rise, high-end condos, but 1,800 new apartment units will come online this year. Therefore, the vacancy rate is forecast to hover right around 4 percent. But new development is not expected to curtail rental rate growth of 3.7 percent.

Other investors are following the demographic shifts that clearly favor Sun Belt markets in Georgia, Texas, and the Carolinas. Some of the fastest-growing metro areas over the past two to three years have been Atlanta, Dallas-Fort Worth, Denver, Phoenix, and Raleigh-Durham, N.C. Without exception, these cities are experiencing strong job growth and population increases as corporations exit expensive locales to take advantage of the quality work force and a low cost of doing business offered in Sun Belt markets. Moreover, these markets will offer better returns to investors in the coming months as fundamentals improve.

For example, in Dallas-Fort Worth cap rates averaged 6.9 percent at the end of 3Q06, and the average price per unit was a real bargain at $67,215. Similarly, Denver's average cap rate was slightly lower at 6.6 percent and the average price per unit was $101,568, according to Real Capital Analytics. Unfortunately, the demand has encouraged developers to start building again. Various sources measure the development pipeline at more than 10,000 units.

Farther east, Raleigh-Durham offers such impressive growth opportunities that it nabbed the No. 8 position on SVN's top apartment market list. Almost 18,000 new jobs are forecast for the coming year for the metro area, and 38,000 people are expected to move to the city.

A large student population and a growing employment base have created significant demand in Raleigh-Durham, pushing vacancy to 7.5 percent and driving rental rate growth of 3.4 percent. The city has absorbed 2,000 units over the past two years, but there is concern that the 3,000-unit development pipeline is a little pudgy.

Even the amount of new development that is planned nationwide for 2007 can't cast too large a shadow on the apartment market's future. About 92,000 units are expected to be completed this year, 2,000 more than last year. Although condo conversions reverting to rentals may add to that total, completions still will fall short of 1990s' levels.

All in all, the economic indicators paint a pretty picture for apartment performance and will tempt investors throughout the year. Opportunities for strong returns exist in several markets. Investors just have to be willing to look hard and move quickly.

 


 

David Baird is senior vice president and national director of multifamily for Sperry Van Ness in Las Vegas. Contact him at (702) 765-6005 or bairdd@svn.com.


 

 

What's Driving the Apartment Sector?
Demand for rental housing is showing no signs of slowing. The United States is projected to add 11.6 million new households between 2007 and 2015, an average of roughly 1.5 million new households each year. This rate is 15 percent higher than the 1.3 million new households created each year since 2001. Most of the growth in household formation can be attributed to the echo-boomer generation, who range in age from 20 to 24 years, and strong immigration, which both positively impact the apartment sector, according to a RREEF report.

Echo boomers account for around 30 percent of the U.S. population or 76.3 million. This group is critically important to the apartment market: Roughly 75 percent of this age group calls an apartment home and historically has lived in apartments. In the 1990s, this age cohort shrunk significantly but started to grow again in 2001 as echo boomers - children of the baby boomers - came of age.

Similarly, immigrants make up a large portion of the renter population. Roughly 4 million immigrant households live in apartments today, and immigrant households are expected to contribute a greater proportion to future apartment demand, according to the National Multi-Housing Council. By 2010, another 500,000 immigrant households are expected to live in rental units.

In addition to echo boomers and immigrants, many Americans may end up in apartments as the cost of homeownership increases. Homeownership costs about 30 percent more a month than renting, according to the NMHC. That affordability gap plus high housing prices are causing fewer apartment residents to become homeowners.

In addition, many existing homeowners have mortgage payments that grow as short-term interest rates increase. The impact of the interest rate hikes already is apparent: The number of foreclosures during the first 10 months of 2006 (766,058 properties) was 19.6 percent more than the number of foreclosures for all of 2005, according to Foreclosures.com, a California-based real estate investment advisory firm and publisher of property foreclosure information.

While foreclosures and weak home sales aren't anything to cheer about from an economic perspective, the multifamily sector certainly will benefit, and those rewards will be passed on to investors.

Copyright © 2007 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    
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7 Real Estate Finance Myths Unveiled


7 Real Estate Finance Myths Unveiled
Discover the market factors that really are influencing today's transactions.
By Andrew Stewart

Much of the real estate finance industry operates on dogma, most of which is grounded in sound theory about the factors that drive commercial real estate markets and risk pricing. During the past 15 years there have been significant advances in methods for assessing and quantifying risk, which contribute to more disciplined debt and equity investors.

However, many of the risk models and decisions taking place in commercial real estate today are based on assumptions that are questionable. Understanding the reality behind some of these myths is important when making commercial real estate financing decisions.

Myth No. 1: Real estate equity currently is a safe haven for investors. In the long term, well-located real estate is a solid investment. However, the short and intermediate outlooks are somewhat more clouded. The idea that today’s valuations will be maintained is a risky proposition. Since 1993 real estate values in this country have performed well in most markets due to a confluence of factors that have made real estate a favorable asset class. This long bull market must end at some point.

For instance, if a property owner places two advertisements for the same property -- one for lease and the other for sale -- there might be a deluge of interested buyers, but far fewer potential tenants. Something is wrong with this phenomenon, since investors buy real estate for its long-term cash flow potential. If interest rates rise, values will decline, with much of the downward pressure being caused by floating rate loans that cannot be refinanced or cannot carry their debt service. And, inevitably, capitalization rates will rise back to historical levels.

Myth No. 2: Spreads on commercial mortgages are too low. Many commercial mortgage debt investors are complaining that they are not being fairly compensated for risk. But this is only partially true. Investors that receive 90 basis points over U.S. Treasuries for a truly conservative mortgage are being fairly compensated, since many of those loans have an extremely low probability of ever defaulting. In actuality, 90 basis points is a fair yield as it is a 22 percent yield increase over a 4.1 percent treasury. When bonds were 8.82 percent on average in 1988 and low leverage spreads were at 90 basis points, the reward for investing in a mortgage was a 10.2 percent premium over the risk-free rate. Note that 80 percent loan-to-value loans were between Treasury plus 175 and 200 basis points in 1988; now they are Treasury plus 110 to 140 basis points for most properties.

Complaints regarding spreads for highly leveraged loans, where debt investors are attempting to get an additional 30 or 40 basis points of yield, are justified. In these instances, the lender is taking on an inordinate amount of risk for the incremental yield offered in today's market.

Myth No. 3: Mortgage debt is a solid investment right now. While lower leverage loans are just fine in the current market, higher leverage mortgages are mispricing risk. A commonly used term these days is debt cap rate, which generally refers to the mortgage amount as a function of the cash flow. Often times the debt cap rate reflects a loan amount that is more than the property would have sold for a few years ago. In many cases, traditional lending tenets are being tossed aside.

Experts know that studying real estate markets’ history is a poor way to predict future performance. Subordination levels are in sharp contrast compared to levels a few years ago. Commercial mortgage-backed securities originators are touting the new "super senior structures" of their issues. This structure carves out a junior piece of AAA bonds backed by mortgages that are subordinate to the rest of the AAA tranches. In theory, the balance of the AAAs is safer. However, this thinking would be sound if AAAs didn't continue to take a growing share of the entire mortgage pool; all this does is recover some of the ground lost by more-lenient subordination levels. The rating agencies and many bond buyers are confusing theory with reality, causing errors in judgment.

Myth No. 4: Liquidity will continue to exist. Many investors wrongly assume that capital, both debt and equity, will continue to be consistently available. More typical credit cycles have longer periods where liquidity is scarce, such as the cycle that occurred between 1990 and 1993.

Real estate fundamentals are stronger now than in 1988-1989, which greatly reduces the chance of a near-term liquidity squeeze. It is likely, however, that in a few years there will be a lower supply of available credit, especially for leveraged transactions. Refinance risk for loans originated now is higher than at any time since 1986-1989. This is true for leveraged fixed rates as well as interest-only floating rates.

Collateralized debt obligations, or CDOs, which have continued their transformation into a core asset class in the fixed-income markets, currently incorporate pooled B financing pieces from CMBS into their offerings. CDOs are complex securities, even for bond investors, as they contain numerous types of credits including home equities, corporate credits, and high-yield loans. Since CMBS B pieces comprised only 6.98 percent of total 2004 collateralized debt issuances, it is possible that the risk inherent in B pieces is not fully understood. There is a trend towards dedicated real estate CDOs comprised of aggregated subordinate debt and mezzanine investments. The idea that pools of unrated securities can have investment-grade tranches seems counterintuitive despite the fact that diversification of the pooled B pieces somewhat neutralizes their risk. Many of the buyers of B pieces are now less concerned about risk so long as they can transfer it to collateralized debt buyers. If B piece liquidity through collateralized debt originations diminishes, then leveraged loan supply will follow suit.

Myth No. 5: All conduits are the same. Many investors believe that all conduit financing is similar in price and structure, but this is not true. In case you haven't noticed, conduits are staffed by people, and so are the rating agencies and bond buyers. This means that anyone originating or selling mortgages has their own subset of experiences from which to draw upon. There are startling differences between securitized lenders in how risk is viewed, structured, and priced. One needs to truly understand what is happening with numerous players in this market to achieve efficient execution.

Myth No. 6: Interest rates must rise soon. This is not as certain as some people seem to think. A popular belief among economists and others is that we have been living off the dole of the Federal Reserve Board for too long. The U.S. economy has yet to establish the kind of job growth that drives gross domestic product to levels that cause the Fed to raise rates dramatically. Hurricane Katrina may also have an impact on federal policy in the near term, causing them to pause in their current round of rate increases.

Inflation appears to be in check assuming that recent oil spikes do not contribute to a spiral of price increases the way they did in the 1970s. The largest financiers of the federal deficit, Japan and China, which hold more than $1.2 trillion of U.S. debt, cannot liquidate their positions without experiencing an enormous bond value loss. This is because the market likely would panic if the industry suspected that either entity wanted to reduce its U.S. Treasury holdings. The Fed also should realize that disastrous consequences could occur if it raises rates too fast. Consumers are financing much of their spending through home equity borrowing. This would collapse if rates rose quickly, which also would deflate home prices to the extent that the solvency of Fannie Mae and other large investors in adjustable rate residential and commercial mortgages would be at risk.

Myth No. 7: The real estate bubble will burst soon. It is possible, but not if rates stay close to current levels. Since rents in many markets have been somewhat depressed for a while, it is possible that rent inflation will increase as some markets reach equilibrium. For instance, it is hard to imagine that class A suburban office rents can drop much more than current levels. Very little supply has been added in areas that are supply constrained due to lack of available land or soft leasing. Better information flow regarding absorption has enabled construction lenders to enforce greater supply financing restrictions. If rents recover in certain areas, there is upside value potential.

To navigate the current market, equity investors should tread water carefully and debt investors need to be wary of leveraged loans based upon inflated asset values. Existing borrowers should lock in as much money as their investments can support for as long as possible -- more than 10 years is preferable. If owners have another method of deploying capital outside of real estate, it is time to sell, but not to buy more real estate at inflated values.

 


Andrew Stewart is chief operating officer of David Cronheim Mortgage Corporation in Chatham, N.J. Contact him at (973) 635-6800 or andrew@cronheimmort.com.

Copyright © 2005 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    

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Tax Watch

Tax Watch
Review the Fundamentals of Section 1031 Like-Kind Exchanges
By Thayne Needles

Taxpayers planning to sell, purchase, or construct real property should review the possibility of conducting an Internal Revenue Code Section 1031 like-kind exchange to defer the incurrence of federal and general state income taxes on the capital gain. To qualify, property owners must exchange real or personal property (relinquished property) for other property of a like-kind (replacement property).

For example, Javier Cortez owns an apartment building valued at $500,000. He wants to sell the building to purchase another investment property but avoid incurring capital gains taxes. Following detailed IRC rules, he can accomplish this through a 1031 exchange.

Defining Like-Kind Property
The definition of like-kind real property is very broad; the replacement property does not have to be the same type as the relinquished property. For example, Javier could exchange his multifamily building for an office or retail property or for a tenancy-in-common or fee interest. Also, the replacement property is not limited to a single building; Javier could purchase a portfolio of three small buildings.

Personal property may be exchanged for other like-kind or like-class property, but the definition of like-kind personal property is more restrictive than that applied to real property. For example, the exchange of a truck for a car likely would not be allowed, while the exchange of one car for another car or a computer for a printer is treated as an exchange of like-kind property.

Real property is not like-kind to personal property, but combinations of the two may qualify under Section 1031 rules. For instance, Javier could not exchange his multifamily building and its furnishings solely for real or personal property in a completely tax-free exchange, but he could exchange the property for a combination of real and personal property, such as a restaurant and its furnishings and equipment. However, exchanges involving both real and personal property may result in the recognition of some gain as it is unlikely that equal values of personal property of a like-kind are exchanged. This form of multiple property exchange is subject to specific rules and can result in the recognition of gain even in the absence of any money transfer.

Not allowed are transfers of certain property inventory or other property held primarily for sale, such as subdivided lots held for sale, and interests in partnerships or real estate investment trusts.

Use Requirements and Holding Period
Taxpayers must have held the relinquished property for use in a trade or business or for investment. Under this requirement, personal residences are not eligible. Vacation homes may qualify as investment property if the taxpayer's personal use is limited or the home has been rented. Since Javier's multifamily building is an investment property, it is eligible for an exchange so long as he selects a replacement property to hold as an investment.

While no formal rule exists, the Internal Revenue Service historically has taken the position that the taxpayer must hold both the relinquished and replacement properties in a qualified use for a certain time period. Thus, the IRS might challenge the exchange if Javier sold the replacement property shortly after the exchange. Taxpayers should consult with a tax adviser concerning the appropriate holding period for property.

Recognition of Gain or Loss
To defer total gain, both the value and net equity of the taxpayer's replacement property must equal or be greater than the value and net equity of the relinquished property at the time of the exchange. In Javier's case, the replacement property must have a value of at least $500,000 and the value must exceed by $300,000 (net equity) any debt assumed in connection with the replacement property.

If the value of the replacement property is less than $500,000 or the net equity is less than $300,000, Javier would be taxed on the greater of the trade down in value or equity, limited to the gain he would have recognized if the property simply had been sold for its fair market value.

The Qualified Intermediary
Most like-kind exchanges are deferred exchanges. To complete a deferred exchange, the taxpayer must transfer the relinquished property for other like-kind property and not for money. Therefore, the taxpayer cannot gain actual or constructive receipt of the relinquished property's proceeds before purchasing the qualifying replacement property. Tax regulations impose strict limitations on the taxpayer's access or control over the proceeds and expressly limit the right to receive, pledge, borrow, or otherwise obtain the benefits of the money.

Thus, deferred exchanges require the use of a qualified intermediary to hold the sale proceeds and acquire the replacement property. Certain persons that provide other services on behalf of the taxpayer are disqualified to act as a qualified intermediary. Many companies specialize in acting as a qualified intermediary for a fee. Consult a tax adviser to make certain that a qualified person is acting as the intermediary in the case of a deferred exchange.

For example, Javier chooses an acquaintance, Robert, as the qualified intermediary. He assigns his rights under the relinquished property sales agreement to Robert who holds the sale proceeds in an account or in a qualifying escrow until purchasing the replacement property on Javier's behalf.

Deferred Exchange Timing
Strict timing rules apply to deferred exchanges. Generally, the taxpayer must identify the replacement property or properties in writing to the intermediary within 45 days of the relinquished property's sale. Within 180 days of the transfer of the relinquished property, the taxpayer must receive the replacement property. The 180-day period is limited to the due date of the taxpayer's tax return unless that return is extended.

Tax rules also place restrictions on the taxpayer's right to use or pledge the relinquished property sale proceeds during the 180-day exchange period. In Javier's situation, he sold the multifamily property to another investor for $500,000 and placed the proceeds in an escrow account held by Robert. Within a month he identified in writing two small medical office buildings as the replacement property. Two weeks later, Robert purchased the medical office buildings for $500,000 using the relinquished property sale proceeds and transferred the title to Javier. By following the guidelines, Javier successfully completed a deferred exchange and avoided incurring federal and state taxes.

Consult a tax professional for more information about Section 1031 tax-deferred exchanges.

 


Thayne Needles is a senior manager in the McLean, Va., office of Ernst & Young. Contact him at (703) 747-1000 or thayne.needles@ey.com.

Copyright © 2003 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    

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Singling Out Triple-Net Leases

Singling Out Triple-Net Leases
Interested Investors Should Understand the Critical Components of These Lease Structures.
By Letty M. Bierschenk, CCIM, Kurt R. Bierschenk, CCIM, and William C. Bierschenk, CCIM

Many real estate investors think nothing could be simpler than an investment in a triple-net-leased (also known as NNN) property. Some liken it to buying a bond. While straightforward to own and operate, triple-net-leased properties can be the most challenging type of real estate investment for advisers to structure or — if the lease already exists — to understand. With lease terms as long as 50 or more years when options are taken into account, due diligence is critical, as changes usually cannot be made later on.

To prevent costly mistakes during the lease term, investment advisers must completely master all critical components of the transaction early in the negotiations. These include the client’s objectives for the investment, the lease document, the type of tenant, the physical real estate, and the type of seller.

The Client’s Objective
Investors considering triple-net-leased properties usually have certain objectives in mind that might not be met by typical real estate investments. These may include relief from management obligations, assured income, pride of ownership, and preservation of capital.

Many investors seek a suitable replacement property to complete a tax-deferred exchange. Having sold a management-intensive property such as a multifamily building, they must reinvest in real estate to take advantage of the exchange provisions. They still need the income, but they no longer want a landlord’s responsibilities. In addition, many take pride in having a well-known and respected company as a tenant. Others are most interested in providing an estate for their heirs, and they prefer to have less current income with the highest possible tax deductions from interest and depreciation.

Although all of these objectives can be met through triple-net-leased investments, the variations in different triple-net-leased properties need to be considered as well.

A Lease Primer
Unlike typical commercial real estate transactions, approach the analysis of a triple-net-leased investment with the idea that it is the lease, rather than the building and land, that the investor is purchasing.

Because definitions of triple-net leases differ, be certain that you understand your client’s concept of what the lease should and should not include. You may discover that a triple-net lease does not meet the client’s objectives after all. Also, be aware that the term is widely misused in brokers’ marketing materials.

After finding a potential property, obtain a copy of the lease and analyze it first. Otherwise you can waste time and money on market studies, inspections, and contract negotiations only to find during due diligence that one paragraph in the lease knocks the property out of consideration.

Generally a net lease refers to the arrangement where the tenant pays all or some of a property’s operating costs in addition to rent. Several general gradations of net leases have evolved over the years. These are summarized here, ranked from strongest to weakest, beginning with the lease that gives the tenant absolute responsibility for the real estate in exchange for absolute control.

Bond Lease. The tenant is fully responsible for operating expenses, maintenance, repairs, and replacements for the entire building and site, without limitation.

NNN Lease. These leases follow the bond lease definition except that capital expenditures are limited, usually in the final months of the lease. The lessee is liable for all of the property’s expenses, both fixed and operating.

NN Lease. This lease follows the NNN, except the landlord is responsible for structural components, such as the roof, bearing walls, and foundation.

Modified Net (or Modified Gross) Lease. The tenant pays its own utilities, interior maintenance and repairs, and insurance. The landlord pays everything else, including real estate property taxes.

Regardless of the type of net lease, many fluctuations, such as increasing utility costs and changes in government regulations, cause problems under rigid lease terms over time. Investors must be aware of lease nuances that may seem innocuous but require knowledge and planning in order to avoid future disappointments or disasters. Two such examples are the inflation trap and the taxation burden.

The Inflation Trap. At one time, single-tenant leases were structured with flat income for 25 or 30 years, and then had a series of options at drastically reduced rent, such as 2 percent of the property’s value. The theory was that the loan would be paid off by then, so the landlord’s spendable income would not be reduced. But inflation made this a nightmare for owners. When income was compared to current rent schedules, properties only could be sold at tremendous price reductions.

Today new leases take this possibility into account by specifying periodic rent increases, with options, if any, pegged to "fair market rent" or other indicators that preserve the income level.

Taxation Burden. Local laws and customs also may affect leases. For example, because triple-net tenants are responsible for real estate taxes, including any future increases, a unique situation developed in California with "Proposition 13" in 1978. It established a new base tax amount of 1 percent of the then value and limited tax increases to 2 percent each year until the property sold. Upon sale, taxes would be recalculated to 1 percent of the new purchase price. This formula, combined with soaring real estate values, meant that tenants were faced with wild leaps in rental rates due solely to changes of ownership, which in no way benefited the tenant.

Today tenants and landlords still are hamstrung over this issue. Tenants generally agree to an allowance for pass-throughs of increases except in the event of a sale. Owners reject these lease provisions, correctly noting that the impact on the net income to a future buyer results in a reduced market value of the real estate.

Triple-Net Tenants
After mastering the lease, the next factor to evaluate is the tenant.

Credit Worthiness. From an investor’s perspective, a triple-net-leased property’s price should reflect the tenant’s ability to meet the terms of the lease. The capitalization rate indicates this variable risk factor, because it directly represents the relationship of the stipulated net income to the price a knowledgeable investor is willing to pay. The higher the risk that a tenant may not be solvent over the long term, the higher the cap rate should be.

A tremendous amount of information is available to assist in evaluating the current and future financial strength of a tenant. If it is a public company, the credit rating is fairly easy to determine through a number of sources, including sites available on the Internet such as http://www.companysleuth.com/, http://www.zacks.com/, and http://www.freeedgar.com/.

The trend toward mergers and divestments adds another dimension to credit reviews. Even though the resulting entity usually is stronger than the original company, the risk of the unknown can be perceived as a negative factor.

If the business is complex or privately held, contact a fee-based tenant underwriting service for added assistance.

Type of Use. Even if the credit rating is substantial, the type of business may affect investment value. From an investment standpoint, a general-purpose use, where tenant improvements easily are convertible to another tenant’s needs, is more desirable than a special-use project. In many special-use cases, the seller passes along the costs of highly specialized improvements to the buyer, who may be unable to recover that portion of the investment over the lease term. Fast-food outlets are a prime example of this problem, but certainly not the only one.

The Physical Real Estate
After reviewing the lease and tenant/landlord compatibility, investors then should evaluate the physical real estate. All categories of office, industrial, retail, multifamily, and hotel properties, and even undeveloped land, can be sold on a triple-net-lease basis, without regard for size, design, or location. However, retail, office, and industrial most often are available in the marketplace.

Businesses that typically lease rather than own their real estate are those that achieve a business-income yield that is substantially higher than the typical real estate yield of 8 percent to 10 percent pre-tax. High-volume retail operations are probably most prevalent. But each investment must be considered individually. For instance, if an investor purchases a special-purpose building with a "theme" construction, the net worth of the company is of prime importance. On the other hand, a food market in a good neighborhood shopping center most likely can withstand even a change of tenancy without significant loss of income.

Similarly, industrial buildings can be classified as warehouse, manufacturing, or research and development space. They come with and without substantial office space and range in size from 10,000 square feet to 500,000 sf. Even warehouse space can be highly specialized today, including high-cube to accommodate the new storage technology, or dock-high local storage for lower volume distribution.

Manufacturing facilities usually have the greatest number of special-purpose characteristics, such as drainage wells, overhead cranes, two-foot-thick concrete floors, and special lighting and exhaust systems that preclude their use by other businesses. The possibility of hazardous materials in any manufacturing process may require consultation with experts who can advise on ways to minimize the landlord’s liability for adverse consequences.

Office buildings, even though they come in all sizes and styles — from free-standing, one-room buildings to lush garden complexes to high-rise palatial headquarters — are easiest to evaluate because they are the most closely tied to location as an indicator.

The purchase price should take into account replacement costs and comparable sales, but be wary of an overmarket rent that cannot be achieved with another tenant in the future. Inflated rents may make the investment return appear desirable. However, if market rents and prices of comparable buildings in the area are substantially lower, the resale value may be less than what the investor paid for the property and the actual yield probably will be lower than other alternative opportunities in the marketplace.

Analyze the effect of overmarket rents on investments by generating a range of internal rate of return calculations, incorporating these assumptions that might impact resale values:

  • The tenant renews at a consistent rental rate in the year of sale.
  • The property must be released at projected market rent in the year of sale for the same type of use.
  • The property must be released for a different use.

Comparing these IRRs demonstrates the marginal value attributed to the current tenant, over and above the demonstrated investment value. Whether or not it is in line with reality can be a subjective call based largely on a client’s "feel" for the company. Quite often, buyers will ignore the importance of the type and location of the real estate when evaluating a triple-net investment. It is not unusual for a fast-food facility to sell at four or five times the replacement value, because the investor is satisfied with the projected return based on the tenant’s strength and length of the lease. But brokers must educate buyers as to the potential problems if such tenants were to go out of business.

Furthermore, if the triple-net facility is located in a shopping center, the owner also must consider the effect of a possible failure of the business location, even if the tenant "goes dark" but continues to pay rent. The loss of traffic, which the credit tenant might have drawn, can impact the sales volumes of every other tenant in the center and destroy the synergism of a previously well-constructed retail mix.

Triple-Net Sellers
Triple-net-leased property sellers fall into three categories: investor/owners of leased properties; owner/users creating sale/leasebacks; and build-to-suit developers.

Investor/Owner. This type of seller presents a known entity for an investor’s analysis. The lease may be a true triple net but with a short remaining primary lease term, requiring either re-leasing or a series of short-term options. Investors can evaluate base rent and expense payment history and may have access to historical sales volumes to assist in determining the likelihood of future income.

Even after the prospective purchaser has analyzed and approved the lease, stipulate a review of an estoppel as a contingency of closing. Many sellers only are willing to involve a tenant during the final stages of the transaction, when they are assured of a sale. However consider what may happen if the estoppel comes back a week before closing and it differs in some way from what the seller’s documents had shown, or worse yet, presents an addendum granting a first right of refusal to purchase the property. Have a clear understanding as to when the seller is willing to submit the form, take note of the response time agreed to by the tenant in the lease, and build this into your contingency timeline.

Owner/User. The triple-net lease is well suited to sale/leasebacks as a way to transition the selling company from having absolute control over its surroundings to a situation where it merely is a "lessee." Despite the emotional response that may be generated by the change in status, the sale/leaseback provides a number of advantages to both seller and buyer. The seller frees up capital, often 100 percent of the equity in the real estate, to expand or enhance the business. Since a business return, generally speaking, is higher than the typical 8 percent to 10 percent real estate return, the seller can benefit from the lower cost of investment capital.

Sellers and buyers also benefit by being able to customize a transaction, negotiating sale and lease terms that reflect unique landlord and tenant needs. Investors, for example, may agree to a higher purchase price in exchange for stipulated rent increases, rather than taking the risk of cost-of-living increases. They may trade a short initial term for a series of 10-year rather than five-year options. Tenants may feel comfortable with the obligations of a bond-type lease because they know the property.

One potential negative is the possibility that the seller overimproved the physical plant to enhance the company’s image and expects the buyer to cover overmarket amenities. This occurs most often with office buildings, but overimproved industrial facilities can be even more difficult to evaluate since the perception of overimprovement is related to the location as well as to the building itself.

Developer. From a logistics standpoint, developers are relatively straightforward, since they are professionals who will have the information you need readily available. As always, consider the seller’s motivations. The developer’s first objective is to build. With a lease in hand, the developer can get construction financing and create the product. The second objective is to sell at a profit, so it is necessary to build a return into the transaction. However, the developer’s costs may be relatively low because of economies of scale in creating a large amount of product. One of the benefits is that the lease is already drawn, and a meticulous analysis of the terms virtually can eliminate the chance of contractual surprises during your client’s ownership.

The main potential downside is that there is no performance history for the site. Second, even experienced developers sometimes give in to a strong tenant’s demands, even though the terms may be detrimental to the property’s investment value.

Armchair Investments
Carefully structured and underwritten, a triple-net-leased real estate investment can be an armchair type of investment. However, before an investor commits capital to such a long-term investment vehicle, pre-acquisition due diligence is paramount. Real estate advisers must ascertain the degree to which the lease is, in fact, a triple-net, the likelihood that the tenant will succeed, and the suitability of the real estate itself for the proposed and subsequent use. Finally, match all of these components to the unique characteristics and goals of the investor to determine if this type of property is a right fit.

 


 

Letty M. Bierschenk, CCIM, Kurt R. Bierschenk, CCIM, and William C. Bierschenk, CCIM, are members of the Bierschenk Group in Los Angeles. They provide brokerage, advisory, and capital services to individual and corporate clients. Contact them at (310) 573-3615 or tbg.inc@ix.netcom.com.

Copyright © 1999 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    
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Excel at Financial Analysis Calculations

Best Practices
Excel at Financial Analysis Calculations
Spreadsheet Software Can Help You Calculate Discounted Cash Flow Measures of Value and Return.
By Donald J. Valachi

Editor’s note: While industry trends come and go, some investment principles remain infinitely valuable for commercial real estate professionals. A version of this article, originally published in the September/October 2000 issue, is the most viewed article on Commercial Investment Real Estate’s Web site, www.ciremagazine.com, which contains articles dating back to 1994. Although the concepts explained here are not new, they represent some of today’s most frequently used commercial real estate investment calculations. The content has been updated to reflect the terminology and concepts presented in the CCIM Institute’s educational courses. All calculations are performed using Microsoft Excel 2003. Visit www.cire magazine.com for additional financial analysis articles as well as all of CIRE’s previously published material.

 

While many financial analysis software programs are available today, solving the time-value-of-money problems commonly encountered in commercial real estate can be accomplished quickly and accurately with spreadsheet software such as Microsoft Excel. Specifically, Excel can calculate discounted cash flow measures of value and return such as net present value, internal rate of return, and modified internal rate of return, which provide the foundation for many commercial real estate investment principles.

Some commercial real estate practitioners consider the DCF analysis for valuing income-producing property to be superior to single-period ratio analysis. One principal advantage is that DCF analysis allows consideration of both the amount and the timing of the cash flows (including capital expenditures) from operations as well as from property disposition. Moreover, once the pro forma cash flows are developed, practitioners can assess the risk associated with investments by performing a sensitivity analysis. This allows experimentation with a range of uncertain variables such as interest rates, vacancy and rental rates, and appreciation rates to determine their effects on NPV, IRR, and MIRR.

IRR is perhaps the most popular measure of yield or return in analyzing income-producing real estate. Despite the many technical problems associated with its use, IRR generally is considered the standard measure of return in evaluating commercial investment real estate.

The following examples are designed to facilitate the process of calculating NPV, IRR, and MIRR using Excel. Unlike calculators, Excel allows users to print out their calculations. Familiarity with the process of compounding and discounting as well as with basic spreadsheet calculations is assumed.

Calculating Net Present Value
NPV is the sum of the present values of an investment’s positive cash flows and the present values of its negative cash flows. This calculation results in a single sum that can be positive or negative. Investors generally specify a required or target rate of return for investing capital; it is an “opportunity cost” concept.

The general rule for considering an investment is if the NPV is greater than or equal to zero, the investment should be accepted; if the NPV is greater than or equal to zero, an investor must be earning at least the required rate of return. In fact, if the NPV is equal to zero, the rate of return being earned on the investment is exactly equal to the specified required rate of return. If the NPV is negative or less than zero, the investment should be rejected because the investor is not earning the required rate of return.

To calculate NPV, assume an investor makes a $100,000 investment today to receive the following annual after-tax cash flows: $9,000 at the end of year one, $10,000 at the end of year two, $11,000 at the end of year three, ($3,000) at the end of year four, $12,000 at the end of year five, and $180,000 at the end of year six. The investor’s required rate of return on equity is 12 percent. Enter the assumptions into a template. (See table, Net Present Value.) The shaded cell, B11, is left blank; this is where the answer will appear. The NPV of $19,933 in cell B11 is calculated as follows:

1. Move the cursor to cell B11, where the answer will be displayed.

2. Click on the Paste Function icon (fx). A box of available options appears. (If the box obscures the data, click on the title bar, drag the box out of the way, and release the mouse.)

3. In the box directly under the title “Search for a function,” delete the highlighted narrative content, type NPV, and click Go.

4. Click OK to continue. A box appears to guide users through the calculation.

5. At the Rate prompt, click on cell B9, which specifies the cell containing the requested information.

6. Press Tab to move to the next prompt.

7. At the Value1 prompt, select cells B3:B8, which specifies the cells containing the requested information.

8. Click OK, which closes the box. The investment’s present value of $119,933 is displayed in cell B11.

9. To calculate NPV, type +B2 at the end of the NPV formula in the formula bar near the top of the screen and press Enter. The NPV of $19,933 is displayed in cell B11.

10. Move the cursor back to cell B11. Click on the Increase Decimal icon or Decrease Decimal icon to display additional or fewer decimal places.

Calculating Internal Rate of Return
IRR equates the present value of the positive cash flows and the present value of the negative cash flows. The decision rule for IRR is if the IRR is greater than or equal to an investor’s required rate of return, the investment should be accepted; otherwise it should be rejected.

Using the same investment assumptions, what IRR is earned on the initial $100,000 investment? Start with the same template for the NPV problem, making changes as necessary. (See table, Internal Rate of Return.) The yield of 16 percent in cell B10 is calculated as follows:

1. Move the cursor to cell B10, where the answer will be displayed.

2. Click on the Paste Function icon (fx). A box of available options appears.

3. In the box directly under the title “Search for a function,” delete the highlighted narrative content, type IRR, and click Go.

4. Click OK to continue. A box appears to guide users through the calculation.

5. At the Values prompt, select cells B2:B8, which specifies the cells containing the requested information.

6. Press Tab to move to the next prompt.

7. Leave the Guess prompt blank. (In most cases users do not need to provide a guess for the IRR calculation. If the guess is omitted, it is assumed to be 10 percent.)

8. Click OK to close the box. The yield (IRR) of 16 percent is displayed in cell B10.

9. Click on the Increase Decimal icon or Decrease Decimal icon to display additional or fewer decimal places.

Calculating Modified Internal Rate of Return
MIRR is an alternative to the traditional calculation of the IRR in that it computes an IRR with an explicit reinvestment rate assumption. MIRR has several versions; the Excel version uses the following rates: Finance_rate is the interest rate used to discount all negative cash flows to the beginning of the holding period; Reinvest_rate is the rate used to compound all positive cash flows to the end of the holding period.

The discount rate that equates the present value of all negative cash flows (including the down payment) to the future or terminal value of all the positive cash flows is the MIRR.

To calculate, assume the same cash flow assumptions used in the previous examples. In addition, assume negative cash flows will be discounted at an interest rate of 6 percent and positive cash flows will be compounded at an interest rate of 10 percent.

What annual MIRR would be earned on the initial $100,000 investment? Enter the assumptions into the template. (See table, Modified Internal Rate of Return.) The MIRR of 15 percent in cell B12 is calculated as
follows:

1. Move the cursor to cell B12, where the answer will be displayed.

2. Click on the Paste Function icon (fx). A box of available options appears.

3. In the box directly under the title “Search for a function,” delete the highlighted narrative content, type MIRR, and click Go.

4. Click OK to continue. A box appears to guide users through the calculation.

5. At the Values prompt, select cells B2:B8, which specifies the cells containing the requested information.

6. Press Tab to move to the next prompt.

7. At the Finance_rate prompt, click on cell B9, which specifies the interest rate used to discount any negative cash flows to the beginning of the holding period.

8. Press Tab to move to the next prompt.

9. At the Reinvest_rate prompt, click on cell B10, which specifies the required rate of return, which is the interest rate received on the positive cash flows that are reinvested for the duration of the project.

10. Click OK to close the box. The yield (MIRR) of 15 percent is displayed in cell B12.

11. Click on the Increase Decimal icon or Decrease Decimal icon to display additional or fewer decimal places.

 

More to Explore
These examples illustrate the simplicity of using spreadsheet programs such as Excel to make a variety of basic time-value-of-money calculations. These examples do not, of course, demonstrate the full range of options and computing power available with the software.

 

 


Donald J. Valachi is a clinical professor of real estate and co-director of the Real Estate and Land Use Institute at California State University, Fullerton. Contact him at (949) 936-1796 or dvalachi@fullerton.edu.

Copyright © 2007 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    

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Creating a Commercial Real Estate Tool Box


Creating a Commercial Real Estate Tool Box
By Todd G. McKissick, CCIM, CRE

Economic, demographic, and psychographic changes affecting the demand for commercial real estate product types continue to present new and exciting opportunities for developers, municipalities, users, investors, and citizens alike. These changes, combined with the natural evolution of cities and other markets, also present new and unique challenges.

Like politics, commercial real estate is still a local business in many ways. Understanding local dynamics and disseminating the components into manageable pieces that can be further analyzed are critical steps to the success of every real estate project.

Despite the location, some problem solving methods are universal for most real estate projects, such as performing site analyses and market studies or conducting highest-and-best-use, adaptive reuse, alternative use, redevelopment, or ground-up development analyses. Based on the scientific method, the process is straightforward: Gather facts and assess the real estate situation; analyze the collected data; recommend key courses of action based on the client’s goals and objectives; and execute the client’s selected course of action.

Sources of data generally vary from project to project and, more often than not, are based on local market factors. However, the types of analyses that projects require often fall into three categories: financial analysis, economic/demographic analysis, and market analysis. Financial analysis tools were discussed in Commercial Investment Real Estate’s November/December 2005 Tech Solutions. Below are programs that have helped me in the other two areas.

 

Economic and Demographic Analysis


STDBOnline
www.stdbonline.com
By far the most valuable tool in my toolbox is STDBOnline. I use it practically every day. If you are not familiar with it, it is well worth learning. Take the classes, experiment with it, and learn to incorporate it into your analyses and presentations. There is no better investment and no better return on investment.

Economic Profile System and Economic Profile System Community
www.sonoran.org/programs/socioeconomics/si_se_downloads.html
Economic Profile System and the Economic Profile System Community are two Excel-based programs developed by the Sonoran Institute in partnership with the Bureau of Land Management. These programs use U.S. Census data to produce socioeconomic profiles for user-defined locations. Originally covering only the Western states, these free programs were expanded to national coverage. They require Microsoft Excel 2000 and approximately 1.7 gigabytes of hard drive space for the databases.

MapInfo
www.mapinfo.com
MapInfo Professional is a Microsoft Windows-based geographic information and mapping application. While it offers more advanced features than STDBOnline, this program is not designed for beginners. It is a great program, but the learning curve is fairly steep; however, Mapinfo allows the user to create highly complex models with intricate filtering criteria that conform to user-specified criteria. Evaluating the demand medical office building, for example, requires an unusual mix of rooftop growth and retail expenditures. These variables are been traditionally examined when evaluating development potential for residential and retail, exclusively. But Mapinfo allows the user to develop criteria based on these factors and create statistical models that include the influence of traffic patterns and location of existing or competing facilities based on correlation or a number of other applicable statistical techniques.

 

Market Analysis
The availability of market data varies considerably. There are numerous sources of subscription-based and one-time purchase services available that are far too numerous to list or critique. In many secondary or tertiary markets, information may be available through the local chamber of commerce or economic development agencies. Often, the only way to compile market data is to conduct surveys.


Center for Community Economic Development

www.uwex.edu/ces/cced
This University of Wisconsin extension program has a number of resources available for collecting data in small markets, particularly under the Tourism Business Development Toolbox and the Business and Downtown Market Analysis. The latter includes a Microsoft Access building inventory database developed by the Wisconsin Main Street Program. This is a good program for compiling data in small markets that are not covered by any of the national research firms.
Currently the database is unavailable but examples of the inventory forms and instructions on compiling such a database are available at www.uwex.edu/ces/cced/dma/2.html.

 

CCIM Models
www.ccim.com/studentcenter
All the tools that I use for market analysis are proprietary Excel-based models. I do not know of any commercially available products that perform market analysis. However, CCIM course instructors, who are experienced commercial real estate professionals, have developed several very good models for CCIM Institute that are simple to use and can serve as a basis for more complex analysis. Models that I have found particularly helpful are:

City Toolkit, developed by Todd D. Clarke, CCIM;
Economic Base Analysis, developed by Karl B. Wagner, CCIM;
Market Feasibility, developed by Robert L. Ward, CCIM;
Location and Site Analysis, developed by Robert L. Ward, CCIM; and
Financial Feasibility, developed by Robert L. Ward, CCIM.

In addition, there are a number of great Excel-based business forms developed by Gary Tharpe, CCIM, Robert L. Ward, CCIM, and Robin R. Dyche, CCIM, that are available on CCIM Institute’s resource toolbox at www.ccim.com/resources/toolbox/busforms.html

 


 

 


Todd G. McKissick, CCIM, CRE, is president of McKissick & Co., an independent economic research company in Atlanta. Contact him at (678) 296-5091 or tmckissick@mckissickco.com.

Copyright © 2005 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    

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Cap Rate Follies


Cap Rate Follies
Avoid These Pitfalls When Calculating Commercial Property Values.
By John Simpson, CCIM, and Eileen Simpson

Capitalization rates are often controversial and misunderstood variables in commercial real estate valuation equations. To value properties, most buyers and sellers prefer an income approach, which analyzes cash flows to determine debt service and investor return — typically the internal rate of return — so it's easy to see why cap rates are scrutinized.

In fact, no other valuation aspect is debated as heavily as cap rates because unsupported data often lead to inaccurate commercial property valuations. By understanding the fallacies that exist, real estate professionals can perform more thorough financial analyses for their clients.

Valuation PrimerEssentially, a cap rate converts income into value: A property's net operating income is divided by the cap rate, and the resulting figure reflects a return on and of capital. The income approach begins by estimating property income and subtracting a vacancy/collection loss allowance and expenses to achieve the NOI. Then the NOI is divided by the cap rate to obtain the property's value.

Commercial real estate owners, lenders, analysts, appraisers, and assessors typically obtain similar projections for a property's income, vacancy/collection loss, and expenses. Minor variances in these figures have little effect on a property's value, especially when compared to historical projections on a stabilized income stream. However, value opinions usually differ in the cap rate selection.

The importance of the cap rate to a property's value conclusion using the income approach is significant. In Table 1, the value conclusion ranges from $3.6 million to $5.3 million — 44 percent — depending on the cap rate. Even a 1 percent or 0.5 percent difference in the cap rate can affect a transaction's outcome.

Cap Rate FallaciesSince cap rates strongly affect properties' values, commercial real estate professionals should avoid the following fallacies that can blunt their projections' accuracy.

The Cap Rate Is Always 10 Percent. Many in the industry consider a 10 percent cap rate as a good rule of thumb for a quick estimate of a property's performance. Although this shortcut may be helpful at times, even a small variance is critical to the actual value. Set cap rates should not be relied upon as a firm industry benchmark.

Data Services Are Accurate. A decade ago, obtaining sales transaction data from a national or local service was almost impossible, but today several companies gather and sell comparable sales data. Though services may claim to provide verified data, commercial real estate professionals should conduct their own due diligence by carefully reviewing financial details, such as income, vacancy rates, expenses, NOI, and cap rates, in data service reports. Beware round numbers: If the income is a round $200,000, vacancy an even 5 percent, and the expense-to-income ratio a flat 50 percent, the data cannot be trusted.

Data services' use of unique terms also points to inconsistencies. For instance, data probably are unreliable if the service provides potential gross income when the property owner only reported effective gross income. Potential gross income typically indicates the service has used rounded figures in the cap rate calculation, which likely results in inaccurate data.

Sale Disclosures Are Valid. About a dozen non-disclosure states do not require sellers and buyers to document sales prices. Unless a state requires a separate disclosure instrument for determining the sales price, actual sales prices must be verified.

A problem in many non-disclosure states is inconsistent sales data. The buyer, seller, or another party involved in the transaction should be a reliable source for verification. At least two different sources should confirm the sales price.

All Cap Rate Components Are Included. Data services usually only report sales above a certain dollar amount — generally $500,000 to $1 million minimum. These sales frequently include business elements that are not denoted in the sales price. For example, car dealerships often include a business value component as part of the price, but this is rarely separate from the real property value. Comparing sales prices that mix real estate and business values to real-estate-only situations produces skewed results.

Historical Projections Are Reliable. Real estate professionals frequently overlook this fallacy, but differences become magnified when using older data. Cap rates usually are calculated based on the prior year's income and expenses. Although the income projection is for the next 12 months, the cap rate is based on the prior 12 months. This discrepancy can produce inaccurate results when the economy or the local real estate market is changing.

Buyer Expectations Are Clear. A common explanation for low cap rates is unclear buyer expectations. Did the buyer expect to expand a business or renovate the building? Was the purchase price heavily based on upside potential? Was there a particular reason why the buyer needed this property, such as its unique location? Buyer compulsions might result in higher selling prices and lower cap rates. Therefore, if a market shows a wide range of cap rates, rely on the median rate for the most accurate assessment.

Cap Rates Reflect Total Value. Some types of real estate, such as hospitality properties and marinas, allow owners to pocket cash that does not appear on financial statements. Such properties' listing prices may reflect value that is both on and off the books. When data services use financial information that reflects only value on the books, the resulting cap rate may be skewed significantly lower.

The Math Is Correct. Investors often want to know an appropriate cap rate for a particular property type or market. However, real estate professionals' cap rate conceptions can result in market values that do not provide buyers with sufficient return on investment.

For instance, consider the investor's requirements in Table 2. The property has a 70 percent loan-to-value ratio, an 8.5 percent interest rate, monthly mortgage payments, and a 25-year amortization rate.

The investor's equity return ranges from 7.45 percent to 20.79 percent depending upon the cap rate. The equity return then must be compared to more-liquid, safer investments to determine if capital would be attracted to this investment. If the first-year equity return is not sufficient for investors to compare it with other investment vehicles, the only way to generate that return is to bank on appreciation, which no longer is considered a good investment strategy.

When real estate is listed at prices resulting in poor equity returns, financially savvy owners and investors may make significantly below-market offers. These low-ball offers reflect the purchaser's return on investment requirements without considering appreciation factors. Many potential buyers refuse to make an offer on properties in these situations because the spread for negotiation is too great.

Frequently when a property's projected equity return is very low or negative, the cap rate also is too low to attract capital to the project.

Cap Rates Always Should Be Developed From Sales. Several techniques other than sales prices, such as the band of investment technique, mortgage equity technique, and hybrids of these two approaches, can be used to derive cap rates.

Like sales-based calculations, these techniques build cap rates from the components necessary to create a deal. Each attempts to model investor and lender requirements by weighting the cap rate for each deal participant. For example, using the loan terms in Tables 1 and 2 and a 15 percent return for the purchaser, a built-up cap rate would be calculated as shown in Table 3.

Mortgage equity and other techniques use the general calculations shown in Table 3 with modifications for variables such as equity increases for paid-down loans and property value appreciation if applicable.

In today's low interest rate environment, it is critical to note that the calculations in Table 3 imply cap rates are heavily dependent upon the current mortgage interest rate. Although this is accurate to some degree, risk parameters are difficult to gauge. For instance, examining the cap rates reported in the Korpacz Investment Survey during the past five years shows relatively little variation, yet during this time a recession began and several other factors affected many commercial real estate markets' performances. Therefore, when relying on these cap rate calculation techniques, fully consider the risks inherent in the equity rate portion of these equations.

 


 

John Simpson, CCIM, MAI, is chief executive officer and Eileen Simpson is president of Commercialappraisal.com, an appraisal company specializing in portfolio valuations and tax assessment appeals in Arnold, Md. Contact them at 410.431.5310 or jasimpson@ccim.net and eileen@ ommercialappraisal.com.

Copyright © 2003 CCIM Institute.All rights reserved. For more information call 312.321.4460 or e-mail us.    
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August 26, 2007

Appraiser Certification: When Is Enough Enough? Part 2

Appraiser Certification: When Is Enough Enough?

by the thrift industry in the 1980s, the Savings and Loan Bailout Bill, formally known as FIRREA XI, was issued by the Office of Thrift Supervision (OTS) under title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. It has since been adopted by all federally-insured thrifts as well as many governmental agencies and quasi-governmental agencies. Because of the complex and transient nature of the evolution of the appraisal profession, the United States Congress, in an effort to prevent clients from choosing appraisers—both with and without designations—that lack competency, made the following provision part of FIRREA XI:

“Sec. 564.6 Professional association membership; competency.

(a) Membership in appraisal organizations. A State certified appraiser or a State licensed appraiser may not be excluded from consideration for an assignment for a federally related transaction solely by virtue of membership or lack of membership in any particular appraisal organization.”

The intent of the legislation is to make sure that each lender or client employs an appraiser competent in the specific type of assignment without regard to designations. There are unfortunately some trade associations and appraisal organizations currently backing a measure to obfuscate this legislation and change it by adding a new sentence and amending FIRREA under a proposal before the U.S. Congress called HR 1295 in section 402 (g) with the following: “Consideration may be given for professional appraisal designations conferred by sponsoring organizations of The Appraisal Foundation as an indication of proficiency in addition to the criteria established by certification or licensing.”

On the surface that may sound good, but this may do far more harm than good. A problem arises if you consider what a designation means. How many courses has the appraiser taken? How much experience does the appraiser have? Look at three appraisers with the same designation—one from 1978, one from 1988, one from 1998—then one from 2008 under the new requirements, and you likely will find that they are very different. Adding to this confusion is the fact that the Appraisal Foundation never has approved any of the designations from any appraisal organization.

While designations have basic requirements, so do state certification and licensing programs. In each case, the individual courses and experiences of the individual appraiser should be evaluated to consider the specific qualifications of the appraiser. However, looking at USPAP (Uniform Standards of Professional Practice), the ethics guidelines that all appraisers must follow, reveals a requirement for appraisers to continue to improve their skill, so appraisers that have done nothing to improve their skill since the time they received a designation in the past are actually in violation of the competency requirement of the ethics required for them to adhere to in USPAP where it says, “for this reason, it is not sufficient for appraisers to simply maintain the skills and the knowledge they possess when they become appraisers. Each appraiser must continuously improve his or her skills to remain proficient in real property appraisal” (See USPAP Standards Rule 1-1(a)).

This is not to say that certifications and/or designations should not be obtained; they definitely should. I applaud appraisers who have achieved designations. If the lure of a new certification helps drive the appraiser into receiving more education, this is a good thing. The down side is that many appraisers simply stop their education once they get their designation. These appraisers, who only have a designation and do not seek to improve their skills, are actually in violation of the ethics that they claim to adhere to as a condition of the license that they hold.

It is never enough to just have a designation, a certification, or a license; the appraiser needs to continue to upgrade their skills through additional education and experience over time. This also can be accomplished in part by teaching and writing about appraising. Additional certifications or designations are a symbol of accomplishment, but do not think that they represent a specific level of education and experience, because you may be grossly incorrect. Rather than considering them the means to an end, ask for a copy of the appraiser’s qualifications. Read their qualifications to see what courses he or she has taken, what kinds of property he or she appraises, how long he or she has been in the appraisal business, whether he or she has published anything about appraising, or is an appraisal instructor.

There are many appraisers without a designation or certification whose training and experience far exceeds that of many of the appraisers who are designated or certified. Choose the most qualified appraiser for the assignment in question. More certifications, more designations, and—most important—more education is preferable. It is never enough if the appraiser already is certified or designated; look beyond certifications to find out what the appraiser’s true qualifications are.

Donald J. Martin, SCRP, RAA, GAA, is chief review appraiser and CEO for MartinAppraisals.com, Orland Park, IL, and serves as an AQB Certified USPAP instructor. He can be reached at +1 708 479 5414 or e-mail martinappraisal@sprintmail.com or on his website at http://www.martinappraisals.com.

Worldwide ERC® provides leadership, advocacy, education and networking for global workforce mobility professionals and the relocation industry through specialized research, training, accreditation, public policy initiatives and information exchange.

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Appraiser Certification: When Is Enough Enough? Part 1

Appraiser Certification: When Is Enough Enough?

Appraiser Certification: When Is Enough Enough?

Reprinted with permission from MOBILITY Magazine

Selecting an appraiser based on his or her designations or certifications is risky, according to Martin. Although designations are very important, it is an appraiser’s experience and training that should dictate his or her selection.

By Donald J. Martin, SCRP, RAA, GAA

Appraisers have numerous opportunities to become certified or accredited. There is Worldwide ERC® certification (for conducting ERC® appraisals), HUD certification (for FHA appraisals), VA Fee Panel (for VA Appraisals), and Appraiser Qualification Board (AQB) USPAP Instructor Certified, for example. Then there is state licensing and certification, which often has three or four categories each state requires in order for appraisers to perform certain types of appraisals.

There also are various trade associations, such as Worldwide ERC®, and appraisal organizations, such as the Appraisal Section of the National Association of Realtors®, the National Association of Independent Fee Appraisers, the Appraisal Institute, among others, that each offer paths for designation. How do we choose an appraiser, and how does an appraiser determine which certification to seek?

To confuse things even further, certification programs often differ within each organization; over the course of time, appraisers often become “grandfathered.” An appraiser who has become “grandfathered” at the time their certification or designation was awarded for meeting the requirements at some previous point in time, becomes inferior to those who become certified or designated under new requirements.

As of January 1, 2008, a new set of qualifications will become mandatory for all appraisers seeking licensing or certification in the United States. Some trade associations have said that their requirements for designation are superior to those of state licensing or certification programs. After these new requirements go into effect, many of the existing educational requirements from appraisal trade associations for their designated appraisers, as well as currently licensed and certified appraisers, will become inferior to the requirements for newly licensed and certified appraisers.

Designations can be very misleading, no matter from which organization they are awarded. As the qualification requirements change—particularly those that take place in 2008 that already are approved through the AQB, which increases qualifications by roughly two-thirds and most appraisal organizations change their designations to mirror these changes—simply considering a designation and not the individual qualifications gives the incorrect appearance that an appraiser qualified under the new requirements is equally qualified to appraisers under the old requirements.

Since appraisers being qualified under the new requirements will be more qualified than those under the old—both those with designations of sponsoring and non-sponsoring organizations of The Appraisal Foundation—any inference that a designation alone indicates the qualifications of an individual appraiser is wrong and grossly misleading both to the lending industry and the public at large.

Under the new requirements set by the AQB, which is part of The Appraisal Foundation, nearly all of the designation requirements by both sponsoring and non-sponsoring organizations will not meet the new standards as outlined by the AQB. Thus, who is served by giving reference only to designations? Certainly not the banking industry or the general public; only designated members would benefit, despite their being inferior to state certification requirements under the 2008 changes of the AQB. Worse yet, giving preference to those with a designation will give the appearance that they are more qualified, when under the new educational requirements for 2008, the reverse actually will be true. The majority likely will be inferior to those certified under the new licensing and certification requirements of each state.

Appraisal trade associations are currently in the process of changing designation requirements and creating additional grandfathering, just as they have in the past. The process of grandfathering actually allows appraisers to have inferior levels of education than those coming into the business or those upgrading their designation, license, or certification. In other words, choose any appraisal designation you want and the likelihood is that you can find three or more people with the same exact designation that means three or more different things; they each have different required levels of education for the exact same designation.

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Real Estate Blogs

Here is our suggested link information:

Our URL is: http://www.real-estate-blogs.com
Our Title is: Real Estate Blogs
Our Description is: A directory of real estate blogs and blog sites of industries affiliated with and serving the real estate industry.

An easy way to add the link is to just cut and paste the following code...

<a href="http://www.real-estate-blogs.com/">Real Estate Blogs Directory</a>  - Directory of real estate blogs and blogs of industries affiliated with and serving the real estate industry.<BR>
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Negotiating A Real Estate Deal

Negotiating A Real Estate Deal   by Steve Gillman


Do you really need to learn special techniques for negotiating a real estate deal? Absolutely not. You can get by with offers that you know work for you, and just keep making them until one is accepted. On the other hand, if you know a few simple real estate negotiation techniques, you can get that yes more often, and at a better price and terms. Here are three of the many techniques you can use.

Negotiating Real Estate - Time Investment

The more time a seller spend with you, the more he will fell he has to make a the deal work. This gives you leverage. For example, suppose a seller has a small apartment building for sale for $450,000. In his mind, he may be thinking he won't go below $435,000. In fact, if you walk into his office one day and drop an offer of $420,000 on his desk, he might just throw it straight into the garbage can.

On the other hand, what if he has spent several days showing you the property, and has spent hours talking to you about the property. It helps that he has time to get to know you and like you, but even if he doesn't like you, he will now feel like he need to get a deal put together after investing so much time. At this point, if you make your offer of $420,000, he might not be thrilled, but he might at east give you a counter-offer. In the end, you might settle on a price of $425,000 - a price he previously considered too low to consider.

This doesn't mean you should waste his time or abuse this technique. But if you seriously want the property, and need a lower price to make it work for you, take your time. Time investment is a negotiating technique that has been proven to work in everything from buying a washing machine to the most expensive real estate.

Negotiating Real Estate - Limited Authority

A tough negotiator often offends a seller. He can't necessarily understand why you can't accept his "reasonable" counter offer. He may think you are being difficult and unfair. How do you avoid this? Give the seller an acceptable reason for your offer or for your rejection of his counter-offer. The most convenient reason? You lack authority to accept his terms or to offer more. In the case of a house, you can say something like, "I can't do that - my wife said I could only go up to..." In the case of a rental or commercial real estate, you can say that you have to check with your partner, or that your partner already said you were limited to ...

Why does this work? It make perfect sense if you think about it. Put yourself in the seller's place. If you thought you are being perfectly reasonable, and the buyer was just saying no, you might feel some resentment. You might even want to look for other buyers.

On the other hand, if he tells you that he thinks you are being fair, but he just can't say yes without checking with his wife... Well, in that case, you might feel bad for him, and even want to make it easier for him to get his wife to agree.

Negotiating Real Estate - Step-By-Step Commitment

Get a seller to agree to everything else first, and you are more likely to get him to agree to a low price. To do this, start getting his verbal commitment to anything and everything along the way to a discussion of price. There are two reasons that this can work.

First, the process of saying yes many times just makes a seller more likely to say yes to whatever else you ask - including a lower price. You essentially are conditioning him. You are getting him in the habit of saying yes. He may not say yes to everything, but he will be more likely to move in your direction.

The second reason this works involves another technique for negotiating real estate deals. That is the technique of asking for many things in order to have something to "throw back into the pot" when it comes time to talk about the things you really want. With a step-by-step commitment to things like closing dates, what will stay with the property, and more, you have many things that the seller feels obligated to give you. You can use these then, as "bargaining chips."

When the time comes to get what you really want - let's say a low price or low interest rate on a note the seller will carry, you offer to "give up" these things you already won in the negotiating. For example, you might want low payments on an apartment building for the first two years, so you can fix things up before raising the rents.

If the seller hesitates, you can say something like, "How about we close when you want to, and you keep the maintenance truck for your other properties?"

A few good techniques make a big difference when negotiating real estate deals.


About the Author

Copyright Steve Gillman. This article was taken from the Free Real Estate Investing Course, available at: http://www.HousesUnderFiftyThousand.com


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Inflated Appraisals One Cause for Record Foreclosure Rates by ForeclosureFish.com

Current Rating: Not rated

Inflated Appraisals One Cause for Record Foreclosure Rates   by ForeclosureFish.com


Although we have been familiar with the problem of inflated appraisals for some time, the trend seems to be growing worse by the day. More and more clients who call us have been the victims of over-inflated appraisals. When the illegal appraisal is discovered, it is usually too late by then to hold anyone accountable, especially if the homeowner is now in foreclosure. Saving the home is the top priority - anything else comes after that.

Why do appraisers inflate appraisals? The main reason is money: the appraiser gives the loan officer whatever value is needed for a loan, so the loan officer will use the appraiser again and again, inflating the value of numerous properties. But when the homeowners attempt to refinance, if they use a different mortgage company, the legitimate appraiser will value the property at its actual (not inflated) value. This may cause a significant decrease in value, sometimes to the point where a client owes more on the mortgage than what the property is worth. Obviously, this can cause significant problems.

And the main problem with the inflated appraisal? There may be no accountability on any entities' part. The lender can blame the loan officer for submitting a bad appraisal, the loan officer can blame the appraiser, and the appraiser can blame the market, location, timing, etc. Appraisers generally do not make enough money to be worth a lawsuit, as well.

The problem has become so vast that even mainstream news outlets have begun to address the widespread situation. James Hagerty and Ruth Simon of The Wall Street Journal report that, "As the housing market cools, Americans are confronting a problem that was easy to ignore during the boom: Inflated appraisals of home values." When home prices were increasing at high rates (over 10% per year in some areas), the value would catch up to the inflated appraisal. But the slowing housing market has caused some home prices not only to fail to catch up to the appraisal, but fall far below the appraised value.

For victims of foreclosure, this means that two valuable options for saving the home are immediately eliminated: selling the home, or refinancing. As the article explains, "For sellers, that can mean being forced to drop their asking prices. Some people hoping to refinance, meanwhile, may be unable to lock in new loan terms because they have less equity in their homes than they thought." In fact, Jacquie Doty of Freddie Mac says that inflated appraisals may lead to more foreclosures.

Another contributing factor to the problem is that most home buyers just want the home, as long as the process is as smooth and easy as possible. Bankrate.com states that "Many homeowners don't think about how loans get done, just whether they're approved." Overlooking the appraisal and just focusing on owning a home is a huge mistake to make. To protect themselves from the consequences of inflated appraisals, the article states that "Borrowers should also get a rough idea of their property's worth before shopping for loans. They can contact local real estate agents or visit one of several registration-required Web sites, including Domania.com andHomegain.com, for such estimates." Also, always ask for a copy of the appraisal the lender is using when applying for a mortgage. The right to receive the appraisal is granted under federal law.

According to another article from The Wall Street Journal, "Some lenders are getting pickier about the appraisers they do business with -- a policy that is easier to enforce now that refinance activity has slowed." This means that as more appraisers who inflate appraisals end up on lender blacklists, properties will be appraised for their true values. When conducting a real estate transaction, the article suggests that "homeowners should request that the bank uses a "designated" appraiser and not simply one who meets state licensing standards."

However, the issue of inflated appraisals put the mortgage and real estate industry in a Catch-22. A cause of concern exists in the housing market if inflated appraisals are not used. Namely, if property values are estimated lower, then the housing market may continue to slow. The lending industry has caused its own financing problem by contributing to an already growing housing bubble and then assisting in the decrease in home values by no longer accepting inflated appraisals.

The potential effects of this could be devastating to homeowners in hardship situations. For example, consider if a lender first accepts an inflated appraisal and gives a purchaser a loan for more than the value of the home. If the borrower then experiences a hardship and falls into foreclosure, they may try to refinance the loan. But with a new, legitimate appraisal, the homeowners may end up owing too much to qualify for a refinance. Then the lender will either have to take a loss by accepting a lower payoff amount because the home is worth less than originally thought, or they will have to take a loss by selling the home at a sheriff sale.

Either of these choices puts the lender in a bad situation, which would not have occurred if the borrower had not fallen behind. They may be less willing to work with the homeowners, push them further into foreclosure to cut their losses as quickly as possible, and accelerate more and more fees to try to obtain a deficiency judgment against the borrowers.

If you are a homeowner who suspects an inflated appraisal, you may want to call an independent appraiser yourself and have the value of your home estimated. If that value and the amount of your loan are far off, you may have been a victim of mortgage fraud. In this case, refinancing may no longer be an option and you may not even be able to sell the home if you wanted to. You are effectively locked into your home.

About the Author

The ForeclosureFish.com website has been designed to provide foreclosure victims with the most relevant and useful mortgage help available. Visit the site today and learn how to stop foreclosure on your own, or download our free e-book which explains the basics of the foreclosure process: http://www.foreclosurefish.com/

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Hazardous Waste Monsters to Be Aware Of When Buying Commercial Real Estate

 

Title: 10 Hazardous Waste Monsters to Be Aware Of When Buying Commercial Real Estate

Author: Tony Seruga, Yolanda Seruga and Yolanda Bishop

Article:

Real estate is a lucrative niche for many people, and there is a lot to stand to benefit from acquiring land as far as re-selling, development, and other purposes. However, just as you would want to have a used car inspected before paying for it is important to know what you are getting into when it comes to purchasing property, and for that reason Environmental Site Assessment surveys are extremely important in the buying and property selection process.

Unfortunately, in this day and age hazardous waste is a real thing and a real profit-killer at that. For this reason, Phase I and Phase II surveys and reports are more important than ever, as they can help to identify ten of the major hazardous waste monsters out there that are destined to kill your real estate profit.

For your information, these ten hazardous waste monsters are:

* Buried Oil Tanks * Previous Gas Station Sites * Asbestos * Hazardous Waste from Adjacent Properties * Previous Industrial Site * PCB's (Typically from fluorescent light ballasts) * Lead

* Previous Military Sites * Contaminated water supply system * Dangerous Farming Chemicals/Pesticides

How to Tell If You Are At Risk

Unfortunately, most of the hazardous waste risks are rather difficult to identify, especially just by looking at the property. Even some basic inspections fail to identify these key problems, so it is extremely important to make sure that you obtain an Environmental Site Assessment just to make sure that you don't have any of these problems to look forward to.

Phase I and Phase II Environmental Assessment Reports can give you an idea of what there is on your property. This assessment is done by inspecting and taking samples of the flora on your site as well as some other environmental samples. The samples are then bottled and taken to a laboratory and the tested for the presence of hazardous waste. This may take anywhere from a few weeks to a few months and it can be a very costly procedure, but very worth it in the end as the value of such a property is drastically lowered.

In addition, the owner of the property or the owner of adjacent properties might also be able to give you an idea of what things to look for before the inspection is even performed, as they can often remember the purposes the site has been used for in previous years.

A Phase I report will give you some idea of what to expect and a Phase II report usually follows as a more extensive version of the Phase I report.

What If There Are Hazardous Materials Present?

If your Environmental Site Assessment determines that you have one of the ten hazardous waste monsters to deal with, that is not necessarily the be-all and end-all of your property investment. A Phase III report can be obtained to determine what steps need to be taken to rehabilitate the property, but this assessment is often financially draining and extremely time consuming as well. Whether or not you want to proceed with the purchase of the property is up to you, but the presence of hazardous waste sucks a lot of the value out of a property and that must be reflected in your purchase price, as this type of project can be very costly to rehabilitate.

If it has been determined that there are hazardous waste materials present on a site that you have purchased, or are thinking about purchasing, it is important to note that the value of the property is drained immediately. It is no longer as valuable a piece of land because even after it has been cleaned and rehabilitated, there are certain things that it cannot be used for. Usually land must be zoned for certain purposes and it can only be zoned for certain types of buildings or uses. After the presence of hazardous waste materials has been determined, it may or may not be in your best interest to proceed with the sale depending on what you had planned to use the land for in the first place.

Hazardous waste materials can definitely be a killer when it comes to dreaming of a certain use for your site, but know their presence is not always a deal killer. There are things that can be done to make land usable after the presence of hazardous waste has been determined. If the numbers make sense on the allowable use for the land, it is just a matter of negotiating a purchase price that works and rehabilitating the property for development.

 

About the author:

Tony Seruga, Yolanda Seruga and Yolanda Bishop of Maverick Real Estate Investments, Inc. work with builders, developers and other players in the commercial real estate industry to acquire and develop properties. They use progressive investment strategies that have proved extremely profitable. In addition to their own deals, they teach both seasoned and inexperienced investors how to be big players in the game. Visit the website for more info.

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Grants for Investing in Real Estate

Title:

Title: Grants for Investing in Real Estate

Author: Lisa Merritt

Article:

By now, we have all seen the commercials shouting that you are a fool for not taking advantage of the government grants available for everything from starting your own business to investing in real estate. Does it sound too good to be true?

That depends. Certainly, some people have received a grant for investing in real estate. A very few have received a large grant for investing in real estate. And even though these grants exist, the requirements can be quite stringent, the competition very tough, and the amounts small.

However, there are some circumstances where it is possible to start or improve a real estate investing career by seeking and obtaining grants. Most often, local municipalities fund affordable housing initiatives. These may range from offering individuals grants to assist in a first-time-homeowner down payment, to grants to non-profit developers to build multi-unit affordable housing developments.

For example, currently in Miami, Florida, housing assistance grants are available

(http://www.miamidade.gov/housing/library/hag_eng_span.pdf) for low-income individuals who meet needs criteria. This type of grant can be found by contacting the housing department of the municipality where you are looking to invest.

Other programs exist on a municipal or regional basis for the elderly, persons with disabilities, and persons with AIDS. If you fall into one of these categories and wish to purchase real estate, again the best place to start looking is your municipal housing authority or agency.

Another class of programs encourages "Sweat Equity," or seeks to provide housing opportunities for people who are willing and able to provide some of the labor of building the home. One of the best known organizations in this category is Habitat for Humanity, although similar organizations exist on local levels.

Individuals may also qualify for downpayment assistance. This information from the website http://www.whitehouse.gov/government/fbci/grants-catalog-housing.

html#020 illustrates a typical example of this type of grant:

AHP Homeownership Set-Aside Program of the FHLBank System Federal Housing Finance Board An FHLBank may set aside up to the greater of $4.5 million or 35 percent of its AHP funds each year for a homebuyer program for low- and moderate-income households. Member lenders provide the set-aside funds as grants to eligible customers generally on a first-come, first-served basis. Set-aside funds may be used for down-payments, closing costs, rehabilitation, or homeownership counseling costs. Each FHLBank may set its own maximum grant amount, which may not exceed $15,000 per household. To qualify for a grant, households must meet several criteria. Please contact your nearest FHLBank Community Investment Officer to learn more. Contact: To find your nearest Community Investment Officer, visit http://www.fhfb.gov/FHLB/FHLBP_officers.htm.

It is also possible to obtain grants to make property improvements to a property that you own. These are most available in Community Redevelopment Areas and can be found through the municipality you are interested in. These types of grants are often available for commercial and residential properties, and may cover anything from disaster preparedness to exterior paint and landscaping to safety items. Rural areas may benefit from irrigation grants and other incentives from the US Department of Agriculture.

For non-profit organizations that seek to obtain grants to build affordable housing initiatives, the Federal government offers several types of grants for real estate investing. Housing and Urban Development (HUD) offers community development block grants that usually funnel through a competitive awards process to a municipality that in turn awards contracts to businesses to build houses for the low-income and underserved members of the community.

Contrary to popular belief, the Small Business Administration does not offer grants to start new small businesses, so if you have to invest your own funds to start a non-profit organization, you have to decide whether developing affordable housing will be a career that you will follow regardless of whether you obtain grants and contracts.

Other grants for real estate investing can be found for rural and farming assistance projects, tribal projects, and other miscellaneous specific projects.

If you do fall into one of the covered categories, a grant for investing in real estate may help start you on the road to owning property. You will still have to do the work of researching properties for purchase, making improvements on the property, reselling for a profit to convert extra cash into additional investments, and working up into bigger and more profitable deals. Seeking and obtaining a grant for real estate investing may help a hard working, motivated investor gain the leg up necessary to profit in real estate.

Multiple books exist that state they can supply information on available grants and how to obtain them. Internet searches also are quite useful in finding different types of funding opportunities. Municipal housing agencies are also a wealth of information for finding out about grant opportunities. For more information, try www.grants.gov or your local housing agency.

About the author:

Lisa Merritt is the owner of Pegasus Consulting Group, Inc., and founder of www.lockboxdeals.com, a real estate listing service. Realtors can post their best deals for free. Sign up for our weekly Top Ten Deals and let the deals come to you. She is also the author of Simply: Grant Writing, available at http://www.pegasuswriter.com/01_buy.html

Author: Lisa Merritt

Article:

By now, we have all seen the commercials shouting that you are a fool for not taking advantage of the government grants available for everything from starting your own business to investing in real estate. Does it sound too good to be true?

That depends. Certainly, some people have received a grant for investing in real estate. A very few have received a large grant for investing in real estate. And even though these grants exist, the requirements can be quite stringent, the competition very tough, and the amounts small.

However, there are some circumstances where it is possible to start or improve a real estate investing career by seeking and obtaining grants. Most often, local municipalities fund affordable housing initiatives. These may range from offering individuals grants to assist in a first-time-homeowner down payment, to grants to non-profit developers to build multi-unit affordable housing developments.

For example, currently in Miami, Florida, housing assistance grants are available

(http://www.miamidade.gov/housing/library/hag_eng_span.pdf) for low-income individuals who meet needs criteria. This type of grant can be found by contacting the housing department of the municipality where you are looking to invest.

Other programs exist on a municipal or regional basis for the elderly, persons with disabilities, and persons with AIDS. If you fall into one of these categories and wish to purchase real estate, again the best place to start looking is your municipal housing authority or agency.

Another class of programs encourages "Sweat Equity," or seeks to provide housing opportunities for people who are willing and able to provide some of the labor of building the home. One of the best known organizations in this category is Habitat for Humanity, although similar organizations exist on local levels.

Individuals may also qualify for downpayment assistance. This information from the website http://www.whitehouse.gov/government/fbci/grants-catalog-housing.

html#020 illustrates a typical example of this type of grant:

AHP Homeownership Set-Aside Program of the FHLBank System Federal Housing Finance Board An FHLBank may set aside up to the greater of $4.5 million or 35 percent of its AHP funds each year for a homebuyer program for low- and moderate-income households. Member lenders provide the set-aside funds as grants to eligible customers generally on a first-come, first-served basis. Set-aside funds may be used for down-payments, closing costs, rehabilitation, or homeownership counseling costs. Each FHLBank may set its own maximum grant amount, which may not exceed $15,000 per household. To qualify for a grant, households must meet several criteria. Please contact your nearest FHLBank Community Investment Officer to learn more. Contact: To find your nearest Community Investment Officer, visit http://www.fhfb.gov/FHLB/FHLBP_officers.htm.

It is also possible to obtain grants to make property improvements to a property that you own. These are most available in Community Redevelopment Areas and can be found through the municipality you are interested in. These types of grants are often available for commercial and residential properties, and may cover anything from disaster preparedness to exterior paint and landscaping to safety items. Rural areas may benefit from irrigation grants and other incentives from the US Department of Agriculture.

For non-profit organizations that seek to obtain grants to build affordable housing initiatives, the Federal government offers several types of grants for real estate investing. Housing and Urban Development (HUD) offers community development block grants that usually funnel through a competitive awards process to a municipality that in turn awards contracts to businesses to build houses for the low-income and underserved members of the community.

Contrary to popular belief, the Small Business Administration does not offer grants to start new small businesses, so if you have to invest your own funds to start a non-profit organization, you have to decide whether developing affordable housing will be a career that you will follow regardless of whether you obtain grants and contracts.

Other grants for real estate investing can be found for rural and farming assistance projects, tribal projects, and other miscellaneous specific projects.

If you do fall into one of the covered categories, a grant for investing in real estate may help start you on the road to owning property. You will still have to do the work of researching properties for purchase, making improvements on the property, reselling for a profit to convert extra cash into additional investments, and working up into bigger and more profitable deals. Seeking and obtaining a grant for real estate investing may help a hard working, motivated investor gain the leg up necessary to profit in real estate.

Multiple books exist that state they can supply information on available grants and how to obtain them. Internet searches also are quite useful in finding different types of funding opportunities. Municipal housing agencies are also a wealth of information for finding out about grant opportunities. For more information, try www.grants.gov or your local housing agency.

About the author:

Lisa Merritt is the owner of Pegasus Consulting Group, Inc., and founder of www.lockboxdeals.com, a real estate listing service. Realtors can post their best deals for free. Sign up for our weekly Top Ten Deals and let the deals come to you. She is also the author of Simply: Grant Writing, available at http://www.pegasuswriter.com/01_buy.html

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Finding Good and Accurate Comparables

 

Title: Comparables or Comps: Finding Good and Accurate Comparables

(Comps) is a Critical Step When Evaluating Commercial Real Estate Pr

Author: Tony Seruga, Yolanda Seruga and Yolanda Bishop

Article:

When you are dealing with commercial real estate and trying to evaluate a piece of commercial property, one of the most important aspects of proper evaluation is making sure that you find good comps. In order for you to prove the market value of the property in question, comps are a definite requirement. If you do not use comps, then you cannot prove if there is a market for that type of property in the area, what the possible absorption rate could be, or even if the value is accurate. Without the use of good comps, the deal will not be justifiable, so in essence, the lack of comps is actually a real deal killer in the end.

If you are unsure of what a comparable or comp is, basically it is referring to the information that you can find on a similar piece of commercial property. They should be very close in their size, price, and type as well. Both sellers and buyers use comps, with the seller determining the value of his property by looking at comps, and the buyer using comps to see what the property is worth before buying it. You can find comps on properties that have been recently sold, or you can also find comps on properties that are currently listed as well.

Criteria for Great Comps When you are looking for comps for your property you want to be sure that they are good ones. Comps will do you no good if the information is not accurate and the properties are not actually comparable. The following are a few things to consider when you are looking for the best possible comps.

1. Up to Date Comps - It is imperative that you use comps that are up to date. When looking at comps, you want to know what the property is going to be worth right now. If you happen to get comps that are too old, they will not be able to give you a good picture of the market today. If you happen to look at comps that are already sold, make sure that they have been sold no earlier than in the past six months.

2. Similar Type and Size - When you are looking for great comps, be sure that you pick comps that are similar in both type and size to the property you are considering.

3. Price Range - Great comps should also be in the same price range of the property you are looking at as well.

4. Location - Location is also important when getting good comps. The location of the comp should be similar to the property you are interested in purchasing. If the property you want is beachfront, then the comp should also be beachfront property.

5. Property Condition - When looking for good comps, the property condition should be taken into consideration too. If the property has been newly constructed and the property you want to buy needs a great deal of work, the value will be off. Also, if the property you are considering is in great shape, but the comp is in need of repair, then this will affect the accuracy of the comp too.

6. Similar Amenities - In order to get the best comps, you will also need to take a close look at the amenities. Make sure that the amenities of the comp are as close as possible to those of the property you want to purchase.

7. In Your Area - You will also want to try and find comps that are in your area. The reason you want comps in the same area is because you need to know the value in that specific area. It is usually best to keep them within a few miles of the property you are looking at; however, closer is better if possible.

Where to Find Comps If you are looking for comps, there are a variety of places that you can get them. First of all, the broker that you are working with should be able to help you find some good comps. Also, you can take a look at the MLS system if you have access to it to find some good comps. There are also some great websites on the internet that now help to provide people with the comps that they need. A few places to check out include CoStar.com and Loopnet.com. If you still need some help finding comps, then consider asking some of the other commercial brokers in your area as well.

3 Types of Comps There are three specific types of comps that you will possibly need to gather; however, this is going to be dependent upon the specific type of property that you are trying to investigate.

1. As Is Comps - The first type of comps you may need to use is "as is" comps. These types of comps are properties that are close to what you are looking at. They should be in the same type of zoning as well as in the same state of disrepair as the property you are investigating. It is important that you do not use comps that have been recently rezoned or repaired.

2. ADV Comps - ADV comps or After Development comps are comps that have already been improved. These comps are ready for buildings to be constructed and may include sidewalks, sewers, streets, and utilities. You may also hear these type of comps referred to as "pad ready" comps.

3. ARV Comps - ARV actually stands for "after repair value" and it is used on buildings that need to be repaired. This will give you an idea of what the value will be after the property is repaired.

When you are considering investing in commercial real estate, finding accurate comps is one of the most critical steps you need to take. Without great comps you cannot accurately tell the property value, and you may not be able to go through with the deal. So, if you want to make sure that you get commercial property for a good price, make sure that you find good and accurate comps.

 

About the author:

Tony Seruga, Yolanda Seruga and Yolanda Bishop of Maverick Real Estate Investments, Inc. work with builders, developers and other players in the commercial real estate industry to acquire and develop properties. They use progressive investment strategies that have proved extremely profitable. In addition to their own deals, they teach both seasoned and inexperienced investors how to be big players in the game. Visit the website for more info.

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Mortgage Meltdown - How Could This Happen

Title: Mortgage Meltdown - How Could This Happen

Author: David Zwierecki

Article:
The mortgage meltdown as many are calling it basically boils
down to, in a nutshell, lenders making money too easily
available to too many consumers. Lending guidelines and lending
criteria became way too loose and relaxed for the better part of
the past decade, housing values continued to rise extremely
quickly because of the easy money and the low interest rates,
and too many consumers bought way more home than they could
truly comfortably afford because lenders would approve them for
too much. Combine all of the above factors up together at the
same time and doom was bound and determined to find its way into
the real estate economy. This is how we ended up in this
mortgage meltdown.

Even though homeownership has reached all time high levels, the
number of foreclosures have reached all time high level as well.
Homes are being foreclosed upon at record pace. Realty Trac Inc.
states that there have been 179,599 foreclosure filings last
month. This number is 93% higher than July of last year and 9%
higher than June of this year. So why are so many people
defaulting on their home loans right now? Many areas around the
nation are experiencing stagnant housing values and depreciating
housing values at this time. With extremely tighter lending
guidelines right now this is making it harder for everyone to be
able to buy a home and this is adding to the problems of sellers
having a difficult time of selling their homes. There are
already not enough buyers for as many houses as there are for
sale and with less borrowers being approved for mortgages this
has created a serious buyers market. In a buyers market many
sellers end up dropping home prices lower or putting extra money
into their homes that they may not have otherwise done. In the
year 2007, there are over 2 trillion dollars worth of ARM loans
that are set to expire and experience rate increases. This is
creating a lot of problems for the consumers who are not able to
refinance because their credit has gotten worse since they took
out their ARM loan, their homes value has decreased, and/or
because of tightened mortgage lending guidelines. Again add all
these factors together, along with the fact that they probably
bought too much home for their finances, and it spells doom to a
homeowner and to an economy as a whole.

Because of this mortgage mess, or mortgage meltdown, the
stock-market has been very inconsistent, the economy has been
going through some rough times and the housing market has really
taken a bad turn for the worse. When the number of foreclosures
increase, it can cost the taxpayers extra money, cause
depreciation of surrounding homes, devalue communities as a
whole, cause banks to tighten lending guidelines so that money
is not as easily available and cause possible financial disaster
to investors. Therefore, the mortgage meltdown has a significant
affect on society as a whole, not just the lenders who are
losing money directly but to consumers, cities, states, and the
country's economy as a whole as well. Keep in mind this is most
likely going to get considerably worse before it gets better.

About the author:
The author of this article, Dave Zwierecki, is the President of
First Security Financial Service and has over 10 years of
experience in the credit, mortgage lending, and home improvement
fields. He is the owner of http://www.GoFirstSecurity.com and
http://www.TheMortgageU.com, which are both sites devoted to the
education of consumers regarding real estate, mortgage, credit,
and home improvement related material.
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What Is Lease Option And What Are The Benefits for Seller And

Title: What Is Lease Option And What Are The Benefits for Seller And
HomeBuyer?

Author: John Wen

Article:
In any market, you can use lease option to reach a much broad
buyer base, such as buyers usually could not buy their homes
because of bad or poor credit score. You can also reach
investors who use lease option as an investment tool. Most real
investors use lease option to buy or sell properties in order to
get more profits. Lease option is a very good tool to sell home
with for sale by owner. It is my favorite tool to sell my
properties.

What exactly is lease option?

In a simple term, a lease option (also called lease purchase or
rent to own) is a real estate contract between a homebuyer and a
seller (in this case, you) that gives the homebuyer tenancy in
your property and the legal right to buy your property at
pre-agreed price on or before a specific future date.

When you enter an agreement with a homebuyer, the homebuyer pays
you a down payment (option money) to lock the sale price,
monthly rent payments, and pay you the full amount of the
pre-agreed purchase price at the end of the lease.

This can be accomplished by writing a right contract. A right
contract usually includes two separated agreements, one is lease
agreement and one sales and purchase agreement. If the homebuyer
exercises the right to buy your home, then the down payment will
be credited towards the purchase price.

Under the term of lease option, the homebuyer is the optionee.
The optionee is not obligated to buy your home. But, if the
optionee chooses to not to exercise the right to buy, the
optionee (homebuyer) has to give up his down payment (option
money). If the homebuyer cannot buy your home at the end the
lease for what ever reason, the homebuyer forfeits the right to
the down payment.

If optionee chooses to exercise the right to buy your home,
then you the home seller, as the optionor, is required to sell.

What are the benefits for you as an optionor?

1. The agreed-upon price of the property may be at the top of
current market value range; 2. Tenant as a future buyer, has
pride of ownership and therefore has an incentive to take good
care of your property, which is less painful than managing a
rental property. 3. The option money can be forfeited if the
rent is not paid on time or the property is not purchased at the
end of the lease. 4. Seller receives equity build up on the
mortgage during the option period. 5. Option money is tax
deferred 6. The ability to quickly regain passion and control
your property in the event of optionee?ˉs default on the
meeting the terms of the option agreement. The process is an
eviction rather than foreclosure.

What are the benefits for the optionee (homebuyer)?

1. Buyer can receive control and possession of your property
with a relatively poor credit score. 2. Very little initial
closing close. 3. Buyer can build up credit score through the
help of seller while renting. 4. Buyer can walk away from the
contract if the value of the property on the specific future
date doesn?ˉt justify its sale price. 5. Buyer can even
generate profits if subleasing is allowed in the contract.

What is the risk for you as the seller?

The biggest risk is that buyer?ˉs default on the rent
payments and walking away from the contract. Your remedy is to
regain to possession of the property by an eviction. But you can
prevent it from happen by 1) check the income and credit scores
before entering into the agreement with the homebuyer; 2) Ask
higher down payment. The higher down payment you get, the better
you are protected. 3) Use good real estate attorney to set up
the right contract.

When doing lease option, always use a good real estate attorney
to help you set up your contract and close the deal in
attorney?ˉs office.

If there is anything you don?ˉt understand about the lease
option, always ask your real estate attorney for help.

My next blog will be on how to sell your home by lease option.
Examples will be given for you to understand it easily



Links For Related
Artilces:http://besthomesellingtips.com/2007/07/29/how-to-protect
-you-from-buyer-default-when-selling-your-home-with-owner-financi
ng/

http://besthomesellingtips.com/2007/07/29/top-10-mistakes-made-wh
en-selling-your-home-with-owner-financing/

http://besthomesellingtips.com/2007/07/28/how-to-do-owner-financi
ng-and-the-eleven-rules-you-must-not-break-to-protect-you-from-bu
yer-default/

http://besthomesellingtips.com/2007/07/16/how-to-sucessfully-sell
-your-home-by-owner-financing-part-1/

About the author:
Author is a licensed real estate agent and active real estate
investor. He received extensive training in real estate
investment, business financing, marketing, and business
management by nationwide famous real estate investors. John
publishes his blog on http://besthomesellingtips.com regularly.
He gives home selling tips to home sellers in order to help them
sell their home fast. One of John's articles was nominated as
the top 7 in a contest.

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Oakland Real Estate: Short Sale VS. Foreclosure, What You Should

Title: Oakland Real Estate: Short Sale VS. Foreclosure, What You Should
Know

Author: Hamid Grinage

Article:
Basically a short sale is when a property is sold for a price
which is less than the remaining balance owed on the property.

For instance: A buyer purchased a property in 2005 using and
adjustable rate or interest only mortgage that was due to reset
in two years. So today, the interest rate adjusts, causing the
monthly payment to rise by 25-50%. This is one scenario, another
one could be that the buyer simply lost a job or had some other
financial hardship which is causing them to have trouble paying
the mortgage. In this situation, once three mortgage payments
are missed the buyer is heading toward foreclosure.

Sometimes a buyer can renegotiate the terms of the loan and have
the lender add the past due amount to the "back end" of the loan
and have you pay it off. This is done on a case by case basis.

One alternative is for the buyer to refinance into a better
loan. Unfortunately this is rarely possible, because now the
buyer has missed payments and has worse credit than when they
started, not to mention there is likely no equity in the home.

Another alternative is for the buyer to file bankruptcy, which
we all know is a serious endeavor which should be avoided if at
all possible. It will leave the buyer with no credit for many
years.

A third option is to simply let the house go into foreclosure
and walk away. This option will leave your credit ruined for 7-8
years and make it highly unlikely that you will be able to to
purchase another home within that time frame.

So in reality, the best option for someone in this situation is
to hire a Realtor and try to proceed with a short sale. This
way, you get the property sold before it forecloses and
basically ask the lender to forgive any left over debt after the
home is sold.

It's called a short sale because the lender will end up "short"
on recovering the money they lended on the property. This
however is good for YOU because you can get out of the property
and not be responsible for the remaining debt. On the other
hand, you may be subject to being taxed on the amount that you
are forgiven. So if you owe $600k on your property, but that is
all you can get for the property on the market, then after real
estate commission and other fees you will end up with around
$550k or so. This means the lender must agree to forgive the
$50k balance, which would mean that the IRS will treat that $50k
as taxable income. I would say that being taxed on 50k which is
being forgiven, is better than having a foreclosure or
bankruptcy on your credit any day.

In a short sale, the property needs to be priced attractively to
make it move quickly. This doesnt hurt the seller, because
remember they are facing losing the property anyway, and the
money is going to the lender, not the buyer. For this reason,
it's the lender who accepts or rejects the offers that come in,
and they also must approve the commission being paid to both
real estate agents involved. This is one reason why many
Realtors refuse to work short sales, they can end up working for
months and never get paid if the lender doesn't approve the
commission (or the sale itself).

Short sales are complex and uncertain, but the bottom line is
that they can be the best option for someone facing losing their
<a href="http://www.oaklandhomespecialist.com">Oakland Real
Estate</a>. If you would like more information on short sales,
contact me at your convenience.
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Real Estate Investing: The Three Levels of Success

Title: Real Estate Investing: The Three Levels of Success

Author: Heather Seitz

Article:
If you are a pro in real estate investing, then you have
undoubtedly faced frustration, hit some highs and then crashed
into some lows! Ultimately, your goal as a real estate investor
is most likely to generate immediate cash flow and long term
wealth and increased net worth. True financial success is
achieved by combining these two elements - cash flow and wealth
creation, or net worth. Cash flow is considered as the monetary
profit that is earned every month to support your lifestyle.
This can also be used to invest in assets that may later
appreciate in value.

<b>Three levels of real estate investors are as follows:</b>

<b>Level one Real Estate Investors</b> - In this level, the
investors learn the basic tricks of the real estate investment
business, and they use it to make real estate investment a
profitable venture. They learn this by making their initial
deals profitable. Thus, Level One investors ensure that real
estate is the path to economic success. They are aware that
there is much to learn from this vast field, and they try to
understand it. Real estate investors at this stage should spend
time learning the business, evaluating the details of the deals,
and make sound decisions. Often times, this will involve some
level of training or coaching to ensure success. There are two
main reasons why investors fail at this level: (1) Fear and (2)
Lack of Knowledge. Because of this, education is critical at
this level.

<b>Level Two Real Estate Investors</b> - In this level, the real
estate investors master the five core real estate business
skills and also maintain a real estate portfolio. Second level
Investors are those investors who generate a monthly cashflow
ranging anywhere from $5000 to $60,000 per month (depending on
location, market conditions, etc.), and also add an average of
$250,000 to their net worth per year. Some investors have a
wrong notion that after reaching the second level they have
achieved it all. They do not realize that there is so much to
achieve down the investment line, and that the benefits are
worth their exertion. The biggest pitfall that investors at this
level tend to fall into is that they get "comfortable". As soon
as you are comfortable, you stop stretching and learning. Level
II investors that excel are those that are constantly adding new
weapons to their arsenal. These investors practice negotiating
tactics, refine their marketing strategies and learn advanced
strategies like note buying, triple net lease investing, etc.

<b>Level Three Real Estate Investors</b> - Level III real estate
investors build a small fortune in such a way that they earn the
majority of their income through passive methods. At this level
of real estate, investors are generally not working in the day
to day grind of real estate. Their not out meeting with sellers
night after night, sitting at open houses on Sundays, etc. They
have effectively learned to make their money work for them and
are using their assets to acquire other assets. For example,
instead of rehabbing houses at this stage, level III investors
may lend hard money to Level I and Level II investors! Often
times, level three real estate investors will branch out into
other businesses and create additional streams of income. Often
times, their income may be similar to a level II investor, they
just simply don't put in the same time, money and effort. They
have mastered advanced techniques are also utilizing leverage.

In order to become a Level III investor (which is what most real
estate investors envision when they get started in the
business), there are a few basic steps that will help you move
through the stages.

But first off... you must realistically evaluate where you are
in your business right now. Once you have determined that, you
can follow these steps to advance your business.

Level I to Level II: Level One real estate investing is about
learning the basics of real estate investing. There are three
hurdles you may need to cross to get to Level II.

<b>1. Take action:</b> Stop "thinking" about real estate and
start "doing" real estate. Pick up the phone and call sellers.
Drive different neighborhoods and learn the communities. Attend
networking events and trainings with other investors.

<b>2. Find a mentor:</b> It is critical that you find a real
estate mentor, tutor, advisor, etc. that can help you succeed in
the early stages. This person will not only teach you the
mechanics, but will also help answer your questions and move you
past the fear.

<b>3. Invest in your education:</b> You'll find that the most
successful real estate investors never stop investing in their
real estate business and their education. Initially, it may be a
tough nut to swallow, but long term, it's essential to your
business. There is but one small caveat. You need to invest in
CURRENT education. You see, what worked just a few years ago, is
not working the same way today. You need the most up to date
information as it comes down the pike!

Level II to Level III - Once you've gotten the basics down and
you've done a few deals, you're ready to advance to level II. At
this stage, you will begin to master the core skills that are
critical to long term success in your real estate investing
business. These include:

* Find motivated sellers consistently, keeping your pipeline
full with deals

* Master the art of negotiation

* Evaluate deals quickly and take fast action

* Diversify. It's time to start adding lease options, rentals,
wholesale flips and retail flips to your profit pipeline.

Level III - It's time to take all of your knowledge, experience,
and proven systems, and leverage yourself. It's at this stage
that you're ready to venture out into additional streams of
income and let your business work for you! This is the level at
which most people begin to teach other investors, to create
systems, and to make money with their information!

About the author:
Heather Seitz works with investors, trainers and promoters all
over the country and is the cofounder of the Real Estate
Training Academy and the Real Estate Rant, the industry's
premier resource for real estate investors. She'll teach you how
to take your business - wherever you're at - to the next level
in the next 90 days. http://www.realestaterant.net

To get to the next level in your business, get your FREE offline
- delivered in the mail

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Sell Your Home Successfully This Year - And On Your Own

Title: Sell Your Home Successfully This Year - And On Your Own

Author: Mike Valles

Article:
You've heard that others have done it, you may even know some
that sold their own home and were able to keep more cash in
their pockets. Now, however, you are trying to decide whether
you want to do it yourself or not. You already know that the
first step may be the biggest - but the decision needs to be
made sometime. Why not go for it? Here are some things you need
to know about selling your own home.

The Tips Are Out There

The secrets of selling your own home is not like discovering
some vein of gold that the new owner wants to keep all for
themselves. Much information is now available to help you every
step of the way. One thing that you do not want to do, however,
is just to get a little bit of information, when, more is better.

Fix Up Your Home First

The truth is that people are drawn to attractive looking and
well-kept homes. Many could be turned away simply by the
appearance of your yard. To get as many potential buyers as
possible to come and look at your house, you want to make it
look good, so as to be inviting - and like a home that they
would want to live in. This is called "staging" today, and
simply means that you will take specific steps to make it as
attractive as possible, with cleaning, plaster, paint, lights,
removing unneeded items, fixing up the yard, and more. It has
almost become a science.

Advertising Is Key

Once your house is ready for people to come, you need to let
them know. There are many different ways to advertise the fact,
but a lot of it comes down to the very words of how you say it.
Some words draw people - some will not. Take some time to find
other ads that make you want to take a look because the ad just
draws you to want to see it. Copy their approach and ideas.

Then, how you distribute those ads, and where, determines the
circulation you get. Using Web sites is very important these
days. Pictures on that Web site are also necessary, too. These
will also need to be done carefully so that they convey the idea
of an inviting place to live - and a homey one, too.

Be Prepared For Negotiating

Before you advertise, of course, you should know what you could
expect to get from your house on the market around where you
live. This price may actually be different than what you expect,
so you need to be prepared.

Once those ads are placed, though, the people and the offers
will most likely come with it. Some will be low - they will just
start anywhere - don't be surprised. Don't rule them out though,
you might be surprised what happens when you make a counter
offer. They might say "Yes." Someone else may take your
suggested price and go with it - you never know.

Either way, though, you need to be prepared to negotiate and to
know how to do it with some tact, and wisdom. Remember, if you
can make the customer happy at the negotiating table - you
probably will be, too.

Study The Agreement

It is possible that some terms that are in the contract could
definitely work against you, the seller. To some people, when
they see a house that is for sale by owner it means that they
think they can take advantage of you. For good contract
negotiation, and to fully understand what is in there, you need
to get a lawyer who will watch out for your interests.

Selling your home yourself does not have to be a difficult thing
at all, just one that you take step by step.

About the author:
Article copyrighted 2007 by Mike Valles - A freelance writer who
has written many articles on real estate and financial subjects.
For more informations see his Web site at
http://www.world-of-money-and-markets.com/real_estate.

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Being a Buyer and Maximizing Your Temecula CA Real Estate

Title: Being a Buyer and Maximizing Your Temecula CA Real Estate
Success.

Author: Stefan West

Article:
Is now a great time to be a buyer in real estate? Yes,
absolutely. No one knows the future and often people dread
making a decision in a down market. However, the fed has
recently proven that it is very interested in keeping our
economy going strong and has once again shown a willingness to
cut rates. It looks possible that will we see continued cuts,
thereby creating more options for financial relief for homes and
of course more incentives for people to buy.

Many people have forgotten that interest rates during the last
real estate boom in the 80s were literally 14-18%. Just about
everyone had <a href="http://www.stefanwest.com">ARM loans</a>
and were getting 2-4% increases annually. Whereas right now,
prices have dropped significantly, you can negotiate like a
demon, there is a ton of supply for the best selection
possibilities, and interest rates are near 40 year lows.

Back when I started in this business my mind struggled to
comprehend how people could rent property and not only cover
their payment but show a positive cash flow. The obvious
assumption was that they put a lot down on the house and had a
small loan or they bought home a long time ago and paid it off.
But the real heart of their success was about when they
purchased and the interest rate they had.

One thing we know about real estate is that is the best long
term investment in America. There are more millionaires made
through real estate than just about any other investment. Plus,
people forgot that real estate puts a roof over your head, has
incredible tax advantages, and it also appreciates! But most
important is that real estate is an investment in a home, a
family, a quality lifestyle, and a community you and your family
can be part of. There are so many important, non-financial
benefits, that will always keep real estate at the forefront of
our culture.

The people that will have the future long term success in real
estate will be ones that get involved when they can get the best
leverage on their purchase decision and investment dollars. <a
href="http://www.stefanwest.com">Temecula, Murrieta, Wildomar,
Menifee and San Diego real estate</a> offers a great opportunity
right now. These are all growing communities, with most of the
growth coming from people leaving LA, Orange County, and San
Diego to get more value for their money and a better community
for their families. The properties are in fierce competition
with each other and the value you can get for your dollar is
huge in terms of high living standards.

In fact, this period in time may very well be the one you look
back on a decade from now and think those were the days when
today's millionaires were made. While the future is the mostly
unknown, the reality is that we are currently in a very enviable
buyer's market that offers a win on every front. Even though
people may worry about a further drop in home prices, the future
of real estate is and has always been financially solid.

If you are planning to purchase a home in today's Temecula,
Murrieta, Wildomar, Menifee or North San Diego County real
estate market, please make sure to use a local and experience
professional broker that can help you maximizing your real
estate success. No one can really predict the market, but the
people that know the market at an expert level can certainly
educate you and help guide you to the best options across the
board.

About the author:
Stefan West is a expert in <a
href="http://www.stefanwest.com">San Diego, Menifee, Temecula,
Wildomar, and Murrietao real estate</a>. To learn more about
Temecula CA Real Estate or read more of his articles, just visit
http://www.stefanwest.com.

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What Should Home Inspectors Check?

Title: What Should Home Inspectors Check?

Author: Raynor James

Article:
We are currently in the middle of a big buyer's market. If you
decide to make an offer on a home, you are going to need to have
a home inspector give it the once over before closing on the
deal.

When buying a home, you want to know what you are getting into.
A home inspector is the person that can give you an indepth,
objective opinion. This is why everyone and their brother will
tell you to pay for a home inspection before closing. In fact,
you want to make the real estate deal contingent upon it being
done. If problems arise during the inspection, you can then
negotiate their resolution with the seller. This resolution can
come in the form of the seller fixing the problem or providing a
cash allowance in the closing so that you can handle it.

The necessity and appropriateness of a home inspection is really
something that nobody doubts. That being said, nobody really
talks about the specifics. What exactly is it the home inspector
should take a look at? Glad you asked.

The electrical system should be one of the priorities.
Electricity is what I call a fast quip problem. It tends to
become a problem immediately, need immediate attention and, if
you are unlucky, burn your new home to the ground. This is one
area where everything must be in good shape and well maintained.
Otherwise, you could be buying the world's biggest barbeque.

The next area that should be prioritized is the heating and
cooling system. Different systems are used throughout the
various parts of the country, but you really want to make sure
they all work. Why? The cost of buying replacement heaters and
air conditioners is not cheap. Throw installation in, and we are
talking about a very pricey subject.

A detailed check of the structural competency should also be a
priority. This should include a bottoms up examination. The
foundation should be checked for cracks, deterioration, settling
and so on. The inspection should then move up the walls and to
the roof with decay, mold, termites and so on being looked for.

One area that can occasionally slip through the inspection
process involves improvements. The home you are looking at my
have large home improvements such as new floors or rooms. Make
absolutely sure these improvements are up to code and have been
approved in writing by the local agency in charge of such
things.

A home inspection should always be done when buying a home.
There are many things that should be looked at and closely so.
You can learn them or just hire a certified home inspector to
handle the matter.

About the author:
Raynor James is with FSBOAmerica.org - list your <a
href="http://www.fsboamerica.org">FSBO</a> property for 1 month
free at FSBOAmerica.org.
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Selling Your Home - Consequences of Failing to Disclose

Title: Selling Your Home - Consequences of Failing to Disclose

Author: Raynor James

Article:
Once you make the decision to sell your home, you have to take a
close look at its positives and negatives. Many of the negatives
you identify must be disclosed to potential buyers if they are
significant.

Temptation. In the early part of this decade, no seller was
really tempted to "forget" to disclose certain things. Why?
Well, the market was so hot that buyers were more than willing
to buy less than perfect homes. Obviously, that is no longer the
case.

These days, the real estate market is slow, slow, slow. The
problems we are seeing in the real estate market suggest this
slow pace is not going to change for some time. As a result of
all of this, sellers are having a more difficult time moving
their homes. Since disclosing potential problems with the home
is a hindrance to selling, more than a few sellers have failed
to mention all that they should.

So what? Isn't this really a case of buyer beware? Well, no. We
are talking about a business deal that will probably be the
biggest financial move of the buyer in their life, or at least
until they move up to a bigger, more expensive home. In most
states, this means the government has put in some safeguards.

In most states, a buyer who feels he or she has been sold a
lemon has a couple of options. They can sue for breach of
contract [the real estate contract] or seek a rescission order
from a judge. In either situation, the seller is looking at
paying attorney fees at a minimum. If a judge or jury agrees
with the buyer, the seller is most likely going to have to take
back the house, return the sales price and pay the buyer's
attorneys fees. In short, a disaster for the seller.

So, what are common issues that sellers fail to disclose? How
about a death or murder in the home? Flooding, grading and
drainage problems are also high on the list as the buyer usually
has no ability to experience this in the middle of summer.
Horrific neighbors are also an issue that can arise.

If you are attempting to sell your home in this slow market, you
may be tempted to forgo certain disclosures. Don't! It will come
back to haunt you.

About the author:
Raynor James is with FSBOAmerica.org - list your <a
href="http://www.fsboamerica.org">FSBO</a> property for 1 month
free at FSBOAmerica.org.

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Square Footage: Why It Isn't Always a Reliable Measurement


Title: Square Footage: Why It Isn't Always a Reliable Measurement

Author: Branden Schroeder

Article:
In my area's MLS, known as the MRIS or Metropolitan Regional
Information Systems, which covers Maryland, Northern Virginia
and Washington DC, square footage measurements are not usually
listed with the other relevant information about a home for
sale. Many clients ask me why this is.

The main reason is that there are a number of different ways to
calculate square footage. Square footage is sometimes calculated
to reflect the outside area of a home, including closets and
even the space within the walls as part of the total square
footage. Sometimes the measurement will reflect the total
interior area. At other times, it is calculated to include only
the livable space, excluding basements, unfinished additions or
storage areas. The American National Standards Institute, ANSI,
actually decrees that all basements not be included in official
square footage measurements, despite the fact that many very
livable and comfortable basements exist. As you can see, these
different ways of calculating square footage can, and have, lead
to trouble in a number of situations.

If, for example, a buyer is comparing the value of a number of
homes but their square footage was calculated differently, the
comparison is invalid and the buyer may not even realize it. The
real estate commissions in every state have receive complaints
about misrepresented or inaccurate measurements of square
footage. To avoid this problem, my area has simply chosen not to
list square footage. Those areas that do list square footage
often do so with a disclaimer stating that it may not be
accurate.

Buyers will often search the county land records of a property
they are looking to buy, and unfortunately, this isn't an
accurate source for determining a building's square footage
either. While many states have a generally accepted method of
measuring square footage, these sources can still not be
guaranteed.

When an exact square footage is important, do not rely on the
number listed in the MLS or any other source. The best way to
determine the exact size is for the buyer to visit the home in
person. Alternatively, if a buyer is from out of state or
country, perhaps they can request their real estate agent's help
in either determining or hiring someone to determine an accurate
square footage based on an agreed upon method.

If you are a seller and want to let buyers know about all the
extra space in your home, listing it as square footage is not
the way to go. If you have usable attic or basement space, or a
dry and usable storage area that frees up space in the more
livable parts of your home, these are indeed assets to you and
could mean a timely sale at a good rate if those features are in
demand by a buyer. If these are features about your home that
you think should be marketed, you may want to measure them
individually and include a description of them for your REALTOR®
to include in the MLS.

About the author:
Branden Schroeder is a Realtor serving the <a
href="http://www.marylandhomesandproperty.com/"
target="_blank">Maryland real estate</a> market. Branden's
background in law has enabled him to provide a level of service
in the real estate market that is unequaled by other agents. For
more info on <a
href="http://www.marylandhomesandproperty.com/annapolis.php"
target="_blank">Annapolis real estate</a>

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August 25, 2007

due Diligence

http://harriscompanyrec.com/blog-mt/mt.cgi

 Title: Due Diligence

Author: Patrick O'Connor

Article:


<b>Due Diligence</b></P>

<b>Due diligence </b>is an essential step in real estate
investment.  After selecting the property type and geographic
location, the investor needs to ascertain he has accurate
information regarding the physical asset, financial performance,
tenant base and future prospects for the subject property. Due
diligence helps the investor accomplish those tasks. Due
diligence can provide in-depth data and insights for these areas
and mitigate the risk of a real estate investment.  The costs
associated with due diligence are minimal compared to the costs
of making an imprudent investment decision.</P>

In addition to investors avoiding unfavorable investments, due
diligence can:</P> <UL> <LI>Enable investors to quickly pass on
potential investments which do not merit a complete analysis;
<LI>Save money and reduce the time an investor spends evaluating
a possible investment by more quickly declining an investment
which does not fit the investor's criteria or that is not
consistent with what was presented; and <LI>Provide the investor
with a better understanding of the benefits, costs, risks and
opportunities related to an investment</UL>

The financial costs and time expended by the investor and the
opportunity cost (of not pursuing other more attractive
investments) related to fully analyzing a real estate investment
are substantial. Due diligence helps to reduce these costs. In
most due diligence cases, the business person leading the
investment effort has developed an "investment hypothesis". 
Potential "investment hypotheses" include the following:</P>
<UL> <LI>This property will generate a 7% unleveraged yield
without any upgrading. <LI>This property is 30% occupied due to
poor management. By focusing on leasing, the purchaser can
achieve stabilized occupancy of 90% within 12 months while
leasing at $18 per square foot.  <LI>The subject class A
apartment complex was built 15 years ago when the level of
finish was at a lower level.  The subject property currently has
both a good resident profile and is in good physical condition.
By spending $8,000 per unit to upgrade the level of finish with
items such as granite countertops, better appliances, upgraded
cabinets, the rental rates can be increased from $.90 per square
foot per month to $1.05 per square foot per month.</LI></UL>

Investors cannot save both time and money by performing an
initial review of the investment hypothesis.  In many cases, the
investor has too many other time consuming commitments and
responsibilities to personally perform an in-depth analysis or
to visit the property to confirm the investment hypothesis
before proceeding with an acquisition. If it is possible to
eliminate investments which do not meet the investor's criteria
before negotiating the contract to purchase the property, the
investor can save legal fees related to the contract, time
involved in negotiating the contract, time working with the
lender, the cost of third-party lender - related records and any
additional due diligence the investor would perform.
 

Depending on the investment hypothesis, the investor's
familiarity with the submarket where the property is located and
the subject property itself, the following due diligence tasks
merit consideration:</P> <UL> <LI>Market rent analysis;
<LI>Market analysis (occupancy, absorption, construction and
rental rate trends); <LI>Financial analysis/financial modeling;
<LI>Construction cost analysis (upgrading and curing deferred
maintenance); <LI>Code compliance; <LI>Organize procurement of
third-party reports; <LI>Evaluate options regarding the level of
renovation or upgrading; <LI>Highest and best use analysis;
<LI>Market study; <LI>Feasibility study; <LI>Lease audit;
<LI>Lease abstraction; <LI>Detailed examination of the seller's
financial statements; <LI>Comparison of seller's financial
statements with bank statements; <LI>Obtain survey;
<LI>Interview management companies; <LI>Interview leasing
companies; <LI>Property tax analysis and forecast.</LI></UL>

The list of due diligence tasks which should at least be
considered is daunting.  However, the time and cost related to
properly performing due diligence is insignificant compared to
the time and cost to remedy a poor investment.</P>

O'Connor & Associates' staff complement of over 50 real estate
professionals can handle any or all of these to due diligence
tasks.  These professionals are supported by a support staff of
over 100 who are accustomed to complex assignments.  Our team
has experience in all aspects of real estate including
acquisitions, due diligence, ownership, appraisal, property tax
appeals and dispositions.  Reduce your risk and stress by
utilizing O'Connor & Associates' breadth and depth of experience
to evaluate your real estate investments.  </P>

To obtain more information on O'Connor & Associates due
diligence services, call or email <A class=ulink style="COLOR:
#770000" href="mailto:lbrewster@poconnor.com">Larry Brewster</A>
at 713-686-9955 or <A class=ulink style="COLOR: #770000"
href="http://www.poconnor.com/contact.asp">fill out our online
form</A>.</P> O'Connor & Associates is a national provider of
commercial property real estate consulting services including
cost segregation studies, due diligence, <a
href="http://www.oconnor-commercial.com/property_tax_articles/ins
urance_valuation.html">insurance valuations</a>, abandonment
studies, business personal property valuations, commercial
appraisals, financial modeling, <a
href="http://www.oconnor-commercial.com/property_tax_articles/hig
hest_and_best_use.html"> highest and best use analyses</a>, and
lease audits.

Our services benefit owners of all commercial property types
including multi-family housing, retail stores, hospitals,
hotels, industrial properties, manufacturing facilities, medical
offices, commercial offices, restaurants, self-storage units,
shopping malls, shopping plazas and warehouse/distribution
centers.

About the author:
Patrick C. O'Connor has been president of O'Connor & Associates
since 1983 and is a recipient of the prestigious MAI designation
from the Appraisal Institute. He is also a registered senior
property tax consultant in the state of Texas and has written
numerous articles in state and national publications on reducing
property taxes. He continues to set the standard in direction
and quality of our appraisal products, adding services ranging
from bus

 

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August 24, 2007

Old Trends Returning-Private Mortgage Insurance Back in Vogue

 

Title: Old Trends Returning-Private Mortgage Insurance Back in Vogue

Author: James Dedolph

Article:

Through the turn of the millennium mortgage brokers have been advocating using a first trust deed and a second trust deed, combination to eliminate private mortgage insurance which is also known as PMI. PMI protects the bank from any deficiency at time of a foreclosure. The borrower receives no benefit or protection from having PMI. The consumer using the first and second trust deed combination in most situations would have lower payments and slightly greater tax benefits, until recently there was no tax benefit in having PMI on the mortgage.

A new product has now emerged to allow for 100% financed stated income loans to exist after many major banks have pulled their 80/20 100% financed stated income loans from the market. This pullback was a direct result of banks not being able to sell their 20% loans on the secondary market on Wall Street, because this group of high-risk loans started to falter in regards to their performance. To fill this void a new single loan up to 100% with PMI built into the pricing has arrived. This product allows the buyer to state their income versus providing paystub and W-2 forms. Banks now are looking for the insurance protection that PMI offers them in case of a foreclosure. This new trend will allow buyers to attain the needed financing that high cost areas require and allow the banks to be protected at the same time.

Another school of thought promoted more of a long term strategy. By opting for PMI, lower payments could possibly be achieved once two years of home ownership had passed and a 20% equity position was reached. At this point with an appraisal the bank would have to remove the PMI. The net result was then lower payments and one loan with a lower rate than the second loan would have had. The federal government just added an additional benefit for the use of PMI. If your household adjusted gross income is under $100,000 the PMI may now be deducted as an expense. As with any tax situation we always advise you to seek the expertise of an accountant or other tax professional. With the meltdown of the sub-prime market which used a first and second trust deed, combination as their main loan structure, traditional single loan programs with PMI are now very much in demand.

 

 

About the author:

Co-written by James Dedolph and Randy Nathan, creators of HomeSniffer.com where you can find <a href="http://www.homesniffer.com">Homes for Sale in San Diego </a> and LoanSniffer.net where you can find the best rate and terms for <a href="http://www.loansniffer.net">Homes Loans in San Diego </a>. Both of these sites are a good resource for information about <a href="http://www.homesniffer.com">San Diego Real Estate </a>.

 

 

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Assessed Value vs Market Actual Value

 

Title: Assessed Value vs Market Actual Value

Author: Darin Sewell

Article:

Assessed Value vs. Market Value - Assessed value is the valuation placed on property by a public tax assessor for purposes of taxation. It is not the same as Fair Market Value. Fair Market Value is the agreed upon price between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances. It is the highest price estimated in terms of money which the property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with full knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used. Homes Market Value - In the real world, very few individuals order appraisal reports to establish an offering price or to substantiate a purchase price. At the point that an offer to purchase (in a typical residential transaction) is made, the price has been set by other parties, not the purchaser. The price has been determined by the seller, who wishes to obtain the highest price possible, or the agent, who receives a percentage of the price as compensation and often represents the seller in the transaction. The sellers realtor's job is to do market analysis and price the property accordingly. If the sellers realtor did there job correctly then the asking price should be a correct assessment of value. There are different types of housing values available. One type of housing value is the assessed home value which is assessed usually by your county auditor. Usually your assessed home value is less than the actual market value of your home may be. This is usually a good thing because the assessed value of your home is generally the basis for your property taxes. Often, the asking price for the home is based upon comparable sales in the area - similar homes that have sold recently. Using the selling prices for those homes, they can determine what the home should sell for, and price the home accordingly. Before buying (or selling) it is wise to do some homework and look at what similar homes in your neighborhood or town have sold for recently. This information is available at county recorders offices, town offices, and from some websites. Of course, the ultimate is to have an appraisal done by a professional appraiser. This will be done anyway before any lender provides the purchase money loan. There are several online sites that can give you an estimate of your home's value. However, whether you are buying or selling, a real estate agent has access to the latest sales data and can give you a more accurate value for your home. How can I find out my homes value? - You can check with a local Realtor. They have access to comparable sales and can give you a pretty good idea what homes are worth in your area. Some online value estimators are actually lead generation sites for realtors. keep that in mind when using them. One easy way would be to call me! Although it would not be a substitute for a professional appraisal, I can access records of closed sales in your neighborhood and compare them to your home. I can also access the Multiple Listing Service and see what kind of prices similar homes as yours are currently being listed for. Short of performing a full appraisal, you will get a very good estimate of the value of your home. You can call a professional appraiser and pay for his service as often as you'd like... A real estate agent (Realtors are members of the National Association of Realtors) can give you a value. Many real estate agents have a good idea of how much a property is worth by using comparable sales. Remember that comparable sales are historical and the best are the most recent as the comparable sales get further back into history the less accurate they are Make sure that if you decide to spend the money on an appraiser that you interview the appraiser and ask about the appraiser's experience. Appraisers who work mostly on loans may not be the best appraiser for you unless you want a loan. If the appraiser does not ask you what type of appraisal you want and the form type you are probably not going to get what you want. There are many appraisal types, make sure you get what you need. Online value estimators are only as accurate as the data they have available. The more recent the data the more accurate. The more conformity you have in the type of properties the more accurate. An online value estimator in a tract situation where there is a lot of turnover will be the most accurate. Remember the online value estimator has absolutely no way of knowing if you have the original Formica or upgraded granite counter tops. I can not tell if you have upgraded your bath or your kitchen and as you get away from identical tract homes the online value estimator is reduced in accuracy exponentially. In fact they can be so bad that there is pending legislation and pending litigation that could result in their permanent demise. The best thing about online value estimators is that they are free. Although they are getting better, they do not have all the information needed to provide the most accurate value, and they won't be accepted by a lender as an appraised value. For the purposes of obtaining home equity line of credit financing, many lenders will allow your homes value to be determined using automated property valuation software or simplified ("drive by") appraisals or broker price opinions. To get a general idea of your home's value you can use an online value estimator. Online value estimators can provide you with a general idea as to the value of your home on paper. These should not be construed as an appraisal report or a true value of your home, but can usually provide a basic idea of your home's value. If you are unsure of the value and it is crucial that you need find out an accurate amount, hiring a professional appraiser is possible as well. This can be the most expensive option, but also the most accurate. There are many different online value estimators that are free, another source is a program made available through the government that generates the house value based on historical appreciation rates in your area. The only way to find out the exact market value of your home is to hire a professional appraiser to come in and do the job. How accurate are value estimators? - Most online value estimation sites will only be able to judge a value if your local tax office has updated their online database. The results given are only going to be as good as the information available. To know a more accurate value for your home, you will need to hire an appraiser. On-line value estimators are more accurate in areas where there are very similar homes, this is known in real estate as the theory of conformity. In areas where there are homes of different architectural types, size and in general are not similar, the value estimators can be off by huge amounts. So if you live in a tract with a lot of recent sales your estimator can get you quite close. I you don't live in a tract or you live in a rural area the estimators are quite useless. Online value estimators should not be used as a reliable method for determining value on a property. There is no substitution for a complete appraisal carried out by a board certified or state licensed appraiser. Many online value estimators are actually tied to a realtor that will visit you within 1 to 2 days after entering your information, as a means to be the first realtor to visit you. The down side is that they may give you an unrealistic amount that you can expect to receive from the sale of your home, as a means to get the listing. There are many different sources on-line for free estimates of the value of your home. Unless you are getting a true appraised value of your home you should not pay for the online estimates. If you would like a list of links that can help you determine the value of your home please contact me. You can usually keep a finger on the pulse of the market by reading newspaper classifieds (real estate section), and inquiring of the price when a home in your neighborhood is for sale. This will achieve far better results to determine the general value of your home, than using an online value estimator. One of the major drawbacks to online estimators is that they do not take into account specifics of your property that a realtor or appraiser would. For example take two identical houses that were built in right next to one another in 2001. House A has finished their basement added a deck and built a fence, while House B has remained unchanged since being built. In many cases the online property valuator would give both properties the same value, when in reality House A is quite possibly worth tens of thousands more. When using an online estimator, make sure they use previous "sold" prices, not current list prices. If the address of the comparable properties used are listed, go and check them out to see how they compare. Online value estimators also do not take into account any upgrades inside the home that have been made or updated. Only a true appraiser who comes out to the property can give an accurate value of the property. A Legal Appraisal by a licensed appraisal is the only true and accurate tool to evaluate the value of a home

About the author:

Darin Sewell is a Milwaukee Wisconsin based mortgage broker that specializes in first time home buyers and buyers with troubled credit. With a low stress low pressure approach to home financing Darin will make sure your mortgage experience is a positive one. Learn more about Darin at http://www.mkemortgage.net

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A Career As A Real Estate Appraiser

 

Title: A Career As A Real Estate Appraiser

Author: Jerry Martinez

Article:

A career as a real estate appraiser is something that you may want to consider.Still this may sound a bit far fetched and risky, as a matter of fact it could be the perfect career for you.

You should at least look into what it takes to be a real estate appraiser when you have any type of interest in this. When you can imagine, this is one career that is always in demand, and when you are good at what you do there is a chance that you will make a very nice living.

Then what is a career as a real estate appraiser all about? What do you have to do day in and day out? Just like any job, not every real estate appraiser is the same. You will actually require to look into what the industry has to offer, and thus decide from there when you should get involved. The important task that a real estate appraiser undertakes is visiting houses, and then appraising the asset.Several people need this done as they are moving, buying a house, or simply require an assessment for any other reason such as divorce or buying insurance.

Remember, as a professional you will be offering a service that people will require. The bottom line is that when somebody requires a real estate appraisal you will be the person that they call.

You will get paid based on the number of real estate appraisals that you complete. In other words, you can set your rates and charge a flat rate for each house that you appraise. This makes things easy on you, and allows you to get a good thought as to how much money you can make.

Ultimately, several real estate appraisers love their job as they are not cooped up in an office all day. Rather, they can go from house to house on their own. And anyhow, when they get to where they are going they can communicate with clients, etc. A career as a real estate appraiser may be only what you have been searching for. You may get your appraiser license, and never look back!

About the author:

A career as an appraiser for the <a href="http://realestatearticledirectory.com/articles/california-r

eal-estate.html"> California Real EState Market</a> could be a great career change.

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Real Estate Appraisal: How Much is this Property Worth?

 

Title: Real Estate Appraisal: How Much is this Property Worth?

Author: Dan Giordano

Article:

Real Estate Appraisal

Real Estate Appraisal or property valuation is the process of determining the value of a property on the basis of the highest and the best use of real property (which basically translates into determining the fair market value of the property).

The person who performs the appraisal is called a Real Estate Appraiser. The value as determined by a real estate appraisal is the fair market value. The appraisal is done using various methods and the real estate appraisal values the property in several ways for different purposes (the appraisal might assign 2 different values to the same property,Improved value and Vacant value) and again the same/similar property might be assigned different values in a residential zone, compared to a commercial zone.

However, the value assigned as a result of real estate appraisal might not be the value that a real estate investor would consider when evaluating the property for investment. In fact, many real estate investors completely ignore the value that comes out of the appraisal process.

A good real estate investor would evaluate the property on the basis of the development going on in the area. A real estate appraisal as done by an investor would consider the value that the real estate investor can get out of the property by buying it at a low price and selling it at a much higher price.

Similarly, an investor could do their own appraisal for the expected value of the property in, say 2 years or in 5 years.A real estate investor might conduct an appraisal based on the value he/she can create by investing additional money in the property (i.e. an investor might decide on buying a property in need of repair or cosmetics, painting etc. in order to increase the value of the property for future sale). Here, the meaning of real estate appraisal changes completely, and can be very different from the value that a real estate appraiser would come up with in appraising the same property.

A real estate investor will generally base his/her investment decision on the appraisal they've done themselves (or had done by an appraiser of their choice).

However the appraisal is done,(by an appraiser or the investor) the goal is to get a concrete idea of the property value in today's market.

To Your Success, Dan Giordano http://www.FreeRealEstateDeals.com

 

 

About the author:

Dan Giordano

Long marketed as one of those 'mystery guys', Dan's online marketing and coaching expertise is no longer a mystery. As the man behind the scene for John Di Lemme and other sites, Dan has created well over $5 million dollars in online sales over a six-month period for his clients.

 

Building on his expertise in real estate investing and Victorian homes, Dan used online promotion and marketing skills to build www.freerealestatedeal

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Why you need a real estate appraisal!

Title: Why you need a real estate appraisal!

Author: Florin Costache

Article:

Whether you are selling, buying or renting a piece of property, whatever it may be, stop what you're doing and get a real estate appraisal - it is a crucial step in every real estate transaction!

Now I know what you're thinking - you don't need an appraisal: extra cost on the whole transaction (it's not as expensive as you might think) just to see that maybe you were right all along. But what if you weren't right and you just lost a big pile of cash?

This can happen to both sellers and buyers: sellers underestimate the property value and sell lower and buyers overestimate, sometimes going overboard with prices!

Ok, now let's see what an appraiser does and how he/she does it:

An appraiser's job is to interpret many types of market value such as fair market value, insurance value, tax value and value in use and then place an estimated price on the appraised property.

Some of the commonly used methods in appraisal:

1. The cost approach (also known as summation approach) is the land value, plus the cost to reconstruct any improvements, less the depreciation on those improvements.

2. The sales comparison approach looks at other similar properties in the same area and derives an approximate price from that comparison. This is one of the most used methods of appraisal because it's very reliable, but only if there were other comparable sales.

3. The income capitalization approach (or simply the income

approach) is used for commercial and investment properties. This approach takes an income stream and uses it to estimate a value

- either by using revenue multipliers or single-year capitalization rates of the net operating income.

Out of the 3 methods above the second, the sales comparison approach, is the most widely used for real estate appraisals because of it's reliability.

And now we get to the real question: when the seller gets an appraisal value that is less than he expected, what is to do?

* You can lower the price. I know it isn't what you want to hear, but sometimes it just comes to this. Buyers will sometimes back off if you don't lower the price, so decide if you want to sell at a loss or risk waiting more and probably getting the same kind of deal.

* If you made a very good impression on the buyer you can actually push it and hope for the best. Some will give in if the difference in price isn't that big, so try to "read" the buyers a bit and see what happens.

* Negotiate with the buyer and maybe you'll both meet in the middle - if everybody gives in a little you may come to an agreement.

* Ask for another appraisal! Yes, this is one very good option; don't forget, an appraisal is an evaluation that gives a very good approximation of value - but it's still and approximation. Other appraisers may come up with different values.

However, the most likely scenario is that the outcome will be in your favor - you just don't want to take the chance of losing a pile of cash! Get an appraisal now!

Eval Corp is one of the top Romanian real estate appraisal companies (<a href="http://www.eval.ro">evaluator imobiliar</a>) that operates primarily in and around Bucharest (<a href="http://www.eval.ro">evaluator Bucuresti</a>).

About the author:

Eval Corp is one of the top Romanian real estate appraisal companies (<a href="http://www.eval.ro">evaluator imobiliar</a>) that operates primarily in and around Bucharest (<a href="http://www.eval.ro">evaluator Bucuresti</a>).

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Commercial Real Estate Expert Knowledge On Holding And Closing Costs

Title: Commercial Real Estate Expert Knowledge On Holding And Closing Costs

Author: Tony Seruga, Yolanda Seruga And Yolanda Bishop

Article:

When investing in commercial real estate, investors have to consider the projected costs surrounding their investment. A savvy investor must have a working knowledge of what the closing and holding costs for the property will be prior to committing themselves to the investment. Working on the purchase price, and the market selling price is simply not enough to make an informed decision on whether a property will be a sound investment.

Holding Costs When real estate investors purchase property, their main goal is to sell the property for a profit. But during this process, the investor must take into consideration the amount of money they will need to pay out before the investment is re-sold. Holding costs are also known as carrying costs. When calculating the holding costs, investors must include the purchase price, and deduct operating income to come to an estimated figure.

Holding costs must be carefully considered when factored into an investment. Without calculating this cost, an uninformed investor could be faced with a disastrous situation. All to often, new investors only factor the purchase price, and the resale market value into their calculations. The result can be disastrous to the estimated profit margin if the investor must produce a further sum for their holding costs.

An example of such a situation is buying a property for $200,000 with an estimated resale value of $280,000. At this stage, the property would seem to be a sound investment with a very generous profit margin. But if the holding costs of the particular property over a six month period were to come to $90,000, it could mean severe loss to the investor, rather than a generous profit.

Estimating Holding Costs Investors must pay close attention to their estimated carrying costs before investing in a property. These include costs such as operating expenses, mortgage payments, capital improvements, as well as the selling costs of the property.

The best way to factor these costs before purchasing an investment property is to analyze the associated carrying costs over a six-month period by taking the sale price, and then

deducting associated costs such as · Purchase closing costs, ·

Clean up and decoration of the property, · Mortgage repayments,

· Taxes, · Insurances · Resale broker commissions, · Resale

closing costs

Take the purchase price, plus the carrying costs, and the total of the two should be deducted from the re-sale price of the property in order to get an estimation of the profit margin.

Knowing what to expect from holding costs should be one of a real-estate investor's main priorities when looking for a profitable investment. While these costs are important to factor, the savvy investor will always be able to creatively come up with solutions to decrease costs, or find ways to make an extra income from the property to make it more profitable.

Closing Costs Closing costs are an estimate of the projected cost once the property has been resold. These costs are often calculated by things such as the lenders experience with the real estate industry, and the area being invested in. The closing costs are only an estimation, which can mean that they will change over the term of the loan.

The lender has no control over how much the attorney or title company will charge for their expenses, but as a rule of thumb, investors should be able to rely on the final estimated expenses to be close to the estimations given in their good faith estimation from the lender.

The closing cost figures, as far as the lender is concerned, should be especially accurate, although in a situation where there are significant changes in the loan program, or the borrower's qualifications, the closing costs could be inflated.

No Closing Costs While closing costs are essential to factor into an investment, there are options available to remove some of the associated closing costs for investors. However, it is important to note that even with advertised no closing costs, there will always be costs, such as attorney fees, insurance, local municipality, and title company, that must be paid.

The no closing cost programs offered by lenders are an option that applies to things such as application, appraisal, credit reporting, processing, underwriting, origination, and discount points. These costs only factor into about a third of the total closing costs of a property. Even with a no closing cost option, investors may still be required to pay other closing costs, such as title insurance, attorney fees and county recording fees.

About the author:

Tony Seruga, Yolanda Seruga and Yolanda Bishop of http://www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.

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Real Estate Management

 

Title: Real Estate Management

Author: Ismael D. Tabije

Article:

Real estate management is primarily engaged in the practice of handling, supervising and controlling an immovable proprietary. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate management industry has evolved into several fields.

Real estate, or immovable property, is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. Real estate is often considered synonymous with real property, as contrasted to personal property. However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate.

With the development of private property ownership, real estate has become a major area of business. This paved the way to the birth of real estate management. Also called real estate development industry, it is primarily engaged in the practice of handling, supervising and controlling an immovable property.

Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate management industry has evolved into several distinct fields. Among these fields are appraisal, brokerages, property management, and relocation services.

The first field, real estate appraisal, is a service performed by an appraiser who develops an opinion of value based upon the highest and best use of real property. The highest and best use is that use which produces the highest possible value for the property. This use must be profitable and probable. Also of importance is the definition of the type of value being developed and this must be included in the appraisal.

The second field, real estate brokerage, is a party or an agency that acts as an intermediary between sellers and buyers of real estate and attempts to find sellers who wish to sell and buyers who wish to buy. It assists sellers in marketing their property and selling it for the highest possible price under the best terms and buyers in the acquisition of a property.

The third field, real estate development, makes improvements of some kind to real property, thereby increasing its value. There are two major categories of real estate development activity: land development and building development (also known as project development).

Land development typically is the acquisition of raw land (real property with no improvements or infrastructure) and improving it with utility connections, roads, earth grading, covenants, and entitlements. Once these improvements have been made to the raw land, it is typically subdivided and sold piecemeal at a profit to building developers or individuals.

Building development is the acquisition of raw land, improved land, and/or property that could be redeveloped in order to construct building projects. The buildings are then sold entirely or in part to others (usually for a significant profit), or retained as assets to produce cash flow via rents and other means.

The fourth, property management, pertains to the processes applied to maximize returns by effective administration of property--one of the major assets of most organizations. It also comprises the disciplines implemented on property rules and rental policies.

And the fifth and last field, relocation services, deals with relocating people or business to different countries. Within each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate.

No matter what field of real estate management you are in, maximizing income can be actualized through reporting complete and accurate income/expenses each month, effectively placing capital improvement into service, accurate budget forecasting, balance sheet management and the day-to-day support of building marketing teams.

The unequivocal delivery of these kinds of services would lead to fully satisfied costumers--bringing more income and credibility.

Copyright 2007 Ismael D. Tabije

 

 

About the author:

Unlock the secrets of successful executives and professionals. http://www.BestManagementArticles.com -- the article directory with thousands of free articles in business and management--tips, advices, strategies and solutions for your success. Specialized articles in the field of Real Estate Management may also be accessed at: http://real-estate-management.bestmanagementarticles.com/

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Illegal Double Closings in Real Estate?

 

Title: Illegal Double Closings in Real Estate?

Author: Tony Seruga, Yolanda Seruga and Yolanda Bishop

Article:

As a property investor it's important to keep up with trends and news, but you also need to be able to separate fact from fiction! One of the biggest false stories in the media recently has been claims that double closings are illegal. They are not.

This misinformation has arisen from a number of indictments on what the media has described as "property flipping scams" which is totally different to double closings. Under the double closing system, the funds from the second closing are used to pay out the first closing.

An escrow system is used so the agent, or middleman, can trade the property and make a profit without using their own funds.. It is a legal, ethical and profitable process which investors have used for a century or more to create wealth.

You've probably read about what has been referred to in the media as illegal property flipping schemes whereby some people purchase inexpensive, poorly maintained properties , then carry out poor renovations and resell the property to naïve purchasers at ridiculously high prices, way above market value.

Generally it isn't the sale that is illegal, but the loan process as all those in the lending chain conspire to submit illegal loan applications in conjunction with a false appraisal. As a result, buyers end up with an over priced house and a loan they can't repay.

Unfortunately for the scammers, a lot of the loans are insured by the Federal Housing Authority (FHA), a government authority, which has now cracked down on the scheme and many of those involved now face the long arm of the law!.

If you read a media article, or hear a real estate agent or mortgage broker claim flipping is illegal you know they are wrong and you need to look further for up to the minute, well informed comment.

The controversy has had some affect on the industry with some title and escrow companies refusing to do double closings. Those that do continue with the practice quite rightly are well aware of the potential for fraud.

As a property investor it's up to you to remain in control of your deals, stay ahead of the process and anticipate issues that can affect the close, particularly if you are buying and reselling a property quickly using a double close.

Be aware that some financial institutions have implemented a "seasoning" process on the vendor's property. This means that if the seller hasn't owned the property for six month or more the financial institution will treat the proposal as suspect and reject the buyers application to borrow money.

This will leave you in big trouble if you purchased the property cheaply and are selling it on in a hurry for a profit. Before signing the contract make sure the buyer, their agent, and the conveyancing lawyer are all aware there could be a seasoning issue.

Better still, if you are really in control of the whole process you will be able to steer the buyer to a lender who is familiar with double closing and will ensure it is a smooth process. Remember, seasoning is just an underwriting suggestion, it isn't a law which has to be enforced.

Don't hesitate to go approach senior management if there appears to be a problem and the sales is likely to stall under red tape. You also need to be aware that when the buyer has applied for an FHA insured loan they can't avoid the ownership period requirement as FHA rules specify the seller must have owned the property for at least 90 days before selling it on.

There are no exceptions to this rule. This rules out the buyer going with an FHA loan in a double-closing but shouldn't be such a problem if you plan to repair and flip the property as it will probably take 90 days to do the repairs then sell the property.

Overall, only the FHA and sub-prime lenders invoke this requirement. FNMA guidelines have no restrictions on providing funds to purchase a property when the vendor is "turning it over" quickly.

Don't panic if some delays occur right up to signing hitch in a double closing situation. You can exercise what's called a "reverse assignment". In this case you just redirect your contract with the last buyer back to the owner and withdraw from the deal.

In this case, your "fee" replaces the potential profit on the deal. Make sure the arrangements have been documented clearly and secured by a lien on the owner's property so you receive your fee on closing.

Double closings are attractive for investors interested in flipping houses because they allow you to get around financing requirements by quickly moving money from one account to another, keep your purchase price secret by never exposing your contract, and work with less liquid buyers because the "assignment fee" is financed .

The first step is finding an attorney who understands, and is prepared to perform the double closing for you. Then you have to convince the buyer it's a good way to go. Scheduling the double closing is the biggest challenge in the process and involves some element of risk.

There's nearly always a last minute glitch, which may mean having to delay settlement for a few weeks, leading to your contract expiring, which in turn can led to you losing your binder, and then losing credibility by reneging on a contract.

Make sure you allow for all these factors in the contract - it will save you a lot of stress! Make sure you know all the risks and processes involved before trying a double closing.

Tony Seruga, Yolanda Seruga and Yolanda Bishop of <a href="http://www.maverickrei.com" target="_blank">http://www.maverickrei.com</a> specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.

 

 

About the author:

Specializing in commercial and investment real estate, Tony Seruga, Yolanda Seruga and Yolanda Bishop are always searching for new and profitable commercial properties across the U.S. Visit <a href="http://www.maverickrei.com" target="_blank">http://www.maverickrei.com</a> for more great information.

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Commercial Real Estate Desirability

 

Title: Commercial Real Estate Desirability

Author: Tony Seruga, Yolanda Seruga And Yolanda Bishop

Article:

For those who are looking for an excellent way to generate outside income, the commercial real estate industry is a great way to go. Many people have begun to invest in commercial real estate, and since this type of real estate is continually being purchased and sold, it has become an excellent way to invest money for a guaranteed return. Before one becomes involved in the commercial real estate market, it is highly important that they understand the commercial real estate industry and its many surrounding components.

A Basic Definition of Commercial Real Estate First and foremost, it is imperative that one understands a basic definition of commercial real estate. Essentially, commercial real estate includes various real estate properties that have the potential to be able to generate outside revenue or even income for the owner. Whether the property has immediate potential for generating income or revenue immediately, or perhaps in the future, it can still be labeled as commercial real estate.

A Desirable Investment Commercial real estate is an excellent choice for investors for a variety of different reasons. One of the main reasons that investors find commercial real estate to be such a pleasing investment is that is brings about both long term and short term financial benefits. In the short term, commercial real estate can help you bring in a better cash flow from the use of the property, and at the same time, in the long run the property will only appreciate in value, which will result in long term benefits should you choose to sell. Most investors also find that there is a lot less risk involved with commercial real estate than there is when dealing with other types of real estate. If you purchase apartment buildings or a strip mall, the risk of your investment will spread out among those who are renting from you, and even if you lose one of your renters, you still will be making money and seeing a return from your investment.

Commercial Real Estate Properties Another positive benefit of commercial real estate is that the scope of properties that you can invest in is quite large. Commercial real estate includes various different properties that make excellent investments. As long as the building consists of more than four units, it can be considered a commercial real estate property. Commercial real estate also includes other properties such as strip malls, apartment buildings, RV parks, industrial parks, mobile home parks, and commercial centers.

Jobs within the Commercial Real Estate Industry There are a variety of different jobs that are included within the commercial real estate industry, and all of them benefit from this excellent market. The investors have a very important job within the industry, since it is their money that is being used to make the property develop and become prosperous. Builders too have an important job, and many times they work within the commercial real estate industry to build new structures on commercial property such as apartment buildings or shopping malls. The lenders have a very important job, and they work to make sure that investors get the loans and mortgages they may need to be able to purchase commercial real estate properties. Also within the industry are the brokers who represent the owners and deal with the sales and property transfer issues. Last of all, but certainly not least, are the users who actually put the money in the investor's pocket.

Financing Commercial Real Estate Those who are planning on being involved in commercial real estate need to consider how they can finance any commercial real estate purchases. While few people can actually just purchase the property with money they already have, most people are going to be turning to other methods of financing the property. More than likely you are going to need to go to a lender to be able to finance any commercial real estate that you want to purchase, but there are a few things that you can do to make the process smother.

First of all, you will want to make sure that you have a business plan. You need to be able to show the lender why you want the property and how you plan on making it a successful investment. It is also important that you have at least a portion of the money needed for the property saved up so you can show that this is a serious venture and you are ready to make a personal investment in its success. Also helpful is a current appraisal of the property you are considering. This will help show the value of the property to the prospective lender. Having an attorney to help you and to check out legal issues will also be important, and in the end you should always compare several lending offers before making a final decision.

Getting Started For those who are interested in commercial real estate and the financial benefits that can be enjoyed, there are many ways to get a start in the business. One of the keys to getting started is to glean all the information about the business that you can, whether from reading books, searching the internet, or speaking with friends and business colleagues that may have experience in commercial real estate investing. Checking into the area you live in and getting a look at what kind of commercial real estate is available and what the prices are running can help you begin to get a closer look at the costs and the availability of commercial real estate in your area. Attending zoning and city planning meetings may also give you insights and ideas for getting started as well. Lastly, one of the best things you can do is to start building a network of friends and business acquaintances that already have their foot in the door of the commercial market. Learning from their successes and mistakes can help you on your way to becoming a successful commercial real estate investor.

About the author:

Tony Seruga, Yolanda Seruga and Yolanda Bishop of http://www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.

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Commercial Real Estate Appraisal

 

Title: Commercial Real Estate Appraisal

Author: Carl Graeber

Article:

Probably most of you are informed about the nature of commercial real estate appraisal, but the fact that some of us are ignorant of what the commercial real estate appraisal is all about, the need for thorough explanation about this matter must be given attention.

So for that reason, I would like to discuss some important considerations about the nature of commercial real estate appraisal. Just remember that this information is just some of the fundamentals for a successful commercial real estate appraisal.

According to many resources, the commercial real estate appraisal is just like some forms of home appraisals that most of the people need when buying or selling a home. For that alone, the commercial real estate appraisal is therefore an estimate of the value of the commercial real estate property. It is important to note that the commercial real estate appraisal is not just done by any person, but the commercial real estate appraisal is performed by a qualified and certified professional called an appraiser. Along with that fact, the commercial real estate appraisal is generally recognized with one of three approaches, which include a cost approach, a comparison approach, and an income approach.

With a cost approach of commercial real estate appraisal, the appraiser investigates what would be the cost for a replacement or improvement of the commercial real estate as of the date of the commercial real estate appraisal. In the sense of the second approach of commercial real estate appraisal which is the comparison approach, the appraiser in this sense of commercial real estate appraisal approach really make some comparisons with the value among other commercial real estate properties of the same size, quality, and location that has been currently sold. On the other, the use of the commercial real estate appraisal's third approach, which is the income approach of commercial real estate appraisal, the appraiser then identifies the value of the commercial real estate property based on the estimate of what an investor would pay with respect to the net income that the commercial real estate property contributes. Nevertheless, the income approach of the commercial real estate appraisal is said to be only available for income producing commercial real estate properties.

Finally, the commercial real estate appraisal will be only made successful if the commercial real estate appraisal includes the estimate value, the effective date of the appraisal, the purpose of the appraisal, the identification of the commercial real estate property and its ownership. Aside from that, the commercial real estate appraisal must also include the condition of the neighborhood, factual data, qualifying conditions, analysis and interpretation of the data and the assumptions made the processing of the data by a single or more of the three approaches to commercial real estate appraisal to value and the certification and the signature. Such considerations must be given attention when doing a commercial real estate appraisal for the benefit of the parties involved in the commercial real estate appraisal.

About the author:

Before going into the buying process you should first ask yourself if your are already ready for home buying. Find out more on the free website at: <a href="http://www.the-commercial-real-estate-business-website.com"

>www.the-commercial-real-estate-business-website.com</a>

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LAWA/IRWA a Focus on Corruption

 

Title: LAWA/IRWA a Focus on Corruption

Author: Cochise

Article:

Dateline: INTERNATIONAL RIGHT OF WAY ASSOCIATION (IRWA) Chapter 1 -Los Angeles County 2006 Annual Fall Seminar

Tuesday, October 24, 2006 Quiet Cannon, Montebello, CA

The Los Angeles World Airport's (LAWA) Director of Economic Development admits that the Manchester Square "Voluntary Purchase" Program is a part of LAWA's Master Plan. This statement was supported by one staff member who presented maps indicating that this area has been set aside for parking.

This Freudian slip of the tough could have major legal consequences since under the agencies "voluntary purchase program" homeowners were not paid Fair Market Value which is "the highest price" required by State Law in condemnation cases.

For years Vivian Howell, an IRWA and LAWA mucky muck, has stated that we are not going to pay them "the highest price" because this is a voluntary program.

This in addition to using unethical appraisal practices like using unqualified appraisal trainees, consultants colluding on values, standardized comparable adjustments, and in some cases- appraising of property based upon it's existing use, rather than it's "highest and best use." It is estimated that these combined, secret practices, have cost property owners millions.

The Director also stated that he foresaw a number of inverse condemnation cases being filed against the agency, by current residents, because the LAWA project has left their neighborhood in a shambles.

If you are a homeowner, property, or seller of property to LAWA in this area we strongly suggest that you contact a qualified Real Estate Condemnation Attorney, or Relocation Expert, and demand a full hearing into these issues.

Cochise Commercial Appraiser

 

 

About the author:

A professonal real estate consultant and appraiser for the past 25 years. Owner operator of The Harris Company, REA/C. http://www.harriscompanyrec.com

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Do You Pass The Mortgage Lender Analysis? Understanding The Home Loan Application and Mortgage Approval

 

Title: Do You Pass The Mortgage Lender Analysis? Understanding The Home Loan Application and Mortgage Approval

Author: TJ Nelson

Article:

When a mortgage lender reviews a real estate loan application, the primary concern for both home loan applicant and the mortgage lender is to approve loan requests that show high probability of being repaid in full and on time, and to disapprove requests that are likely to result in default and eventual foreclose. How is the mortgage lenders decision made?

The <a href="http://www.bad-credit-mortgage-refinance-advisor.com/mortga

ge-lender.html">mortgage lender</a> begins the loan analysis procedure by looking at the property and the proposed financing. Using the property address and legal description, an appraiser is assigned to prepare an appraisal of the property and a title search is ordered. These steps are taken to determine the fair market value of the property and the condition of title. In the event of default, this is the collateral the lender must fall back upon to recover the loan. If the loan request is in connection with a purchase, rather than the refinancing of an existing property, the mortgage lender will know the purchase price. As a rule, home loans are made on the basis of the appraised value or purchase price, whichever is lower. If the appraised value is lower than the purchase price, the usual procedure is to require the buyer to make a larger cash down payment. The mortgage lender does not want to over-loan simply because the buyer overpaid for the property.

The year the home was built is useful in setting the loan's maturity date. The idea is that the length of the home loan should not outlast the remaining economic life of the structure serving as collateral. Note however, chronological age is only part of this decision because age must be considered in light of the upkeep and repair of the structure and its construction quality.

<b>Mortgage Lenders and Redlining</b>

In the past, it was not uncommon for mortgage lenders to refuse to make loans in certain neighborhoods regardless of the quality of the structure or the ability of the borrower to repay. This was known as redlining and it effectively shut off mortgage loans in many older or so-called "bad risk" neighborhoods across the country. Today, a mortgage lender cannot deny a loan application solely because of the age of a building or because of neighborhood income level or racial composition. To assure compliance, the federal government requires mortgage lenders who make federally-related home loans to disclose the number of loans made in various sections of their service area.

A lender can refuse to lend on a structure intended for demolition, a property in a known geological hazard area, a property that is in violation of zoning laws, deed covenants, conditions, or restrictions, or significant health, safety, or building codes, or upon a single family dwelling in a n area devoted to industrial or commercial use.

<b>Loan-to-Value Ratios</b>

The lender next looks at the amount of down payment the borrower proposes to make, the size of the loan being requested and the amount of other financing the borrower plans to use. This information is then converted into loan-to-value ratios. As a rule, the more money the borrower places into the deal, the safer the loan is for the mortgage lender. On an uninsured home loan, the ideal loan-to-value ratio for a lender on owner-occupied residential property is 70% or less. This means the value of the property would have to fall more than 30% before the debt owed would exceed the property's value, thus encouraging the borrower to stop making mortgage loan payments. Because of the nearly constant inflation in housing prices since the 40s, very few residential properties have fallen 30% or more in value.

Loan-to-value ratios from 70% through 80% are considered acceptable but do expose the mortgage lender to more risk. Lenders sometimes compensate by charging slightly higher interest rates. Loan-to-value ratios above 80% present even more risk of default to the lender, and the lender will either increase the interest rate charged on these home loans or require that an outside insurer, such as FHA or a private mortgage insurer, be supplied by the borrower.

<b>Mortgage Closing Settlement Funds</b>

The lender then wants to know if the borrower has adequate funds for settlement (the closing). Are these funds presently in a checking or savings account, or are they coming from the sale of the borrower's present real estate property? In the latter case, the mortgage lender knows the present loan is contingent on another closing. If the down payment and settlement funds are to be borrowed, then the lender will want to be extra cautious as experience has shown that the less of his own money a borrower puts into a purchase, the higher the probability of default and foreclosure.

<b>Purpose Of Mortgage Loan</b>

The lender is also interested in the proposed use of the property. Mortgage lenders feel most comfortable when a home loan is for the purchase or improvement of a property the loan applicant will actually occupy. This is because owner-occupants usually have pride-of-ownership in maintaining their property and even during bad economic conditions will continue to make the monthly payments. An owner-occupant also realizes that if he/she stops paying, they will have to vacate and pay for shelter elsewhere.

If the home loan applicant intends to purchase a dwelling to rent out as an investment, the lender will be more cautious. This is because during periods of high vacancy, the property may not generate enough income to meet the loan payments. At that point, a strapped-for-cash borrower is likely to default. Note too, that lenders generally avoid loans secured by purely speculative real estate. If the value of the property drops below the amount owed, the borrower may see no further logic in making the loan payments.

Lastly the mortgage lender assesses the borrower's attitude toward the proposed loan. A casual attitude, such as "I'm buying because real estate always goes up," or an applicant who does not appear to understand the obligation he is undertaking would bring low rating here. Much more welcome is the home loan applicant who shows a mature attitude and understanding of the mortgage loan obligation and who exhibits a strong and logical desire for ownership.

<b>The Borrower Analysis</b>

The next step is the mortgage lender to begin an analysis of the borrower, and if there is one, the co-borrower. At one time, age, sex and marital status played an important role in the lender's decision to lend or not to lend. Often the young and the old had trouble getting home loans, as did women and persons who were single, divorced, or widowed. Today, the Federal Equal Credit Opportunity Act prohibits discrimination based on age, sex, race and marital status. Mortgage lenders are no longer permitted to discount income earned by women even if it is from part-time jobs or because the woman is of child-bearing age. Of the home applicant chooses to disclose it, alimony, separate maintenance, and child support must be counted in full. Young adults and single persons cannot be turned down because the lender feels they have not "put down roots." Seniors cannot be turned down as long as life expectancy exceeds the early risk period of the loan and collateral is adequate. In other words, the emphasis in borrower analysis is now focused on job stability, income adequacy, net worth and credit rating.

Mortgage lenders will ask questions directed at how long the applicants have held their present jobs and the stability of those jobs themselves. The lender recognizes that loan repayment will be a regular monthly requirement and wishes to make certain the applicants have a regular monthly inflow of cash in a large enough quantity to meet the mortgage loan payment as well as their other living expenses. Thus, an applicant who possesses marketable job skills and has been regularly employed with a stable employer is considered the ideal risk. Persons whose income can rise and fall erratically, such as commissioned salespersons, present greater risk. Persons whose skills (or lack of skills) or lack of job seniority result in frequent unemployment are more likely to have difficulty repaying a home loan. The mortgage lender also inquires as to the number of dependents the applicant must support out of his or her income. This information provides some insight as to how much will be left for monthly house payments.

<b>Home Loan Applicants' Monthly Income</b>

The lender looks at the amount and sources of the applicants' income. Sheer quantity alone is not enough for home loan approval; the income sources must be stable too. Thus a lender will look carefully at overtime, bonus and commission income in order to estimate the levels at which these may reasonably be expected to continue. Interest, dividend and rental income would be considered in light of the stability of their sources also. Under the "other income" category, income from alimony, child support, social security, retirement pensions, public assistance, etc. is entered and added to the totals for the applicants.

The lender then compares what the applicants have been paying for housing with what they will be paying if the loan is approved. Included in the proposed housing expense total are principal, interest, taxes and insurance along with any assessments or homeowner association dues (such as in a condominium or townhomes). Some mortgage lenders add the monthly cost of utilities to this list.

A proposed monthly housing expense is compared to gross monthly income. A general rule of thumb is that monthly housing expense

(PITI) should not exceed 25% to 30% of gross monthly income. A second guideline is that total fixed monthly expenses should not exceed 33% to 38% of income. This includes housing payments plus automobile payments, installment loan payments, alimony, child support, and investments with negative cash flows. These are general guidelines, but mortgage lenders recognize that food, health care, clothing, transportation, entertainment and income taxes must also come from the applicants' income.

<b>Liabilities and Assets</b>

The lender is interested in the applicants' sources of funds for closing and whether, once the loan is granted, the applicants have assets to fall back upon in the event of an income decrease (a job lay-off) or unexpected expenses such as hospital bills. Of particular interest is the portion of those assets that are in cash or are readily convertible into cash in a few days. These are called liquid assets. If income drops, they are much more useful in meeting living expenses and mortgage loan payments than assets that may require months to sell and convert to cash; that is, assets which are illiquid.

A mortgage lender also considers two values for life insurance holders. Cash value is the amount of money the policyholder would receive if he surrendered his/her policy or, alternatively, the amount he/she could borrow against the policy. Face amount is the amount that would be paid in the event of the insured's death. Mortgage lenders feel most comfortable if the face amount of the policy equals or exceeds the amount of the proposed home loan. Less satisfactory are amounts less than the proposed loan or none at all. Obviously a borrower's death is not anticipated before the loan is repaid, but lenders recognize that its possibility increases the probability of default. The likelihood of foreclosure is lessened considerably if the survivors receive life insurance benefits.

A lender is interested in the applicants' existing debts and liabilities for two reasons. First, these items will compete each month against housing expenses for available monthly income. Thus high monthly payments may reduce the size of the loan the lender calculates that the applicants will be able to repay. The presence of monthly liabilities is not all negative: it can also show the mortgage lender that the applicants are capable of repaying their debts. Second, the mortgage applicants' total debts are subtracted from their total assets to obtain their net worth. If the result is negative (more owed than owned), the mortgage loan request will probably be turned down as too risky. In contrast, a substantial net worth can often offset weaknesses elsewhere in the application, such as too little monthly income in relation to monthly housing expense.

<b>Past Bad Credit or Good Credit Record</b>

Lenders examine the applicants' past record of debt repayment as an indicator of the future. A credit report that shows no derogatory information is most desirable. Applicants with no previous credit experience will have more weight placed on income and employment history. Applicants with bad credit, a history of collections, adverse judgments or bankruptcy within the past three years will have to convince the lender that this mortgage loan will be repaid on time. Additionally, the applicants may be considered poorer risks if they have guaranteed the repayment of someone else's debt by acting as a co-maker or endorser. Lastly, the lender may take into consideration whether the applicants have adequate insurance protection in the event of major medical expenses or a disability that prevents returning to work.

When a mortgage lender will not provide a home loan on a property, one must seek alternative sources of financing or lose the right to purchase the home.

 

 

About the author:

 

With twenty plus years experience as a real estate agent, appraiser and real estate investor TJ Nelson, <a href="http://www.bad-credit-mortgage-refinance-advisor.com">Mortg

age Refinance Advisor</a>, provides the tools for people with bad credit to acquire the American dream, home ownership.</p>

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10 Tips on Financing Commercial Real Estate

 

Title: 10 Tips on Financing Commercial Real Estate

Author: Groshan Fabiola

Article:

If you are hoping to purchase commercial real estate property, then you are most likely going to need financing in order to do this. That is unless you were born fabulously and independently wealthy. There are certain things that lending institutions expect from those they are getting ready to summarily hand large sums of money to. Hopefully, the following tips will help insure that you get the best possible financing for your commercial real estate investment.

1) Make sure you have all the documents you need and that they are accurate and up to date. You need to have a solid business plan in place with facts, figures, estimates, and forecasts. Lenders are making an investment and taking a huge risk when dealing with commercial real estate. If you don't have a business plan that indicates that you have put a great amount of time, effort, energy, and thought into your business, they are going to be less than enthusiastic about the prospect of taking that risk.

2) Have money of your own to invest in the property. For most commercial real estate investments you will need a down payment, closing costs, earnest money, and points that may be required. Banks want to share the risk not absorb it. By taking some of the risk upon yourself, you are actually lessening their risks while increasing their confidence in your ability to make good on your debt to them.

3) Have paperwork that shows the solidity of this property as an investment. You need to have your business plan, financial records, forecasts and projections, history of income on the property, and the appraisal of the property when you approach lending institutions. This lets the bank know that you take this venture seriously and that you are organized.

4) Come into the deal with a current appraisal of the property. This can make all the difference in the world. Even if the bank requires you to have another appraisal, it is a good idea to have your own appraisal of the property before you even make an offer on the property. An appraisal will provide you with and unbiased estimate of what the property is truly worth and it will help you determine what kind of risk you are really taking before you've put money on the table.

5) You will need financial statements for either yourself or your business. This is a no brainer, but you would be surprised by how many are really shocked when they are asked for this information. Banks are lending you a large sum of money they want to be assured that you are fiscally responsible and somewhat solvent.

6) Have an attorney who specializes in real estate investments go over everything with a fine-toothed comb. You need someone who knows the business and will be an aggressive advocate on your behalf.

7) Be absolutely certain that you can afford to keep your business operating and still make the payments on the business. If you can't do this, or you aren't certain of your ability to do so, then either now is not the best time for you, or this is not the right investment for you.

8) Check with your local small business administration and see what services they have available to first time business investors and/or small business owners. They have a wealth of resources available it would be a shame to miss out on a potential grant or low interest loan simply because you neglected to check with them from the start.

9) Negotiate. You do not have to take the first offer you get. Be an aggressive advocate for yourself and your business. Learn this skill early and it will serve you well in your business.

10) Check out several lenders and go with the one that offers you the best deal. Remember this is a hefty investment and an unfavorable loan could increase the burden greatly.

This is your investment in your future; protect it aggressively. These tips should help you get the financing that is so vitally necessary when purchasing commercial real estate.

Apply For A Business or Commercial Real Estate Loan using our FREE Loan Application - compare rates and contact multiple lenders. We have over 300 commercial, business and construction lenders as well as private equity groups waiting to help you. Best of all, GlobalBX is FREE!

© 2006 GlobalBX. All Rights Reserved.

About the author:

<A href="http://www.globalbx.com/business-loan-real-estate-loan.asp"

>Commercial Real Estate Financing</A> - <A

href="http://www.globalbx.com/business-loan-real-estate-loan.asp"

>Get a Commercial Loan</A> for business and commercial real

estate! Compare rates and contact multiple <A href="http://www.globalbx.com/business-loan-real-estate-loan.asp"

>commercial lenders</A> for FREE at GlobalBX!

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Be Aware of These Common Mortgage Pitfalls

 

Title:

 

Title: Be Aware of These Common Mortgage Pitfalls

Author: Rick Johnston

Article:

One of the things that people that invest in real estate sometimes have to do is get a refinance on their current mortgage. This article details some of the issues that I've had to deal with when getting a refinance.

Mortgage Brokers

This happens a lot. You start talking to a broker and he promises you the earth, moon and stars all at 6 percent interest. However when you get further along in the process, usually after the point when you can cancel without losing a ton of money or the house you want, the broker will tell you that some aspect of your loan has changed. Whether it be the interest rate or the fees, none of it is usually good news. Now's a good time to remind you about the difference between the interest rate and the APR. The APR is the number that reflects the fees attached to your loan. The mortgage officer will give you a Fair Lending truth in lending statement that will have your interest and APR rates. A rule of thumb I use is that your APR shouldn't be more than .25 percent of your interest rate. I'd suggest you try to beat your agent and your mortgage broker up on his fees and get it in writing. If you're buying, I'd suggest you tell the seller that you want him to pay all closing costs. The real estate market is weak in just about all areas of the country, so take advantage of some deals.

Mortgage Seasoning

This is when you take a mortgage out on a property, fix it up, then try to get it reappraised at the new higher value so you can cash out your equity to pay for the repairs and to pay yourself hopefully. Many banks will stop you cold right there because the old mortgage hasn't been 'seasoned' enough. That is you haven't had the loan long enough to justify the increased appraisal amount. The reason why a bank would do this is to prevent fraud. Imagine a situation where you buy a really rundown house. Then an appraiser comes in and appraises it for a lot more than what it's worth. Then you keep the difference.

If you get stuck by a seasoning rule at one bank, you can always go to another. Sometimes the bank will accept the receipts of the work done as proof that the house's value has increased.

Commerical Property Loans

Most people know the rule that if it's over 4 units then it's a commercial property loan. What about if one of the units within the building used to be a commercial storefront while the remaining units stayed residential? There are some ways to cope with this. One is to tell the bank that the commerical unit is no longer being used for commerical purposes. That's what we did with the purchase and refinance of our 4 unit building.

HUD Settlement Statement

Your HUD Settlement Statement is the document you get at closing that details your transaction. It is frequently wrong. I've done about 50 deals and on 10 percent of them the statement had a wrong fact or misprint. Check with your agent before going into closing to see if he can review a trial HUD statement before you sign to make sure you're not stuck with something that's not in your contract.

There are three things that you have to keep an eye out for as a real estate investor. If you don't prepare for it each one can cost a bundle.

About the author:

<a href="http://www.arecreditreportsfree.com">http://www.arecreditre

portsfree.com</a> is a site dedicated to the free flow of information about the refinancing mortgages and <a title="Mortgage Seasoning" href="http://www.arecreditreportsfree.com">mortgage

seasoning</a>.

Author: Rick Johnston

Article:

One of the things that people that invest in real estate sometimes have to do is get a refinance on their current mortgage. This article details some of the issues that I've had to deal with when getting a refinance.

Mortgage Brokers

This happens a lot. You start talking to a broker and he promises you the earth, moon and stars all at 6 percent interest. However when you get further along in the process, usually after the point when you can cancel without losing a ton of money or the house you want, the broker will tell you that some aspect of your loan has changed. Whether it be the interest rate or the fees, none of it is usually good news. Now's a good time to remind you about the difference between the interest rate and the APR. The APR is the number that reflects the fees attached to your loan. The mortgage officer will give you a Fair Lending truth in lending statement that will have your interest and APR rates. A rule of thumb I use is that your APR shouldn't be more than .25 percent of your interest rate. I'd suggest you try to beat your agent and your mortgage broker up on his fees and get it in writing. If you're buying, I'd suggest you tell the seller that you want him to pay all closing costs. The real estate market is weak in just about all areas of the country, so take advantage of some deals.

Mortgage Seasoning

This is when you take a mortgage out on a property, fix it up, then try to get it reappraised at the new higher value so you can cash out your equity to pay for the repairs and to pay yourself hopefully. Many banks will stop you cold right there because the old mortgage hasn't been 'seasoned' enough. That is you haven't had the loan long enough to justify the increased appraisal amount. The reason why a bank would do this is to prevent fraud. Imagine a situation where you buy a really rundown house. Then an appraiser comes in and appraises it for a lot more than what it's worth. Then you keep the difference.

If you get stuck by a seasoning rule at one bank, you can always go to another. Sometimes the bank will accept the receipts of the work done as proof that the house's value has increased.

Commerical Property Loans

Most people know the rule that if it's over 4 units then it's a commercial property loan. What about if one of the units within the building used to be a commercial storefront while the remaining units stayed residential? There are some ways to cope with this. One is to tell the bank that the commerical unit is no longer being used for commerical purposes. That's what we did with the purchase and refinance of our 4 unit building.

HUD Settlement Statement

Your HUD Settlement Statement is the document you get at closing that details your transaction. It is frequently wrong. I've done about 50 deals and on 10 percent of them the statement had a wrong fact or misprint. Check with your agent before going into closing to see if he can review a trial HUD statement before you sign to make sure you're not stuck with something that's not in your contract.

There are three things that you have to keep an eye out for as a real estate investor. If you don't prepare for it each one can cost a bundle.

About the author:

<a href="http://www.arecreditreportsfree.com">http://www.arecreditre

portsfree.com</a> is a site dedicated to the free flow of information about the refinancing mortgages and <a title="Mortgage Seasoning" href="http://www.arecreditreportsfree.com">mortgage

seasoning</a>.

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Step By Step Short Sale Process

Title: Step By Step Short Sale Process

Author: D Carter

Article:
To make things easier for realtors here is the information you
will need to do a short sale. Investors can use this guide also
there are just a few things that are done differently.

1. Get a list of people in foreclosure or work from your
referral base to send letter to potential clients in foreclosure.

2. Talk with homeowners

3. Meet with homeowners in foreclosure

4. Tell them you are a realtor and that you will be contacting
the bank to list your property at a discount + your fee.

5. Get paperwork from homeowner to show the bank that there is a
hardship.

6. Paperwork includes: a. Authorization to Release Loan
Information b. Cover letter c. Listing contract agreement d. 2
year tax returns e. W-2 f. 2 Months Bank Statements g. Hardship
letter h. Personal financial statement

7. Call bank or lender to get loss mitigation number or use the
list in this book.

8. Contact loss mitigation and fax over authorization

9. Call 2 days later and make sure the authorization is in their
system.

10. Once authorization is in system, send over short sale
package to the loss mitigation fax. (Note the fax may be the
same for the authorization and short sale package)

11. Wait 3 to 5 days call loss mitigation to make sure they got
the paperwork.

12. Meet BPO appraiser at the property to get the price that you
need to sell the house at.

13. Once assigned to negotiator, then work with them to get the
price you need to sell the property and get the time you need to
sell it.

14. Once you get the ok from the negotiator, sell the property.

15. Sometimes in the MLS you will see the agent put short sale
contingent upon bank approval. This has to do with the offers,
if it is too low the banks will not sell.

I have given you a step-by-step guide to doing a short sale. I
have been doing deals for a long time, so everything I am
telling you works. These are tested methods, not theory. You
must consistently call the lender and keep marketing.
Consistency will get you the great deals to be successful at
this type of business. Good Luck!

About the author:
I came across was real estate investing, and it has changed my
life for the better. For the last ten years I have been creating
wealth and generating large paychecks on deal after deal. To
help you out I am giving away 27 must have real estate legal
forms and 6 ebooks on real estate investing for free just go to
http://www.TheRealEstateLegalWizard.com

Copyright 2007 Derek Carter

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Signing Over the Deed to Stop Foreclosure Quickly

Title: Signing Over the Deed to Stop Foreclosure Quickly

Author: ForeclosureFish.com

Article:
There are a lot of bad ideas and disinformation floating around
in regards to transferring title to a property to stop
foreclosure. It seems like such a simple solution on its face:
transfer the property to someone else's name and the bank will
suddenly find itself foreclosing on a property that is no longer
owned by the original homeowners paying the mortgage. Some
sources even recommend this tactic to foreclosure victims for
the purpose of saving the home or avoiding the damaging effects
of foreclosure on one's credit. But this solution will not
result in any beneficial situation for homeowners and can
actually put them in a worse situation.

When a homeowner in foreclosure transfers ownership of the
property, they lose control of the house. They give the legal
rights to the property away, and can not sell the house,
refinance it, or even give the lender a deed in lieu of
foreclosure. Many of the options to avoid foreclosure are
unavailable once the foreclosure victims no longer own the
house, unless they get permission from the new owner for
whatever plan they decide to work on. Retaining ownership of the
property for as long as it is in foreclosure is a vital part of
retaining control of what happens during the foreclosure process.

Even though a homeowner can transfer ownership of the property,
though, there is no way to transfer responsibility for paying
the mortgage. Homeowners who do this will find that they no
longer control a property that they still have a loan on, and
that the loan is still in default and that the lender is still
suing them to take the property. Transferring ownership does not
affect the responsibility to find a solution to foreclosure, as
it does not affect the homeowners who promised to pay back the
mortgage loan. Some mortgages will allow a third party to assume
the loan, but this still requires approval by the mortgage
company and will not stop foreclosure unless the new party
becomes current on the loan by paying the defaulted amount.

Transferring ownership would also not affect the bank's ability
to sue for a deficiency judgment. Mortgage companies will sue
the debtor on the loan, rather than the owners of the property,
so they will come after the parties signed on the mortgage in
the unlikely event of a deficiency judgment. However, it is
important to keep in mind that banks rarely sue for deficiency
judgments, because they know that homeowners in foreclosure do
not have a lot of extra cash to pay another judgment. In fact,
suing former homeowners often costs the bank too much in terms
of time and court fees, and they have already experienced a loss
on the sheriff sale of the property (which creates the
deficiency in the first place). It is simply not worth their
time to attempt pursuing more money they will not be able to
collect.

One final danger of transferring ownership of a property in
foreclosure arises when <a
href="http://www.foreclosurefish.com/scams.htm">foreclosure
scam</a> operators persuade unsuspecting homeowners to transfer
the title. They convince homeowners that transferring ownership
will stop the foreclosure, and the former foreclosure victims
will be able to start making payments to the scammer, until they
have repaired their credit and can refinance. Too often, though,
these schemes result in homeowners paying "rent" to the scam
operator while the bank is still pursuing the foreclosure,
wasting thousands of dollars on a solution that they thought was
legitimate. The foreclosure scam will collect the payments until
the homeowners are evicted, never using the money for any
purpose beyond their own personal uses, and move on to another
family facing the loss of their homes.

It is almost never a good idea to transfer ownership of a
property while facing foreclosure. Unless the property is being
outright sold, either through a conventional sale or a short
sale, homeowners need to retain the most control of the property
that they possibly can. Signing over the deed to anyone
precludes a number of solutions that may be used to stop
foreclosure, and transferring ownership can make homeowners easy
victims to predators. Gaining as much foreclosure advice as
possible will help homeowners understand when, if ever, to
consider transferring ownership of their property and if they
are becoming the potential victim of a foreclosure scam. As a
general rule, though, foreclosure victims need as much control
as possible in order to come up with the best solution to save
their homes.

About the author:
The ForeclosureFish.com website provides homeowners with free <a
href="http://www.foreclosurefish.com/assistedhelp.htm">foreclosur
e advice</a> and resources designed to help them save their
homes from foreclosure on their own. Visit the site today and
search through hundreds of pages of information and articles,
and download a free foreclosure e-book:
http://www.foreclosurefish.com/
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Buy vs Rent - Advantages and Disadvantages

Title: Buy vs Rent - Advantages and Disadvantages

Author: David Zwierecki

Article:
With it being a buyer's market right now, does that mean it is
the right time to buy? Should I wait another year or two for the
real estate market to come back and for interest rates to come
back down? If you are confused about whether you should still
continue renting or look into buying, read on...

Renting and buying both have their advantages and disadvantages.
In the current real estate market is it more advantageous to buy
a home or a condo, or should you continue renting a house or an
apartment. Right now, it is considered a buyer's market. A
buyer's market is one that presents more homes for sale than
there are buyers available to buy. Thus sellers will do almost
anything to sell their home, especially if they are desperate to
sell.

Some advantages of renting an apartment or home are that you are
not locked into a long term obligation like being a homeowner
with a 30 year mortgage, you don't have to worry about your
property value depreciating, there is no need to worry about
increases in property taxes and homeowners insurance, a rental
is much easier to decide to up and move from than a home, and
you normally don't have a lot of exterior maintenance to take
care of when renting.

On the flip side of this there are also some disadvantages to
renting instead of buying such as: all of your rental money is
going to someone else and you are not building any equity in a
rental, you are limited to what you are permitted to do to the
property (painting, adding on, remodeling, etc...), you will
have less privacy in a rental than owning a home under most
circumstances, and you are at the mercy of your landlord.

Some advantages of owning a home are that you are making
payments to build equity in your home, you have more freedom to
do what you would like with your property (home improvements,
remodeling, etc...), you have a place to call your own, a status
symbol for some, and tax advantages that are not available to a
renter.

Owning a home has it's disadvantages too, such as yard work,
home maintenance and repairs, long term obligations, tax and
insurance payments (that normally increase), responsibilities,
and necessary improvements.

Thus, as you can see owning a home or renting a place of your
own both have advantages and disadvantages. What is right for
you truly depends on you, your family and your goals and dreams.
Current market conditions may play a big role in your decision
as well. For instance we are currently in a buyers market and
many homes are being sold for under market value and/or are
having extras thrown in as incentives to buy. These extras may
include home warranties, cash, car leases, thousands of dollars
in gift certificates to home improvement or furniture stores and
much more. Interest rates are still very low and all of these
factors alone can make the current market conditions really
worth considering buying a home versus renting. Therefore, make
a list of pros and cons for you and your family on what would be
best for all of you. If you intend to move within a year renting
may be best for you as a short term solution, however, if you
are planning on settling down somewhere you may want to look
more into buying.

About the author:
The author of this article, Dave Zwierecki, is the President of
First Security Financial Service and has over 10 years of
experience in the credit, mortgage lending, and home improvement
fields. He is the owner of http://www.NoMoneyDown123.com and
http://www.TheMortgageU.com, which are both sites devoted to the
education of consumers regarding real estate, mortgage, credit,
and home improvement related material.

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FHA or Conventional - Pros and Cons

Title: FHA or Conventional - Pros and Cons

Author: David Zwierecki

Article:
FHA and Conventional mortgage loans have both been around for a
long time. They will most likely both be around for a lot longer
as well. Even with the recent "mortgage meltdown" as Wall Street
is calling it, both types of mortgage financing are here to
stay. Actually, with the mortgage crisis that is being discussed
in every newspaper and on every news channel in the nation, FHA
loans are beginning to become increasingly popular again.

The FHA, Federal Housing Administration, has been insuring
properties since it was established in 1934. FHA tends to be
more lenient when it comes to credit, credit scores, calculating
income and certain underwriting guidelines than conventional
mortgage lending. FHA was designed to assist potential
homeowners with owning a home for less money and easier qualify
criteria than typical mortgage loans. FHA is the only government
agency that operates without a dime of money generated from
taxes and operates from self-generated income alone. Unlike
traditional mortgage lending, FHA does not use credit scores as
a main determining factor as to whether a consumer qualifies for
a home mortgage loan or not. Instead, they look down deeper into
a consumer's file, payment history and their overall worthiness
as a borrower. FHA interest rates are generally very similar to
conventional mortgage loan interest rates and qualifying is
generally much simpler. So why doesn't everybody just get an FHA
loan since they sound so wonderful? Well FHA loans do have
stricter guidelines when it comes to a property, the condition
of the property, and their appraisal requirements. Along with
this FHA loans add what is called an MIP fee on top of your loan
amount which is 1.5% of the loan amount. Thus if you were buying
a home for 100,000 you would actually be borrowing 101,500. This
fee is for what is known as Mortgage Insurance Premium. This is
different than PMI and the MIP is required on all FHA loans,
regardless of down payment or equity in the home. FHA mortgage
loans also require a monthly mortgage insurance premium which is
included in your monthly payment for all loans that do not have
at least 20% equity or a 20% down payment made. Therefore, while
there are advantages to FHA loans, there are also some
disadvantages to.

Conventional loans have been around for a long time as well.
While FHA used to own such a large percentage of mortgages with
lower credit scores and more lenient income and underwriting
guidelines, conventional loans have started coming out with
programs to compete with FHA loan products. Fannie Mae, or FNMA,
has come out with a My Community loan program that allows for as
little as no down payment and has much less restrictions when it
comes to credit and credit scores. Freddie Mac, or FHLMC, has
also come out with a product of their own which is called Home
Possible to compete with FHA as well. Conventional loans are
more driven by credit scores, assets, compensating factors, loan
terms and other items. Both of these products are becoming
increasingly popular and a great alternative to FHA loans in
many situations. These programs allow for the same great
conventional loan rates, lower credit score requirements than a
normal conventional loan, and the ease and quickness of the
conventional loan process from start to finish. Conventional
loans will also require the use of PMI for mortgages without a
20% down payment as well, but with some conventional loan
products there are ways around the PMI requirements. There is no
MIP added to your loan amount on conventional loans like there
are with FHA loans, but the PMI on a conventional loan is
generally a little higher than the monthly MI on an FHA loan.

Therefore, both types of mortgage programs, FHA and
Conventional, have their pros and cons and they both provide a
quality mortgage product for qualified consumers. Some
situations will call for an FHA loan and with the recent
subprime meltdown and the topsy-turvy mortgage market right now,
FHA loans are becoming more and more popular. However, I would
still recommend contacting a conventional mortgage lender first
to obtain your mortgage from and if you do not qualify there,
then try the FHA route. Neither type of mortgage is a bad
decision and whichever option can get you into a home at a
payment you can afford is a good choice.

About the author:
The author of this article, Dave Zwierecki, is the President of
First Security Financial Service and has over 10 years of
experience in the credit, mortgage lending, and home improvement
fields. He is the owner of http://www.GoFirstSecurity.com and
http://www.TheMortgageU.com, which are both sites devoted to the
education of consumers regarding real estate, mortgage, credit,
and home improvement related material.
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Buying Homes From A Sheriff Sale

Title: Buying Homes From A Sheriff Sale

Author: David Zwierecki

Article:
Buying a home from a sheriff sale can be a great way to purchase
a home. However there are a lot of factors to consider when
going to the county courthouse to find that special bargain.
Read on for a list of important factors to consider when buying
a home from sheriff sale or sheriff auction.

When placing a bid to buy a home at sheriff sale you need to be
aware that a 10% down payment is required immediately proceeding
the auction. This 10% needs to be in the form of personal check,
certified check or cash (although some counties do not accept
personal check). If you do not know how much money you are going
to be able to buy the home for then you may want to obtain a
certified check in the amount of the maximum that you intend to
bid for a certain house and this way you have enough to cover
the 10% and you do not go over the amount you intended to bid.

After you have successfully placed the highest bid and won an
auction for a specific home you will have 30 days from then to
come up with the remainder of the balance of the home. The
remaining balance of the purchase price is due by certified
check only. You will generally have 8 days from the date of the
auction to come up with the balance in full without interest
being assessed, however you will have up to 30 days to come up
with the remaining balance with interest being assessed per day.
If you are not able to pay the remaining balance within 30 days
you can request an extension, which are not always granted, or
you will be held in contempt of court and risk losing your 10%
down payment. Understand that winning an auction is a legally
binding agreement and you are bound to the terms of the
sheriff's department and their policies and laws for a sheriff
sale.

Financing from traditional mortgage lenders on sheriff sale
homes is usually very difficult to obtain. Most mortgage lenders
will want to have a full appraisal done, inside and out, and
even if you are the winning bidder of a home and pay your 10%,
you still do not and will not have access to get onto the
property or inside the home. Therefore, getting an appraisal is
extremely difficult. Also, many homes that have been foreclosed
upon and are being sold via auction have been run down, poorly
maintained and also have some problems with them. Depending on
the severity of these items, many lenders do not want to get
involved in properties of this nature.

Finally, bidding usually starts at 2/3's of the county assessed
value of the home and the homes will not generally be sold for
less than this. Most lenders will send a representative from
their attorney's office to the sheriff sales to bid on the homes
to buy them back. Usually, lenders will not allow a home to be
sold at sheriff sale for below what is owed on the current
mortgage. Therefore, knowing roughly how much was owed on a
mortgage prior to going to the sheriff sale is very helpful. Not
all lenders send a representative to every auction to buy a home
back, but most do. Sometimes, homes that do not sell at auction
will be attempted to be sold again at a future sheriff sale with
the starting price being decreased. This is when your
opportunity to buy a home for way below market value really
increases.

Therefore, it is important to understand that by bidding on a
home you are agreeing that if you are the winning bidder you
will pay the full amount of your bid, plus interest if
applicable for the home or you can be held in contempt of court
and possibly lose your down payment, along with other court
costs and fees. It is wise to do your homework on a property
before bidding on it to make sure that you are indeed getting a
good deal. Finally know what your maximum bid is for each
property that you intend to bid on and never exceed that bid.
Understanding the information above can better help you to
prepare for a sheriff sale or sheriff auction and help to make
sure that you do not end up losing a substantial amount of
money. For more information on buying foreclosed homes, please
visit:
http://www.gofirstsecurity.com/Purchase/buying_foreclosed_homes.h
tm

About the author:
The author of this article, Dave Zwierecki, is the President of
First Security Financial Service and has over 10 years of
experience in the credit, mortgage lending, and home improvement
fields. He is the owner of
http://www.First-Time-Homebuyer-Site.com and
http://www.TheMortgageU.com, which are both sites devoted to the
education of consumers regarding real estate, mortgage, credit,
and home improvement related material.


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Making the Perfect Judgment in Mortgage Refinancing

Title: Making the Perfect Judgment in Mortgage Refinancing

Author: Alex Ivanov

Article:
If there's one reality that should be accepted by mortgage
borrower that is the fact that mortgage interest rates nowadays
are soaring unrelentingly. Consequently, the used to be lustrous
Adjustable Rate Mortgages was already outshined by the
conventional fixed interest loans for mortgage.

In the event that you decide to take mortgage refinancing and
have a foreseeable mortgage payment you would need to work out
your budget. Probably you may take the 30 year fixed interest
rate mortgage loan, but it should be paired up with enough
knowledge regarding mortgage refinancing so that you won't end
up outspending.

Be informed

Knowledge is the key for you to be able to direct everything to
a path that is lucrative for you. Yes it popular and for some it
is the best option to take, but are you guaranteed that it would
function in the same way with you? The first step for you to
take to be able to calculate the risk of what you are settling
in, is to investigate the existing market and some accessible
services which you can take advantage of.

The benefits

If you are a homeowner with an untarnished credit, then you
might just be looking at a blessing thrown from heaven because
you can experience having lower rates than what the others with
bad credit has to endure. Not to mention the fact that you get
high appreciation for your property.

Refinancing may also be beneficial for you, as soon as you reach
the moment known as the reassessment phase, wherein the payment,
terms and the interest rates would most likely be altered at
that point. The hybrid loans which are especially offered by
mortgage refinancing gives you a fixed rate while choosing from
an adjustable rate of the so called balloon payment which is
characterized by balanced due.

This option may actually give you either gains or costs, but for
you to be able to weigh which is the best option then you must
learn to conduct a basic comparison. Simply evaluate the costs
the loan where you are in as of the moment and a potential loan
which you are taking into consideration for future action.

Due to the fact that you can only estimate how much you are
going to pay subject to you capacity to pay, you can only
predict the length of time when you would be able to handle a
new mortgage. If you were able to sum up all the costs and it is
lower than what you currently then you must refinance.

How much to borrow

Though it is the discretion of the lending agency to provide you
with the amount of refinancing loan which you have applied for,
but there are times when they would just give you less.

They are most likely to consider your capacity to pay them back,
your credit history, previous monetary responsibility and the
appraisal of your home. In reality, the advantages offered by
refinancing were really amazing, but for you to be able to
maximize it you must also gauge the perfect timing when to
settle for it.

About the author:
LoanGuru.org and HomeEquityLoanStore.org provide professional
financial services with free quotes form multiple lenders: <a
href="http://homeequityloanstore.org">home equity loans</a>, <a
href="http://homeequityloanstore.org">home equity loan</a>, <a
href="http://loanguru.org">loan guru</a> and other types of
loans for any individual's financial needs.
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Tax Consequences of Foreclosures

Title: Tax Consequences of Foreclosures

Author: Richard A. Chapo

Article:
As we all know by watching the news, the real estate market is
pulling back hard from the days of glory earlier this decade. In
fact, many people are losing their homes to foreclosure. Few
realize the tax consequences of losing one's home.

The Internal Revenue Service looks at things in a strange
manner. What you may see as a loss, it sees as a gain. How could
this possibly be? Well, the agency takes the view that any loss
that relieves you of a financial obligation is actually a
monetary gain. Let's look at an example.

Assume I own a house. I am carrying a $200,000 mortgage on the
home. I run into problems making the payments and the home goes
into foreclosure. I eventually am evicted and the bank takes
back the home. I have lost the house and my credit is a
disaster, but I am off the hook for the $200,000. Life could be
worse, right? Well, it is about to get much worse.

The IRS is very interested in that $200,000 mortgage debt. The
agency takes the view that the relief from that debt can
actually be considered income to me. Yes, the IRS views the
foreclosure as though I have received a $200,000 salary for the
year. You can guess what comes next. The agency wants me to pay
taxes on it!

As foreclosures go up around the nation, more and more people
are getting very surprising letters from the IRS. It isn't bad
enough that you have lost your home, you now have a monstrous
tax bill. This also applies to situations where a short sale is
undertaken.

So, is there anything you can do? Yes. The key is to get an
appraisal of the home before you are foreclosed on. This forces
the lender to value the home at an objective price, not some low
figure it arbitrarily sets. This is important as you are taxed
on the difference between the value of the home and what you
owe.

In addition to the appraisal, you can make arguments to the IRS.
There are different approaches, but the basic idea is to suggest
you received no gain and are insolvent. The IRS can then waive
the tax liability.

If all else fails, there is always the bankruptcy route.
Although taxes generally are not terminated through bankruptcy,
the "gain" you are perceived to have received is. Since there is
no gain, there can be no tax and you are off the hook. Of
course, this approach shreds whatever small amount of positive
credit you had left, but it beats a big tax bill.

About the author:
Get professional help dealing with <a
href="http://www.businesstaxrecovery.com/back_taxes">back
taxes</a> at BusinessTaxRecovery.com.

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Sheriff Sales - Must Know Information

Title: Sheriff Sales - Must Know Information

Author: David Zwierecki

Article:
Buying a home from a sheriff sale can be a great way to purchase
a home. However there are a lot of factors to consider when
going to the county courthouse to find that special bargain.
Read on for a list of important factors to consider when buying
a home from sheriff sale or sheriff auction.

When placing a bid to buy a home at sheriff sale you need to be
aware that a 10% down payment is required immediately proceeding
the auction. This 10% needs to be in the form of personal check,
certified check or cash (although some counties do not accept
personal check). If you do not know how much money you are going
to be able to buy the home for then you may want to obtain a
certified check in the amount of the maximum that you intend to
bid for a certain house and this way you have enough to cover
the 10% and you do not go over the amount you intended to bid.

After you have successfully placed the highest bid and won an
auction for a specific home you will have 30 days from then to
come up with the remainder of the balance of the home. The
remaining balance of the purchase price is due by certified
check only. You will generally have 8 days from the date of the
auction to come up with the balance in full without interest
being assessed, however you will have up to 30 days to come up
with the remaining balance with interest being assessed per day.
If you are not able to pay the remaining balance within 30 days
you can request an extension, which are not always granted, or
you will be held in contempt of court and risk losing your 10%
down payment. Understand that winning an auction is a legally
binding agreement and you are bound to the terms of the
sheriff's department and their policies and laws for a sheriff
sale.

Financing from traditional mortgage lenders on sheriff sale
homes is usually very difficult to obtain. Most mortgage lenders
will want to have a full appraisal done, inside and out, and
even if you are the winning bidder of a home and pay your 10%,
you still do not and will not have access to get onto the
property or inside the home. Therefore, getting an appraisal is
extremely difficult. Also, many homes that have been foreclosed
upon and are being sold via auction have been run down, poorly
maintained and also have some problems with them. Depending on
the severity of these items, many lenders do not want to get
involved in properties of this nature.

Finally, bidding usually starts at 2/3's of the county assessed
value of the home and the homes will not generally be sold for
less than this. Most lenders will send a representative from
their attorney's office to the sheriff sales to bid on the homes
to buy them back. Usually, lenders will not allow a home to be
sold at sheriff sale for below what is owed on the current
mortgage. Therefore, knowing roughly how much was owed on a
mortgage prior to going to the sheriff sale is very helpful. Not
all lenders send a representative to every auction to buy a home
back, but most do. Sometimes, homes that do not sell at auction
will be attempted to be sold again at a future sheriff sale with
the starting price being decreased. This is when your
opportunity to buy a home for way below market value really
increases.

Therefore, it is important to understand that by bidding on a
home you are agreeing that if you are the winning bidder you
will pay the full amount of your bid, plus interest if
applicable for the home or you can be held in contempt of court
and possibly lose your down payment, along with other court
costs and fees. It is wise to do your homework on a property
before bidding on it to make sure that you are indeed getting a
good deal. Finally know what your maximum bid is for each
property that you intend to bid on and never exceed that bid.
Understanding the information above can better help you to
prepare for a sheriff sale or sheriff auction and help to make
sure that you do not end up losing a substantial amount of
money. For more information on buying foreclosed homes, please
visit:
http://www.gofirstsecurity.com/Purchase/buying_foreclosed_homes.h
tm

About the author:
The author of this article, Dave Zwierecki, is the President of
First Security Financial Service and has over 10 years of
experience in the credit, mortgage lending, and home improvement
fields. He is the owner of http://www.NoMoneyDown123.com and
http://www.TheMortgageU.com, which are both sites devoted to the
education of consumers regarding real estate, mortgage, credit,
and home improvement related material.

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Are All Real Estate Appraisals Accurate?


Title: Are All Real Estate Appraisals Accurate?

Author: Kim Lee

Article:
If you are interested in obtaining a real estate appraisal,it is
your duty to get accurate information.Not all real estate
appraisals are accurate. This is a flaw in the industry, and one
that can really harm you in more ways than one. But you can get
accurate real estate appraisal if you are willing to do the leg
work that is associated with getting started.

Do you know the best way to accurate real estate appraisal?
Simply put, you need to hire an appraiser who will provide you
with accurate information. The best way to do this is to ask
them as many questions to clear your doubts. How long have you
been doing real estate appraisals in the area? Do you have
references? How much do you charge? What do I get for the fee
that I pay? These are all questions that will help you to get
the most out of your real estate appraisal.

Once you have done your homework, you can probably get an
accurate real estate appraisal. But even if you think that you
hired a reliable appraiser, things do not always work out like
this. For this reason, you have to closely look over the report
to ensure everything is said and done. Since you know your home
better than anybody else, you can suggest if everything is as it
should be. This is not to say that you know more than the
appraiser, but look for glaring omissions or problems that you
are not aware of.

When it comes down to it, not all real estate appraisals are
accurate. Some of them are better than others, so make sure that
you get a good one. If you are going to spend a few hundred
dollars paying for a real estate appraisal, you should get
accurate results and a report to match.

For more Information <A
HREF=http://www.rentinsingapore.com>http://www.rentinsingapore.co
m</A>

About the author:
Kim Lee writes for <a href="http://www.rentinsingapore.com"
target="blank">Number 1 Rental Portal in Singapore</a> This
portal lists rental properties like HDB flats, whole flats,
landed property, office space, private condos etc.

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Is Real Estate Appraisal Necessary?

Title: Is Real Estate Appraisal Necessary?

Author: Kim Lee

Article:
Is a real estate appraisal necessary? is a common question that
lot of homeowners ask on a regular basis. Eventhough they know
about real estate appraisal, they are not sure whether they
really need. Some people home Owners feel that they need a real
estate appraisal right now, and others will consider do this in
the future. There are many cases when a real estate appraisal is
absolutely necessary, and some other times when it is not.

So when is a real estate appraisal necessary?Most of the people
do this process when they are planning to sell their home. Every
home property owner is keen to know about its worth,so that they
can get the proper amount of money for the property.

This is not necessary, but the majority of home sellers willing
to do this because it gives them assurance that they are going
to get a good deal when selling. In many cases, your real estate
agent may take care of the appraisal process. But even then,
there is nothing wrong with getting a third party real estate
appraisal.

You may also need to look into a real estate appraisal if you
are planning for any alterations in your home. This is necessary
for insurance purposes in many cases. For instance, if you
expanded your home or renovated a major portion of if, you may
need to submit this to your insurance company. Remember, they
are the one that is responsible for paying for this if something
happens to your home.

Finally, a real estate appraisal is often times necessary when
people are going through a divorce. Since both parties want a
share of the home, knowing it's worth is very important. In many
cases, the one partner will buy out the other one so that they
can keep the home. But of course, a real estate appraisal is
necessary for this to happen with complete accuracy.

A real estate appraisal is necessary in many cases. If you are
not sure of if you need one, take the time to look into things
and maybe even speak with a professional. It is better to be
safe than sorry when it comes to getting a real estate
appraisal.

For more Information check <A
HREF=http://www.rentinsingapore.com>http://www.rentinsingapore.co
m</A>

About the author:
Kim Lee writes for <a href="http://www.rentinsingapore.com"
target="blank">Number 1 Rental Portal in Singapore</a> This
portal lists rental properties like HDB flats, whole flats,
landed property, office space, private condos etc.

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Getting Your House Appraised

Title: Getting Your Home Appraised

Author: Kim Lee

Article:
Are you interested in getting your home appraised? If so, you
may have a very good reason for this. On the other hand you may
have never considered getting your home appraised. There are
many reasons that you may need to undergo this process, whether
you like it or not. The fact of the matter is that getting your
home appraised is something that most people have to do sooner
or later, and a process that is not nearly as bad as you may
think. In fact, many people find it to be downright fun for one
reason or the next.

The most common reason for getting the home appraised is that
the person may be selling it sometime in the near future. When
you get your home appraised you will have a good idea about
worth of your property, which will in turn allow you to price it
accordingly. You are much better having your home professionally
appraised than missing out on a lot of money when you sell.

Of course, home appraisals are done for other reasons as well.
This can include everything from insurance purposes to going
through a divorce. There are many cases when you may need to get
your home appraised. Instead of fighting with this process get
your home appraised as soon as possible.The first step to
getting your home appraised is to find a professional in your
area who has a good reputation. Remember, you want to make sure
that the appraisal you receive is accurate.

This is something that will dictate a major part of your life,
so the correct information is very important to say the least.
Once you find a reputable appraiser, the next step is to get in
touch with them and ask about cost. You may some times find that
one appraiser has prices that are twice as much as another's. If
this is the case consider both options, and then move forward
with the one that you feel the most confident about.

Finally, the appraiser will come to your home and complete the
process for you. They will check every detail of your home, both
inside and out. From there, you will get a full report with
their findings, the appraised cost, etc.As you can see, getting
your home appraised is not a long, difficult task.

For more Information check <A
HREF=http://www.rentinsingapore.com>http://www.rentinsingapore.co
m</A>

About the author:
Kim Lee writes for <a href="http://www.rentinsingapore.com"
target="blank">Number 1 Rental Portal in Singapore</a> This
portal lists rental properties like HDB flats, whole flats,
landed property, office space, private condos etc.

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7 Things That Will Help You Get Approved For Hard Money Loans


Title: 7 Things That Will Help You Get Approved For Hard Money Loans

Author: Fred Hopkins

Article:


Hard Money can be a fast way to fund everything from residential
property, to industrial properties to new home construction. I
will not get into every aspect of hard money but I will give you
a general frame work that your brain can understand.</P>

First of all most hard money lenders let you to finance up to
65% of the value of the home. If the loan is for rehab purposes,
the lender will use the after-repaired value of the house as a
frame of reference. I have seen occasions that went as high as
75% but 65% is typical.</P>

These loans are per case basis and very flexible so there is a
lot of space if the package works. It can be a set back if you
are fresh to investing but luckily that can usually be offset
with adequate cash reserves and a good plan of action.</P>

Lets look at an investor rehab loan to visualize how the numbers
work.</P>

Lets say you came across a beat up old home in a good
neighborhood where homes sell for $100,000. The seller walks you
through the home and you determine that the property needs
around $12,000 in work. Youve gotten pre-qualified for a rehab
loan and want to know what the maximum you should pay for the
house.</P>

Lets keep it basic, you will want to take $100k x 65% - loan
costs repair costs/holding costs = Purchase price. Loan costs,
for <A
href="http://www.mountaintopmtg.net/hard-money-loans.htm">hard
money loans</A>, run from 8-13% of the total loan amount. They
are not inexpensive but its less money than you will pay to a
partner! For now we can assume costs of 10% and holding costs of
$2,000. Given those numbers, you probably should not invest more
than $45,000 for the house. If you decide to pay more, that just
means more money out of your pocket to complete the project.
</P>

Here are a few great tips you can use to maximize the likelihood
of getting approved for hard money loans, in general:</P> <OL>
<LI>The more equity in the property after the loan, the
better,</LI> <LI>The higher your credit rating, even better</LI>
<LI>The more credit history you have, the better!</LI> <LI>The
more liquid assets you can show that you have personally or have
guaranteed access to (lines of credit, partners, rich uncles. .
.) the better</LI> <LI>The more populated the area, the
better</LI> <LI>The faster the properties in that area sell, the
better</LI> <LI>The more solid the appraisal value, the better!
A lot of hard money lenders like to use fire sale values as the
basis point of the loan so dont be stunned. This is definitely
not the time to use stretched values.</LI></OL>

All in all, this is a numbers game. Do not allow yourself to get
attached to a property if the numbers dont make sense. Hard
money lenders can be flexible but present them a deal where the
numbers dont add up and it could cost you a relationship. Credit
doesnt always matter but it does help, tremendously, if you can
show good credit history.</P>

About the author:
Fred Hopkins is an 8 year mortgage veteran specializing in <a
href="http://www.mountaintopmtg.net/hard-money-loans.htm">hard
money loans</a> and <a
href="http://www.mountaintopmtg.net">mortgage refinancing</a>.
For more information on the loan programs he has available,
visit http://www.mountaintopmtg.net.

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What Happens to Property in a Chapter 7 Bankruptcy Case?

Title: What Happens to Property in a Chapter 7 Bankruptcy Case?

Author: David Siegel

Article:
Chapter 7 bankruptcy is a fresh start bankruptcy. A person lists
all of his debts in a bankruptcy petition which is filed with
the U.S. Bankruptcy Clerk. A typical Chapter 7 debtor receives a
fresh start in that many of the debts in a Chapter 7 bankruptcy
case are eliminated. There are exceptions to this general
scenario which I will explain in greater detail later. Chapter 7
is basically for a person who does not have significant assets
and who is strapped with an overburdening amount of unsecured
debts. Unsecured debts are debts that are not secured by some
form of property. These commonly include debts from credit
cards, medical bills, personal loans, utilities, auto
deficiencies as a result of a repossessed auto and rental
deficiencies among others. Since there is no property or
security attached to those debts, the debt is easily eliminated
in a Chapter 7 bankruptcy case. Debts that are secured by
property such as houses and cars are treated differently in a
Chapter 7 bankruptcy case. Those debts must continue to be paid
if the debtor wishes to keep the properties.

Options with regard to secured property:

The debtor can simply continue to make the contracted payment,
on time, just as he did before he filed for bankruptcy relief.
This act of continuing to pay on a debt is known as reaffirming
a debt. By reaffirming on a debt, the debtor re-obligates
himself on the loan. Another option would be to surrender the
property and eliminate the underlying debt. The third option
would be to redeem the property secured by the creditor. The act
of redemption involves making a lump sum payment for the market
value of the property. Since a debtor rarely has the ability to
make such a payment, the redemption option is really not invoked
all that often. The final option with regard to secured debt is
to continue to make voluntary payments on the property. This is
sometimes known as the fourth option; however, this option only
exists in certain states. This option does not exist with regard
to purchase money security interests. A typical purchase money
security interest would be a furniture purchase, jewelry
purchase or household appliance purchase. The voluntary payment
option does exist with regard to real estate property in those
states that permit the fourth option.

Property that can be kept in a Chapter 7 bankruptcy

If a person has significant assets, he will not likely decide to
file a Chapter 7 bankruptcy. This is because there are limits on
the amount of value that one can keep free and clear while at
the same time being able to eliminate miscellaneous debt. Each
state has exemption amounts that can be readily utilized by a
debtor to protect property while he is in a bankruptcy. There
are Federal exemptions and individual state exemptions. Some
states utilize the Federal exemptions, other utilize the state
exemptions, while other states can elect between the two.
Obviously, if a debtor resides in a state in which an election
can be made, the debtor will choose the exemption that best
protects his property. The exemption limits differ so it is
extremely important to discuss your rights and options with a
qualified attorney who concentrates in bankruptcy law. If
property is not protected properly by miss-applying the proper
exemption and the proper amount of the exemption, property can
be taken in exchange for the fresh start.

How is equity determined?

Some people struggle with the concept of equity in property.
They don't know whether it is the market value, the amount owed,
both or neither. Here is a simple way to calculate the equity in
property. First of all, think of equity as ownership. The amount
of equity in property is the amount of ownership that you have
in the property. For example, let's say that you have a home
with a market value of $250,000.00. Let's further say that you
have a mortgage on the property with an outstanding balance of
$200,000.00. When you take the market value of the property and
subtract the mortgage debt associated with the property, you are
left with the equity. In the above example, the equity or
ownership in the property would equal $50,000.00. This same
concept would apply to vehicles, boats, jewelry, furniture and
any other property that is secured by a lien.

How is fair market value calculated?

Another issue arises when calculating the fair market value of
property. Fair market value of property is not what you think it
is worth. Rather, it is what the property would sell for if
placed on the market for a reasonable period of time. When it
comes to real estate property, market value can be determined by
obtaining an appraisal. Since appraisals can be costly, another
option is to get a free, market evaluation from a licensed
realtor. Any dedicated realtor would be happy to provide a
listing of comparable homes that are currently listed in your
area or that have recently sold in your area. When requesting
your free market analysis, advise the realtor that you are
looking for an accurate evaluation. You don't want one that is
elevated or unrealistic. You want one that will accurately list
the likely price that the home would sell for if place on the
open market. You can check general home values at
http://www.realtor.com or http://www.housevalues.com. With
regard to autos, you can check the value with Kelly Blue Book or
N.A.D.A. (www.kbb.com) You can also have the vehicle evaluated
by an auto dealership. They will put in writing what you car is
worth as a trade-in. Of course, don't rely on only one person or
entity to provide a market value for your property. Check with a
few sources so that you know that the values being provided are
accurate.

About the author:
David M. Siegel is the author of Chapter 7 Success: The Complete
Guide to Surviving Personal Bankruptcy. He is a member of the
American Bankruptcy Institute and currently practices bankruptcy
law in Chicago and its surrounding suburbs. Additional
information is available at http://www.chapter7success.com .

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Appraising Residential And Commercial Property

Title: Appraising Residential And Commercial Property

Author: Kim Lee

Article:
When it comes to real estate appraising there are two types of
properties: residential and commercial.Before proceeding into
this process you need to make sure about type of property you
have. Generally speaking, this is not very hard to do.
Residential real estate is property in which people can live.

This can include single family homes, condos, apartment
complexes, etc. On the other side, commercial real estate is
where people work. This can be anything from a retail outlet to
a large office building and everything in between. Irrespective
of type of property , a real estate appraisal is something that
you may be interested in.

As you can imagine, the real estate appraising process is pretty
much the same for both residential and commercial properties; at
least from an owner's point of view. It will be your job to find
an appraiser that suits your needs, and complete the job for you
with a high level of proficiency. It is better to take your time
when it comes to real estate appraising than rush through things.

But even though an owner may see the process of residential and
commercial appraising as the same, this is not the case from the
other side of the fence. The real estate appraiser will take on
an entirely different way of looking at things depending on the
property that they are appraising. As you can imagine, an
appraiser will not check out the same details for a condo as
they would a high rise office building; it simply would not make
sense.

No matter what type of property you own, if you are interested
in a real estate appraisal you should be able to find a
professional who can assist you. But remember, not every
appraiser is going to specialize in both types of properties.
For this reason, you need to make sure that you find the person
who is best for your property. If you were to hire a commercial
appraiser for your home you may not get the best results.

For more Information check <A
HREF=http://www.rentinsingapore.com>http://www.rentinsingapore.co
m</A>

About the author:
Kim Lee writes for <a href="http://www.rentinsingapore.com"
target="blank">Number 1 Rental Portal in Singapore</a> This
portal lists rental properties like HDB flats, whole flats,
landed property, office space, private condos etc.

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The #1 Golden Key to Killer Commercial Real Estate Deals

Title: The #1 Golden Key to Killer Commercial Real Estate Deals

Author: Tony Seruga, Yolanda Seruga and Yolanda Bishop

Article:
In real estate, investors want to create the best environment
possible when it comes to dealing with their properties. As an
investor, you want what is best for your pocketbook in the very
end and the best real estate deals are made in the shortest
amount of time possible with the least bit of money paid out of
your pocketbook in the end. Investors share secret after secret,
many of them wondering what the #1 golden key to killer
commercial real estate deals is that some investors seem to have
and others do not. What is this golden key that seals killer
deal after killer deal every year? It is nothing more than a
motivated seller.

What Is a Motivated Seller? A motivated seller is just what it
sounds like--a person who is ready and able to get the deal
closed as soon and efficiently as possible. The reasons why a
seller is so motivated are not important, as long as the seller
is really and truly motivated to get the deal closed as soon as
possible.

Sellers have a variety of reasons that they might be anxious to
get a particular deal closed, but the main ones have to do with
monetary gain or other personal, vested interest in a particular
property. As an investor, when you have a motivated seller on
your hands, they are much less difficult to sell certain terms
and requirements of a sale to, and they are looking for less
specifics when it comes to buyers. Motivated sellers are looking
to get their property off of the market and into the hands of an
equally motivated investor like yourself as soon as possible,
making it as time sensitive, not to mention cost effective, as
it could ever be.

What Are the Differences Between Motivated and Non-Motivated
Sellers? The opposite of a motivated seller is a person who is
looking to get a specific dollar amount or other benefit out of
a sale, and chances are that they probably won't sway much from
that. Deals that are made with non-motivated sellers usually
cost more and take more time to finalize, which isn't always the
best deal for people who invest in real estate properties as a
matter of survival or income.

There are a whole slue of advantages to using a motivated seller
that many, especially the more novice, real estate investors are
not always quick to realize. First of all, motivated sellers are
much more quick to respond to all types of communications. Phone
calls, faxes, emails, snail mail letters--these are all ways
that investors and sellers can use to communicate with one
another, but they don't do anybody any good going unanswered.
Motivated sellers are much more apt to be responsive to
communications and doing anything that might speed up the
process a bit.

As a real estate investor you have probably come across those
properties that are just way overpriced; this can happen for a
variety of reasons whether it be due to an extremely enlarged
ego or an overestimated appraisal. Either way, non-motivated
sellers are not always willing to do anything but stand firm on
their price and their terms. This isn't necessarily a bad thing,
but real estate investors are usually not willing to deal with
particularly difficult or stubborn sellers.



What Are the Advantages of Using a Motivated Seller? There are a
whole variety of benefits to using a motivated seller. Motivated
sellers and eager buyers go hand-in-hand, making for a smoother
business transaction and a much better deal for everybody
involved. Who cares if your seller is motivated because he has
some ulterior motive? When it comes to business transactions,
everybody has motives and they are usually financial, but the
same goes for you as the investor.

There are some sellers that are not always interested in making
the most money out of a real estate deal as they possibly can.
They may have other things that motivate them, like the need to
get any amount of money out of the transaction as soon as
possible or getting the property off of their hands for tax
reasons or any other reasons. Motivated sellers are more
flexible in every way possible. They make things much easier on
everyone, offering much more attractive terms and even flexible
pricing options and financing options than non-motivated
sellers.

Motivated sellers and interested buyers go hand-in-hand, and
matching up the two is an efficient and effective way of getting
properties sold and into the hands of the right people. In this
sense, the motivated seller and buyer combination are truly the
#1 golden key to landing killer real estate deals every time.



About the author:
Tony Seruga, Yolanda Seruga and Yolanda Bishop of Maverick Real
Estate Investments, Inc. work with builders, developers and
other players in the commercial real estate industry to acquire
and develop properties. They use progressive investment
strategies that have proved extremely profitable. In addition to
their own deals, they teach both seasoned and inexperienced
investors how to be big players in the game. Visit the website
for more info.

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The Importance of a Good Appraisal


Title:
Title: The Importance of a Good Appraisal

Author: Ivan Cuxeva Jr

Article:
What is it Worth?

When we decide to sell a car or some unused items around the
house, we make some kind of judgment as to what we think it
might be worth. We may base it on what we paid for it or what we
saw one selling for down the street, but we are the ones making
the determination. However, due to the fact that most real
estate transactions involve securing a loan to complete the
deal, a more precise and unbiased opinion of the value is
normally required. The person who makes these decisions is known
as an appraiser.

Appraisers are trained and certified and state licensed
professionals that understand the significance of all the
components that determine what a piece of property is worth -
the residential or commercial appraisal. This price is known as
the market value, and that is what most lenders use as the basis
for the loan amount. They note the physical characteristics of
the property such as lot size, building size, condition, and
comparison to other similar properties. Other factors such as
the strength or weakness of the real estate market in the area,
and neighborhood in which the property is located. These and
other factors enter in to the calculation of the current market
value of the property.

Who do I Trust?

By now, if you are like me, your head is starting to spin trying
to figure out what all this means. As a real estate buyer or
seller, the most important thing is to understand the appraisal.
Take the time to go over all of the factors and ask questions
until you understand what you have. If you have reason to
question the appraisal, ask for another appraiser. Your real
estate professional or your mortgage broker can help you "get a
second opinion." It may cost you more up front, but in the long
run, it can be well worth the price - in peace of mind, if
nothing else.

An understanding of the market in the surrounding area is key to
the appraisal process. Identical property located in the
Okanagan Valley of British Columbia would appraise different
than one located in an area that is not as much of an
attraction. Consequently, Okanagan appraisals would best be done
by an appraiser who knew the area and the real estate
environment. Likewise, a firm like Caruso Daniels, Inc., would
be best suited to carry out Kelowna appraisals than someone who
had not been in the area since 1978. While there are a lot of
differences between residential appraisals and commercial
appraisals, the same thing is true. When it comes to knowing
what property is worth, it is best to deal with people who know
the area.

When you are buying or selling property, you have enough to
worry about without being concerned about the accuracy of your
appraisals. Deal with a local appraiser with a good reputation
among the real estate professionals in the area. Most of all -
do your homework. If you do, you will choose Caruso Daniels,
Inc. for all of your Kelowna and Okanagan appraisals.

About the author:
Learn more about <a href="http://cdappraisals.ca/">commercial
appraisals</a> from a trusted and well established source. Your
<a href="http://cdappraisals.ca/" target="_blank"><u>Kelowna
Commercial Appraisal</u></a> is in good hands with <a
href="http://cdappraisals.ca/" target="_blank"><u>Caruso Daniels
Inc.


Author: Ivan Cuxeva Jr

Article:
What is it Worth?

When we decide to sell a car or some unused items around the
house, we make some kind of judgment as to what we think it
might be worth. We may base it on what we paid for it or what we
saw one selling for down the street, but we are the ones making
the determination. However, due to the fact that most real
estate transactions involve securing a loan to complete the
deal, a more precise and unbiased opinion of the value is
normally required. The person who makes these decisions is known
as an appraiser.

Appraisers are trained and certified and state licensed
professionals that understand the significance of all the
components that determine what a piece of property is worth -
the residential or commercial appraisal. This price is known as
the market value, and that is what most lenders use as the basis
for the loan amount. They note the physical characteristics of
the property such as lot size, building size, condition, and
comparison to other similar properties. Other factors such as
the strength or weakness of the real estate market in the area,
and neighborhood in which the property is located. These and
other factors enter in to the calculation of the current market
value of the property.

Who do I Trust?

By now, if you are like me, your head is starting to spin trying
to figure out what all this means. As a real estate buyer or
seller, the most important thing is to understand the appraisal.
Take the time to go over all of the factors and ask questions
until you understand what you have. If you have reason to
question the appraisal, ask for another appraiser. Your real
estate professional or your mortgage broker can help you "get a
second opinion." It may cost you more up front, but in the long
run, it can be well worth the price - in peace of mind, if
nothing else.

An understanding of the market in the surrounding area is key to
the appraisal process. Identical property located in the
Okanagan Valley of British Columbia would appraise different
than one located in an area that is not as much of an
attraction. Consequently, Okanagan appraisals would best be done
by an appraiser who knew the area and the real estate
environment. Likewise, a firm like Caruso Daniels, Inc., would
be best suited to carry out Kelowna appraisals than someone who
had not been in the area since 1978. While there are a lot of
differences between residential appraisals and commercial
appraisals, the same thing is true. When it comes to knowing
what property is worth, it is best to deal with people who know
the area.

When you are buying or selling property, you have enough to
worry about without being concerned about the accuracy of your
appraisals. Deal with a local appraiser with a good reputation
among the real estate professionals in the area. Most of all -
do your homework. If you do, you will choose Caruso Daniels,
Inc. for all of your Kelowna and Okanagan appraisals.

About the author:
Learn more about <a href="http://cdappraisals.ca/">commercial
appraisals</a> from a trusted and well established source. Your
<a href="http://cdappraisals.ca/" target="_blank"><u>Kelowna
Commercial Appraisal</u></a> is in good hands with <a
href="http://cdappraisals.ca/" target="_blank"><u>Caruso Daniels
Inc.

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Differences Between Residential And Commercial Loans

Title: Differences Between Residential And Commercial Loans

Author: Eric Morgan

Article:
When you go to apply for a loan, you will find that there is a
rather large difference between a residential and a commercial
loan. This means that you will need to understand the
differences in advance so that being unprepared does not hinder
the application and approval process. You also will be sure to
get a better deal when you understand more about the process and
information needed to complete either one. Here is a brief
explanation showing the difference between a commercial and a
residential loan.

The Application Process

The process of application will vary in most of the details - as
well as in the terms of the loan. A residential loan is based
almost entirely on the finances of the person getting the loan.
A commercial loan, on the other hand, depends on the
profitability of the property at the time the loan is taken out.

* Residential Loan

A residential loan is designed for a building for one to four
family units. For a building that houses more residents than
that, you will need to get a commercial loan.

Residential loans require that the borrower provide the lender
with personal financial information. Generally, this will
require tax returns for the previous two years, pay stubs from
your place of employment, and at least three month's worth of
your bank statements.

A form 1003 (Universal Residential Loan Application) will also
need to be completed and filed. This form is applicable in most
states, but some additions will need to be added in some
locations.

Near the end of this form, a lender is required to add a section
(may be in an attachment) if you are applying for a balloon
loan. It includes notice that you have opportunity to refinance,
with a guarantee to do so, but it is conditional upon your being
able to meet the qualifications at the time of your new
application. Otherwise, you must be ready to pay the loan in
full, when required.

Your financial information will also be checked. This means that
your credit score will be examined, and your debt to income
ratio is going to be scrutinized.

Your application will then be forwarded to the lender for their
approval. Other documents will then be ordered and need to be
completed before the loan can be approved. This will include
papers like property appraisals, title search and escrow, and
flood certification. Also, a lock on the loan will need to be
included (if appropriate).

Lender's Role

Once all the paperwork is in the lender's hands, then he or she
will review the paperwork. The 1003, and your credit, will be
checked and verified. Other information that you have included
will also be verified. Various conditions will need to be
cleared, and once that is done, the final documents are drawn up
and a closing date is set.

* Commercial Loan

The application process for a commercial loan is much different
than that of a residential loan. The main difference is that a
commercial loan is not at all based on your income - and for
this reason the details of your personal finances are not the
basis of determining whether the loan is approved or not.

Application Process

The process starts out by obtaining the financial situation of
the commercial building itself. This means that the documents
showing income and expenses of the property for the last two
years will need to be collected. Another main consideration will
be the current amount of rent being collected every month. This
will become the basis of how much of a loan that can be
obtained.

The broker then takes this information and analyzes it in order
to make overall statements that he or she will submit to the
lender. These statements include a net cash flow (NCF), loan to
value (LTF), and a debt service coverage ratio (DSCR).

The main consideration here is that there is a sufficient income
(at the present time), to be able to provide the commercial
property with a profit from day one. Lenders will look to make
sure that there is at least a 1:1.1 to 1:1.25 ratio of the
monthly payment to the amount of profit that is brought in after
all other expenses. Some lenders may even want a slightly higher
ratio before a loan will be given.

The Lender's Role

Once the lender receives the paperwork from the broker, then he
or she will review all the documents. A quote will then be sent
to the borrower based on this data.

Various services will also be ordered to make sure that the
property is a good investment on the lender's part. An appraisal
will be required, a title search, and a credit check will be
necessary. Under some circumstances, engineering and an
environmental verification will also need to be preformed.

Once everything comes back, and is evaluated, then the new terms
on the loan are issued and a closing date is set. The buyer then
looks over the terms, makes sure they are acceptable - and gets
ready for the big day.

About the author:
Please visit <a href="http://www.sncloans.com">SNC Commercial
Loans</a>. You can also find more information on <a
href="http://www.sncloans.com/commercial-loan-broker.html">commer
cial brokers.</a>
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Cheap Bridging Loan--an Easy Way to Fill Financial Fissure

Title: Title: Cheap Bridging Loan--an Easy Way to Fill Financial Fissure

Author: Eva Baldwyn

Article:
Buying a new house which an individual has been wishing for a
long time, sometimes becomes rather financial burdensome for the
individuals fall short of the required sum. There are many
options too before him, but financial options still, demands
denomination. The person consults a financial expert, the expert
suggests him of cheap bridging loan-- the loan works as a
financial plank between two edges. It is between two dealings-a
selling and a buying.

For, there are many lenders available online and offline,
however online method of availing the <a
href="http://www.easybridgingloansuk.co.uk/cheap_bridging_loan.ht
ml">cheap bridging loan</a> is preferred these days. With the
method, candidates not only save their time and energy, but also
on an instant appraisal, the processing makes an instant door
knocking at ones door steps.

Cheap bridging loan is secured in nature, and that collateral is
placed as of borrowers' security. On the current value of the
placed house, the cheap bridging loan amount is sanctioned to
the borrowers. However, amount raised by the lending authority
under bridging loan is £100, 000; further this amount can be
increased up to £400, 000 too.

Filling financial gap requires an instant and quick action
against the monetary deficit, so for that, the cheap bridging
loan is offered for a very short period of time. Being
short-term in nature, lenders incur upon higher interest rates,
in order to get best of the borrowers' financial malaise. Many
lenders have invaded the loan market, and owing to competition
amongst lenders affect the cheap bridging loan rate. In between,
borrowers get comparative loan rate while shopping.

Importantly, no matter of individuals' financial status, the
cheap bridging loan is offered to everyone who wishes to buy a
new house. Residential properties, development sites, auction
properties, retail shops, buying to let properties, and
commercial or semi-commercial etc., are some other collateral
pledging options the borrowers have for availing the cheap
bridging loan.

About the author:
Eva Baldwyn aims to inform common men and women of the several
issues involved in Easy Bridging Loans through her articles. An
MSc in Economics & Finance from the Warwick Business School is
proof enough of the knowledge that she possesses in the field of
finance. To find cheap bridging loan, commercial bridging loan,
residential bridging loan, personal bridging loan, short term
bridging loan visit http://www.easybridgingloansuk.co.uk/


Author: Eva Baldwyn

Article:
Buying a new house which an individual has been wishing for a
long time, sometimes becomes rather financial burdensome for the
individuals fall short of the required sum. There are many
options too before him, but financial options still, demands
denomination. The person consults a financial expert, the expert
suggests him of cheap bridging loan-- the loan works as a
financial plank between two edges. It is between two dealings-a
selling and a buying.

For, there are many lenders available online and offline,
however online method of availing the <a
href="http://www.easybridgingloansuk.co.uk/cheap_bridging_loan.ht
ml">cheap bridging loan</a> is preferred these days. With the
method, candidates not only save their time and energy, but also
on an instant appraisal, the processing makes an instant door
knocking at ones door steps.

Cheap bridging loan is secured in nature, and that collateral is
placed as of borrowers' security. On the current value of the
placed house, the cheap bridging loan amount is sanctioned to
the borrowers. However, amount raised by the lending authority
under bridging loan is £100, 000; further this amount can be
increased up to £400, 000 too.

Filling financial gap requires an instant and quick action
against the monetary deficit, so for that, the cheap bridging
loan is offered for a very short period of time. Being
short-term in nature, lenders incur upon higher interest rates,
in order to get best of the borrowers' financial malaise. Many
lenders have invaded the loan market, and owing to competition
amongst lenders affect the cheap bridging loan rate. In between,
borrowers get comparative loan rate while shopping.

Importantly, no matter of individuals' financial status, the
cheap bridging loan is offered to everyone who wishes to buy a
new house. Residential properties, development sites, auction
properties, retail shops, buying to let properties, and
commercial or semi-commercial etc., are some other collateral
pledging options the borrowers have for availing the cheap
bridging loan.

About the author:
Eva Baldwyn aims to inform common men and women of the several
issues involved in Easy Bridging Loans through her articles. An
MSc in Economics & Finance from the Warwick Business School is
proof enough of the knowledge that she possesses in the field of
finance. To find cheap bridging loan, commercial bridging loan,
residential bridging loan, personal bridging loan, short term
bridging loan visit http://www.easybridgingloansuk.co.uk/

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The Real Estate Investor's Complete Guide to Cash on Cash Return

Title: The Real Estate Investor's Complete Guide to Cash on Cash Return

Author: James R Kobzeff

Article:


Cash-on-cash is a rather popular return many real estate
investors use for real estate investment analysis because it is
easy to compute.

Nonetheless, many investors who forego real estate investment
software and attempt to make the calculation themselves are
doing it wrong, and therefore it seems appropriate to discuss
it.

<b>What is the Cash on Cash Return?</b>



Cash-on-cash measures the ratio between the cash flow a real
estate investment property is anticipated to collect during the
first year of operation and the amount of cash investment the
real estate investor initially makes to purchase the property.

Often, where many real estate investors go wrong when computing
cash on cash is not to correctly compute the amount of initial
cash investment made to purchase the property. Namely, down
payment, loan points, and cost of acquisition (escrow and title
fees, appraisal, and inspection costs).



Instead, real estate investors tend to consider only the down
payment as the cash investment and ignore inclusion for loan
points and other costs associated with the purchase like escrow
and title fees.



Perhaps not a major deal, but anyone seeking to compute cash on
cash correctly, and as accurately as most real estate investing
software solutions, should make the adjustment.



<b>How to Calculate Cash on Cash</b>



Cash on cash is relatively straightforward. Cash Flow divided by
Initial Investment equals Cash on Cash Return.



The result is expressed as a percentage. For example, $5,000
cash flow divided by $100,000 cash investment equals 5.0% cash
on cash return (or CoC as most APOD's and proformas might show
it).



<b>How to Use Cash on Cash during the Real Estate Investing
Process</b> <ol> <li>Cash on cash enables the real estate
investor to gauge the profitability of one investment
opportunity to another quickly. Regardless whether the
investment opportunity is residential or commercial real estate
or another-type investment, cash on cash is a suitable way to
measure the return on cash invested to the anticipated first
year's cash flow.</li> <li>Cash on cash enables the real estate
investor to compare similar real estate investment properties
easily. Again, whether the investor is considering the purchase
of residential or commercial real estate, cash on cash helps the
investor to measure and compare returns various real estate
investment properties might yield.</li></ol>

<b>Summary</b>



Not unlike most returns useful for real estate investing, by
itself, cash on cash should not be used to decide whether a
property is fit to buy.

Moreover, in as much as it does not account for time value of
money, cash on cash is primarily useful to a real estate
investor one time during a real estate investing analysis--as a
measurement of the first year cash flow, not future year's cash
flows.

Nonetheless, cash on cash is not without advantage, and real
estate investors would benefit to compute it when making real
estate investing decisions, to work with real estate
professionals who can compute it, or when deciding to purchase
real estate investor software to be sure the software includes
it.</p>

About the author:
James R Kobzeff is a real estate broker and developer of ProAPOD
<a href="http://www.proapod.com"> Real Estate Investment
Software</a> and <a href="http://www.proapod.com/INVESTOR.htm">
Real Estate Investor Software.</a> All ProAPOD <a
href="http://www.proapod.com"> real estate software
</a>solutions are extremely easy to use for novice or advanced
real estate agents and real estate investors.

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Multi Family Loans

Title: Multi Family Loans

Author: Eric Morgan

Article:
Buying into an investment property for yourself and your family
is a good way to get started in real estate. Whether you are
looking to expand later on, or simply want to secure a future
for your family, buying a multi-family residence is a great way
to provide this need. Here are some things you will need to know
about getting a multi-family loan for the apartment building of
your choice.

A multi-family residence basically means that the building has
more than one apartment in it. Applying for a loan for a
multi-family dwelling is generally based on the number of
apartments that the building has in it. For instance, if it has
between two and four apartments, then you would need to get a
residential loan. This type of loan is much different than your
would need for a larger apartment building.

When you go to buy an apartment building that has more than four
apartments in it, you will need to get a commercial loan. This
article will focus on what you must do in order to get a
commercial loan for your multi-family apartment building.

When you apply to a direct lender for your multi-family loan, it
becomes necessary to get documentation on a number of things
about the apartment building. In fact, the focus of the
information will be on the apartment building itself - and not
on you.

Documentation Needed

The first thing that will be needed is documentation about the
renters themselves. It is possible that the government may fix
some of the rent prices because one or more renters may receive
government assistance. This means that their rent may not be
increased without approval. Other things that will need to be
discovered are how many renters are now in the building compared
to how many apartments there are available.

It is important to note that the amount you can borrow on a
multi-family loan is partially determined by the number of
renters you have in the building compared to how many you could
have. In fact, if there are currently no renters at all, then
you probably cannot get a multi-family loan, but you would have
to get a bridge loan first.

Other documentation required is that there be a complete income
and expense statement provided for the last two years. This will
be used to help determine the profitability of the building in
relation to its regularly scheduled maintenance and projected
costs.

Renters Needed

The amount of renters that are currently in the building in
proportion to the apartments will determine just how much of a
loan you can get. The more renters there are the better deal you
receive.

Percentage Available

A multi-family loan will often provide up to 75% of the value of
the building - some may go a little higher. The reason for this
is because there will always be at least one vacant apartment
from time to time, and this means a loss of income.

Necessary Profit Ratio

In most cases, the books for the multi-family building will need
to show that there has been a ratio of profitability. This ratio
is determined by income versus expense. Many lenders will go
down to 1:1.1, but most may require a ratio of 1:1.2. They may
also look to see that there is some reserve money available to
cover emergency expenses and vacancies.

Loan Terms

Your multi-family loan may come with varied terms, but you can
usually get your commercial multi-family loan for up to 25 to 30
years. Loan amounts often start around $250,000; others will
start around $500,000.

Just in case you think you might feel safer if you had a way out
- or at least an easier way out than losing the building, a way
can be supplied. Multi-family loans can come with an assumable
feature, making it easier to buy and sell the property.

Other Charges That May Apply

Commercial loans for multi-family dwellings will require an
appraisal, title search, etc. In addition, though, there may
also need to be an engineering report given, and an
environmental report may be needed, too.

Key To The Best Deal

Remember that you can get the best deals by putting down a large
down payment. This will reduce your interest rate and may also
allow you to get some better features.

There is one final thing that will enable you to get the best
deal possible - assuming that everything else looks good. If you
and your family actually live in one of the apartments, you can
get an even better interest rate. When you make the investment
personal, and live in it, the lender likes this idea enough to
give you lower rates.

The simple reason is that, if you live there, you are less
likely to not make the required payments - even if things get a
little rough financially. Since your own residence now is at
stake, the lender feels more comfortable and has greater
confidence that you will make the payments.

About the author:
<a href="http://www.sncloans.com">SNC Commercial Loans</a> has
been in the commercial loan industry for years. They are a
direct lender that accepts 1003 applications. Learn more about
<a href="http://www.sncloans.com/multi-family-loans.html">multi
family loans</a> here.

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New Commercial Equity Loan Creates Liquidity.


Title: New Commercial Equity Loan Creates Liquidity.

Author: Jeff Rauth

Article:
Commercial building owners have struggled for decades on how to
effectively and economically tap their commercial property's
equity. This lack of liquidity seems to be one of the biggest
complaints in commercial real estate ownership; equity rich,
cash poor, as the saying goes.

There are a few new options however for the small commercial
property owners (both investors and users) that are turning
heads. Historically, accessibility to commercial equity via loan
products has been very limited, and for good reason. Second lien
position behind a separate financial institution is one of the
riskiest positions for a commercial lender to be in.

However, in the past, small local banks have been known to take
on these types of loans assuming that the combined loan to value
and debt coverage ratios were strong - typically less than 60%
LTV and over 1.4 on a DCR. Banks wrote these lines almost like a
business loan that happen to be secured by the commercial
building. The banks also, wanted a depository "relationship," as
bankers always say, with the borrower.

Developer of large sophisticated projects also have had 2nd lien
position loan options, called mezzanine loans. But these types
of loans are normally only available to highly experienced and
successful developers working on projects over $5,000,000.

Interestingly, a few lenders have recently stepped up and
created commercial equity lines aka commercial lines of credit.
The result is liquidity never before known for small building
owners. Highlights include no upfront fees to close loan (no
appraisal, no title, and no environmental fees), combined loan
to values up to 75% and relatively low interest rates at Prime
plus .75% - 1.25%.

We will see in time how much of an impact these commercial
equity lines make on "Main Street" USA, but one thing is for
certain: commercial property owners have more loan options now,
than ever before.

About the author:
Jeff Rauth is President of Commercial Finance Advisors, Inc out
of Bloomfield Hills. He specializes in Commercial Real Estate
Loans between $100,000 - $5,000,000. Offers unique loan programs
such as Commercial 30 Year Fixed and 90% non SBA financing,
Commercial Private Money, Commercial Equity Lines. He can be
reached at 248 990-7602. jrauth@cfa-commercial.com
http://www.cfa-commercial.com.

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Business Financing and Commercial Loan Lenders to Avoid

Title: Business Financing and Commercial Loan Lenders to Avoid

Author: Stephen Bush

Article:
One of the most serious business financing scenarios is a lender
that causes difficulties for their commercial borrowers on a
regular basis. It is specifically this kind of commercial lender
which informed commercial borrowers should be prepared to avoid
unless realistic alternative commercial mortgage business loan
options are totally impractical.

As a direct result of my commercial loan experiences advising
business owners for over 25 years and regular conversations with
other business financing professionals, I do in fact believe
that there are a number of commercial lenders that should be
avoided. This conclusion is based on a recurring pattern of
lending abuses by some business lenders.

This commercial loan strategy overview will discuss the value of
avoiding "problem business lenders", but we will not attempt to
name specific commercial lenders to avoid. Key examples will be
provided to explain why commercial borrowers should be prepared
to avoid a number of commercial lenders when looking for
successful business loan programs.

Meaningless Pre-approvals for a Commercial Mortgage Business Loan

Commercial borrowers frequently want a commercial lender to
approve their commercial loan at the earliest possible point.
The assumed benefit to this early commercial mortgage approval
is that it will enable the commercial borrower to make other
business plans which depend on the business loan being finalized.

An ethical commercial lender will treat any form of business
financing approval very seriously. Commercial borrowers should
expect that a meaningful version of such an approval will not be
realistically possible in just two or three days.

However, there are lenders who prepare a misleading and
questionable version of a pre-approval shortly after receiving
minimal application data. Because this approach often produces
surprises for the borrower as the commercial mortgage process
moves forward, borrowers should be wary of any lenders that do
this.

Why should a lender use a questionable commercial loan
pre-approval? Here are two primary possibilities. (1) To
encourage the borrower to end their consideration of other
commercial lenders. (2) To use a business financing pre-approval
that is like a residential mortgage structure.

Since many commercial mortgage loans are arranged by residential
mortgage brokers who are frequently unfamiliar with common
business loan procedures, this reason will be especially
applicable when dealing with commercial lenders that specialize
in dealing with residential mortgage brokers. This type of
commercial lender should be avoided at all costs for most
business financing situations.

Commercial Mortgage Loan - Yes or No?

I have previously published a report which describes the
unfortunate practice of some regional and local banks to say
"yes" when they mean "no". These banks will often impose
excessive business loan requirements for commercial financing
rather than reject the loan. Commercial borrowers should pursue
other commercial loan choices rather than agreeing to business
financing terms that are unacceptable.

Commercial Mortgage Business Loan Options: Think Outside the Bank

In smaller metropolitan markets, it is not unusual for a
dominant commercial lender to impose harsher commercial loan
terms than would typically be seen in a more competitive
business financing market. Such commercial lenders routinely
take advantage of a relative lack of other commercial lenders in
their local market.

For many business lending scenarios, a non-local lender can
probably provide better business loan terms because they are
normally competing with other business lenders. It is not wise
for borrowers to rely upon local banks for most business
financing requirements.

Commercial Property Commercial Loan Appraisals

For commercial mortgage loans, commercial appraisals are an
unavoidable part of the commercial loan underwriting process.
The commercial appraisal process is lengthy and expensive, so
avoiding commercial lenders which have displayed a pattern of
problems and abuses in this area will benefit the commercial
borrower by saving them both time and money.

Copyright 1995-2007 AEX Commercial Financing Group and Stephen
Bush. All Rights Reserved.

About the author:
About the author: Stephen Bush provides candid <a
href="http://docs.google.com/View?docid=dghctwn4_46gktmqq">workin
g capital</a> advice. Free series of <a
href="http://aexllc.com">Church Loan</a> reportsThis article is
available as a <a
href='http://www.uberarticles.com/home.php?id=22201'>unique
content article</a> with free reprint rights.

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Commercial Real Estate Appraisal

Title: Commercial Real Estate Appraisal

Author: Patrick O'Connor

Article:


<B>Commercial Real Estate Appraisal</B></P>

Commercial real estate appraisal is a combination of art and
science. Knowledgeable appraisers gather and analyze data prior
to making informed decisions about real estate value. The
appraisal profession has developed a series of well-established
analytical techniques; the cost approach, income approach and
sales comparison approach. The most appropriate approaches
depend upon the characteristics of the subject property. </P>

The cost approach is considered most applicable for commercial
real estate appraisals for relatively new properties and
special-use properties. Commercial real estate appraisers are
less likely to use the cost approach for older properties due to
the difficulty of precisely calculating the amount of
depreciation.</P>

The income approach is considered most applicable for investment
or income properties. Appraisers gather data regarding the
actual income and expenses for the subject property, rental
comparables, expense comparables, industry expense data, market
occupancy, and rental market trends. The commercial real estate
appraiser then estimates gross potential income, other income,
effective gross income, operating expenses, and net operating
income. Net operating income is converted into an indication of
market value using a conversion factor termed the capitalization
rate, using the following formula:</P>

Market value = net operating income/capitalization rate. This
process is termed direct capitalization.</P>

The income approach can also be calculated using a discounted
cash flow analysis. Revenue and expenses are estimated for a
period of years and the resulting annual cash flows and gross
proceeds from a projected sale of the property are discounted to
a present value using a discount rate.</P>

Commercial real estate appraisers also utilize the sales
comparison approach to estimate market value. The sales
comparison approach is often considered most comparable for
owner-occupied properties. After obtaining data regarding
similar properties that recently sold, the appraiser makes
adjustments to generate an indication of market value for the
subject property.</P>

After considering each of the three approaches to appraisal and
preparing an analysis for the approaches which are considered
relevant, the appraiser reconciles the indications of value to a
final value conclusion. The quality and quantity of data for
each of the approaches is considered when reconciling to a final
value conclusion.</P>

O'Connor & Associates is the largest independent appraisal firm
in the southwestern United States and has over 40 full-time
staff members engaged full-time in valuation and market study
assignments. Their expertise includes valuing commercial real
estate, single-family, business personal property, business
enterprise value, purchase price allocation for businesses,
valuation for property tax assignments, partial interest
valuation, estate tax valuation, expert witness testimony and
valuation for condemnation. They have performed over 20,000
commercial real estate appraisals since 1988.</P>

To obtain a quote or further information for a commercial real
estate appraisal, contact either <A class=ulink style="COLOR:
#770000" href="mailto:gthomas@poconnor.com">George Thomas</A> or
<A class=ulink style="COLOR: #770000"
href="mailto:cyoung@poconnor.com">Craig Young</A> at
713-686-9955 or <A class=ulink style="COLOR: #770000"
href="http://www.poconnor.com/contact.asp">fill out our online
form</A>.</P>O'Connor & Associates is a national provider of
commercial property real estate consulting services including
cost segregation studies, due diligence, <a
href="http://www.oconnor-commercial.com/property_tax_articles/ins
urance_valuation.html">insurance valuations</a>, abandonment
studies, business personal property valuations, commercial
appraisals, financial modeling, <a
href="http://www.oconnor-commercial.com/property_tax_articles/hig
hest_and_best_use.html">highest and best use analyses</a>, and
lease audits.



Our services benefit owners of all commercial property types
including multi-family housing, retail stores, hospitals,
hotels, industrial properties, manufacturing facilities, medical
offices, commercial offices, restaurants, self-storage units,
shopping malls, shopping plazas and warehouse/distribution
centers.

About the author:
Patrick C. O'Connor has been president of O'Connor & Associates
since 1983 and is a recipient of the prestigious MAI designation
from the Appraisal Institute. He is also a registered senior
property tax consultant in the state of Texas and has written
numerous articles in state and national publications on reducing
property taxes.
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Commercial Banker Discusses Timing on Commercial Loan Refinance


Title: Commercial Banker Discusses Timing on Commercial Loan Refinance

Author: Jeff Rauth

Article:
We are often are asked when is the optimal time to refinance a
commercial real estate loan. Many factors such as market
interest rates, prepayment penalties, existing loan terms and
the overall goals of the borrower come into play. There are
however no set answers, but below are some real world thoughts
on how you might analyze your own commercial refinance.

Traditionally, the analysis to keep an existing loan in place or
to refinance into a new commercial loan can become very complex.
Financial advisors like to use the Discounted Cash Flow method
which essentially compares the two loans on the Net Present
Value basis.

We have found though, that most commercial building owners are
primarily interested in how the proposed loan will: 1. Affect
their monthly cash flow. 2. What the closing costs will be and
how these costs will affect their equity. 3. What the out of
pockets costs will be. 4. How long will it take for the increase
in cash flow to "pay back" the owner. Principal pay down is
obviously another important component of any commercial loan.
However, for most owners, especially those with highly leveraged
properties, cash flow is more pressing than above. This is due
to the relative high debt payment versus net cash after all the
expenses have been paid.

Example 1. Owner occupied office building. Borrower is 3 years
into a 5 year fixed, 20 year amortized loan and is considering
refinancing into a 30 year fixed, 30 year amortization
commercial loan. The borrowers primary motivation is a desire to
increase cash flow to help businesses overall profitability. In
addition the borrower has concerns over future rate increases
when the existing loan balloons Existing Loan - 5 year fixed 20
year amortization. Property Value $1,500,000 Current Loan
Balance $1,075,000 Original Loan Balance $1,125,000
(Purchased building with 25% down) Current Loan to Value 72%
Current Equity 28% or $420,000 Interest Rate 7.25%
Monthly Payment $10,418 Proposed Loan - 30 year fixed, 30
year amortization. Borrower is planning on rolling as much of
the closing costs as possible into the loan amount to reduce
"out of pocket" cash. Property Value $1,500,000 Current Loan
Balance $1,075,000 Closing Costs $19,638 Proposed Loan
Amount $1,094,638 Proposed Loan to Value 73% Interest Rate
8% Monthly Payment $8,582

* Closing Cost Break Down (Title at $2000, Lender Legal Fees
$2000, Origination Fee at 1% or $10,838, Appraisal $3,000,
Environmental $1,800).

Increase in cash flow is $1,835 per month or $22,028 annual.
Essentially, from a cash flow perspective, the borrower would
recoup the costs of loan in less than one year, despite the rate
increase by 75 basis points. Although the borrower would have to
pay for the appraisal and environmental report upfront, they
would be "refunded" for these costs at close if desired.

In our experience most business owners would be very interested
in pursuing the proposed refinance.

Example 2. Investment Property, 10 Unit Retail Center. Borrower
has owned the property for 7 years and has two loans on the
subject property. First loan is a conventional floating rate
loan that adjusts annually, amortized over 25 years and the
second is seller held. It is amortized over 20 years and has a
fixed 20 year rate. Neither loan has a balloon provision;
however the first loan does have a prepayment penalty of 5% of
the remaining loan balance, which is in effect for 3 more years.

Property Current Value - 9% Cap $2,600,000 (Purchase for
$2,300,000) Combined Current Loan Balance $1,635,000 Original
Loan Balance, 1st $1,610,000 (70% Loan to Value) Original
Loan Balance, 2nd $230,000 (10% Loan to Value) Current Loan
to Value 61% Interest Rate, 1st 6.65% Interest Rate, 2nd
7% Current Debt Coverage Ratio 1.27 Net Operating Income
$235,000 Combined Monthly Payment $15,448

Proposed Loan - 10 year fixed, 30 year amortization. Borrower is
planning on combining the two loans together and wants the
security of having a fixed rate loan. Borrower also wants to
roll in as much of the closing costs as possible into the loan
amount to reduce "out of pocket" cash.

Property Value - 9% Cap $2,600,000 Combined Current Loan
Balance $1,635,000 Closing Costs $83,500 * Proposed Loan
Amount 1,735,568 Proposed Loan to Value 67% Interest Rate
7.5% Current Debt Coverage Ratio 1.54 Net Operating Income
$235,000 Monthly Payment $12,743 Closing Cost Break Down
(Pre Pay $72,500 [5% of 1st loan amount], Title at $3000, Lender
Legal Fees at $2,200, Origination Fee at 1% or $17,185,
Appraisal $4,000,Enviromental $1,800) .

Cash flow increase is $2,704 per month or $32,449 per year while
the cost to close the loan is high at $83,500 due primarily to
the prepayment penalty. The borrower is facing a closing cost
payback period of over two and a half years. In addition the
interest rate has gone up considerable on the proposed loan,
which of course increase the overall cost of the loan.

Not an easy decision for the borrower. The option to go forward
would probably rest heavily on the borrower's opinion of where
the future interest rates will be when the prepayment period
ends.

It is interesting to note that the borrower would be able to
increase his loan amount to $2,333,964 (cash out proceeds would
be approximately $598,000) if he choose too. This is due to the
increase in cash flow. The building Debt Coverage Ratio would
improve to a 1.54 - the typically minimum is DCR is 1.2. If the
borrowers intent was to pull cash out of the property to inject
into another property (or for any other reason) this would
probably be a much easier decision to go forward with the loan.

About the author:
Jeff Rauth is President of Commercial Finance Advisors, Inc out
of Bloomfield Hills. He specializes in Commercial Real Estate
Loans between $100,000 - $5,000,000. Offers unique loan programs
such as Commercial 30 Year Fixed and 90% non SBA financing,
Commercial Private Money, Commercial Equity Lines. He can be
reached at 248 990-7602. jrauth@cfa-commercial.com
http://www.cfa-commercial.com.

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August 21, 2007

AI, Appraisal Institute, MAI, and Others Conspire to Influence public policy.

AI, Appraisal Institute, MAI, and Others Conspire to Influence public policy.

"This year we are proud to be joined by NAIFA because the more we can speak as a unified profession, the more success we will have in influencing public policy."


"Legislators and government officials will hear a unified voice from the real estate appraisal profession during 2007, thanks to an agreement signed by the four largest appraisal organizations in the United States.

http://www.thefreelibrary.com/Appraisers+on+same+page+in+Washington-a0161921774

Follow Ups:

 

Appraisers on same page in Washington.


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Link to this page
<a href="http://www.thefreelibrary.com/Appraisers+on+same+page+in+Washington-a0161921774">Appraisers on same page in Washington.</a>

Legislators and government officials will hear a unified voice from the real estate appraisal Real estate appraisal

An estimate of the value of property using various methods.
 profession during 2007, thanks to an agreement signed by the four largest appraisal organizations in the United States.

The Appraisal Institute, the American Society of Appraisers (ASA Asa (ā`sə), in the Bible, king of Judah, son and successor of Abijah. He was a good king, zealous in his extirpation of idols. When Baasha of Israel took Ramah (a few miles N of Jerusalem), Asa bought the help of Benhadad of Damascus and ), the American Society of Farm Managers and Rural Appraisers (ASFMRA), and the National Association of Independent Fee Appraisers (NAIFA NAIFA National Association of Insurance and Financial Advisors (formerly NALU)
NAIFA National Association of Independent Fee Appraisers
NAIFA Nevada Association of Insurance and Financial Advisors
) have signed an agreement that will enable the organizations to work cooperatively in the area of government relations.

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Under the agreement, the Washington, D.C. Office of the Appraisal Institute will be responsible for monitoring proposed real estate legislation and will keep members of all four organizations informed of relevant federal and state regulatory real estate issues.

"For the past few years, the Appraisal Institute has worked successfully with the ASA and ASFMRA in advocating for issues that are important to our members," said Don Kelly, the Appraisal Institute's chief external relations officer. "This year we are proud to be joined by NAIFA because the more we can speak as a unified profession, the more success we will have in influencing public policy."

The legislative issues and activities the appraisal organizations will pursue during 2007 include: Achieving appraisal licensing reform to ensure greater professionalism; Combating mortgage fraud by working with Congress and other organizations on solutions to the deficient regulatory structure for the appraisal and lending communities; Supporting appraiser independence as a consumer benefit; Promoting professional appraisers as a resource for a wide array of real estate concerns.

"The issues of mortgage fraud and predatory lending are likely to be near the top of the agenda for several Congressional committees," noted Bill Garber, director of Government Affairs for the Appraisal Institute. "It's important that the top real estate appraisal organizations speak with a unified voice to help enact change."

The Appraisal Institute represents more than 21,000 members worldwide. Members may hold the prestigious MAI MAI Mail (File Name Extension)
MAI Multilateral Agreement on Investment
MAI Maius (Latin: May)
MAI Ministerul Administratiei si Internelor (Romanian) 
, SRPA SRPA Senior Real Property Appraiser (Appraisal Institute)
SRPA Snake River Plain Aquifer
SRPA Sala de Recuperação Pós-anestésica
SRPA Special Registration Plate Account (license plate fund, North Carolina) 
 and SRA SrA
abbr.
senior airman
 designations. Appraisal Institute members adhere to a strictly enforced Code of Professional Ethics and Standards of Professional Appraisal Practice.

The American Society of Appraisers is an organization of appraisal professionals and others interested in the appraisal profession.

The American Society of Farm Managers and Rural Appraisers is a professionally trained group of farm managers, rural appraisers, review appraisers and accredited accredited

recognition by an appropriate authority that the performance of a particular institution has satisfied a prestated set of criteria.


accredited herds
cattle herds which have achieved a low level of reactors to, e.g.  agricultural consultants capable of providing expert guidance and assistance to farmland owners, farmers, and other groups which have caretaking responsibilities for farm lands and rural properties.

The National Association of Independent Fee Appraisers is a nonprofit professional association of real estate appraisers.

 agricultural consultants capable of providing expert guidance and assistance to farmland owners, farmers, and other groups which have caretaking responsibilities for farm lands and rural properties. The National Association of Independent Fee Appraisers is a nonprofit professional association of real estate appraisers.
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World's First Real Estate Custom Search Engine

Real Estate Informatin for the Novice and Expert Alike.
The Harris Company REAC
5780 West Centinela Avenue, 1-408
Los Angeles, CA. 90045
310.337.1973
http://www.harriscompanyrec.com
curtis_harris@harriscompanyrec.com

Google's mission is to organize the world's information and make it universally accessible and useful. The objective of our website/search engine is to organize the world's real estate information and make it universally accessible and useful. Sometimes it pays to play "Follow the Leader."



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MAI, Appraisal Institute, The Fox Guarding the Chicken Coop

Our Mission
The Appraisal Foundation Sponsors
Printable VersionMuch of the work of The Appraisal Foundation is supported through the professional input and financial assistance of Sponsoring Organizations. Currently, there are two types of Sponsors. Appraisal Sponsors are non-profit organizations serving appraisers and Affiliate Sponsors are non-profit organizations serving those with an interest in appraisal, primarily the users of appraisal services. Each Sponsor appoints one member to the Board of Trustees.

The Appraisal Foundation offers its sincere gratitude to these organizations for their professional and financial support.


Appraisal Institute
550 West Van Buren Street, Suite 1000
Chicago, Illinois 60607
Telephone: 312/335-4100
Facsimile: 312/335-4400


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Robert J. Fletcher, MAI Appraisal Institute, Crook?

YMCA entangled in unorthodox land deal with Robert J. Fletcher, MAI, Appraisal Institute.
By MICHAEL BRAGA and BOB MAHLBURG
STAFF WRITERS
michael.braga@heraldtribune.com
bob.mahlburg@heraldtribune.com

SARASOTA -- A complex real estate deal between the Sarasota Family YMCA and one of its fundraising foundation board members made the charity at least $250,000.

But the deal also turned out good for the board member, Sarasota attorney David Band.

Together with four partners, Band sold half of a run-down office building on land tainted by groundwater pollution to the YMCA for $830,000 and donated the other half to the nonprofit as an $830,000 gift that could save Band and his partners at least $200,000 on their tax bills.

The same day, the YMCA made a quick profit by selling the entire building for $1.3 million, receiving $300,000 in cash, while providing the buyers with a $1 million interest-only loan.

"The whole thing stinks," said Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, a Washington-based nonprofit watchdog group. Nonprofits typically are cautious with money and rarely venture into real estate investments, much less financing land deals or buying and selling a building the same day, he said.

To finance its $830,000 purchase of half the building, the YMCA borrowed $690,000 from Band and his partners. The loan is to be fully repaid by September 2008 at an interest rate of 6.5 percent the first year, 7 percent the second year and 7.5 percent the third.

On that same day, the YMCA sold the full property -- the part it purchased and the part that was donated -- to Fletcher (MAI) and Sweet, a Sarasota architect, for $1.3 million. The YMCA got $300,000 in cash and lent Fletcher (MAI) and Sweet $1 million with the same interest rate formula as the loan from Band and his partners.

The YMCA's loan to Fletcher (MAI) and Sweet was critical to the deal, because environmental problems would have made it difficult for the partners to get financing.

Fletcher (MAI) said that he and Sweet are novice real estate investors and do not have established banking relationships.


Robert J. Fletcher, MAI
President
Fletcher Appraisal Services
1953 Eighth Street
Sarasota, FL 34236
(941) 954-7553
Fax: (941) 952-9440
Home: (941) 954-4231
Bfletch651@hotmail.com
Accepts Fee Assignments (more info)

"David Band has a lot of real estate holdings and this property was kind of a turd," said Fletcher (MAI), an appraiser with Bass & Associates (MAI) in Sarasota. "It was old. You could tell the former owners (Band and his partners) skimped on maintenance. There was a lot of vacancy. Some of the tenants weren't that good and there was a lot of garbage on site."

Richard W. Bass, MAI
President
Bass & Associates, Inc.
1953 8th St.
Sarasota, FL 34236
(941) 954-7553
Fax: (941) 952-9440
rikbass@comcast.net
Accepts Fee Assignments (more info)

For the Full Story
http://www.heraldtribune.com/article/20070812/NEWS/708120621/1417/RSS02



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August 20, 2007

Are predetermined Appraisal ADJUSTMENTS Legal/Ethical?

Are predetermined Appraisal ADJUSTMENTS Legal/Ethical?  Please see attached
Predetermined adjustments provided by
Curtis - Rosenthal, Inc. (MAI Appraiser Los
Angeles) LLC. an MAI Firm.  You be the judge and get back with us or call them for this
years update.  If your property was acquired by the Los Angeles World Airport (LAWA) you
had better read this!
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