Posts Tagged → Loans
March 14th, 2010
How to Become a Real Estate Investor – Why Choose Real Estate?
Investors typically choose real estate for a number of reasons: cash flow, appreciation, tax benefits, and leverage. A real estate investor holds property for personal or commercial investment reasons. This differs from real estate dealer who holds property primarily for resale to potential clients. An active investor typically buys a property and then makes repairs or improvements with the intention of selling the property for a profit. A passive investor usually hires an investing firm to find and manage potential profitable opportunities, and is not actively involved in any improvements or negotiations related to the property. Unlike a professional realtor who has to pass a series of exams and be licensed by local and state agencies, an investor simply needs capital and confidence.
By putting down payments on a real estate transaction, an investor can significantly increase his profit percent and better the terms of the financing loans. By bettering the terms of the loan, an investor can increase his available cash for other transactions, thus increasing potential earnings exponentially. This process creates a strong cash flow. This cash flow is very enticing to real estate investors.
Barring any unforeseen declinations in quality, real estate, unlike a car, generally appreciates in value. This means that once a property is purchased, the value of that property steadily increases over time. Residential real estate is especially prone to this process. This is so because residences are comparatively priced. This means that the value of a property is largely dependent on the value of the surrounding properties. Therefore, if one house appreciates in value, then the surrounding properties also increase in worth. An investor can force appreciation by investing in repairs or improvements.
A somewhat lesser known reason that so many people are learning how to become a real estate investor is the beneficial tax rules governing such transactions. State and federal governments try to encourage investment by writing financial rewards into the tax code. There are two main rewards built in. First, an investor can claim monthly mortgage payments as a tax deduction. Secondly, tax deductions can be made through a process called depreciation. Though a property may appreciate in value, an investor is allowed to make the assumption that it will actually depreciate over the projected useful lifespan of the unit. He or she is then allowed to claim this theoretical loss as a tax deduction.
Another strong reason for becoming an investor is called leverage. Leverage can best be explained through an example. Say you bought a house for ten thousand dollars and then sold it for eleven thousand dollars. Your profit margin would be ten percent. However, if you get an initial loan for the purchase and make a down payment of only one thousand dollars, then your profit margin would be one hundred percent. This method is called leverage and is a great way to maximize profits.
For all these reasons real estate investing is both an easy and very profitable business to get into.
By admin • Posted in Real Estate Investors • No Comment
November 20th, 2009
Loss Mitigation — How to Profit as a Real Estate Investor
Are you interested in making incredible returns in real estate foreclosures? If so, one thing you should really start to understand is the whole area of loss mitigation which is used to describe a third party helping a homeowner, a division within a bank that mitigates the loss of the bank, or a firm that handles the process of negotiation between a homeowner and the homeowner’s lender.
Loss mitigation works to negotiate mortgage terms for the homeowner that will prevent foreclosure and allows the lender to take a lesser loss right now in order to avoid the much greater losses caused by such foreclosures. As a foreclosure investing pro, you can use this knowledge to your advantage because you can work with a property before or after it goes to loss mitigation.
Foreclosure
As a real estate investor, realize the foreclosure situations tend to be extremely time sensitive so you need to put yourself in a position to take rapid, and decisive action. From the pre-foreclosure stage when the owner is just going into default, to the loss mitigation stage, to the sale at the court house steps, to acquiring the property as a bank REO offers unbelievable opportunity for the knowledgeable and swift. As current foreclosures push inventory to record levels, the opportunities become better and better as a potential investment.
Homeowners and What They Experience
Homeowners who got a mortgage plan with bad terms, like loan resets and balloon payments are now bailing on those loans because they can’t refinance. First comes the pre-foreclosure followed by attempts at loss mitigation. As an investor, you need to be aware that homeowner’s loss mitigation department does have some pre qualifications which need to be met before a loan modification is even considered; i.e., structuring something to bail out the homeowner. As an investor, if you can offer the homeowner a faster, better solution you may have just stumbled into a golden opportunity. Homeowners are looking to come up with a debt plan that is reasonable for them and the bank, in order to avoid foreclosure however if you present them with a better option, they may be all ears.
What is a Loan Modification
The most common modifications are lowering the interest rate, reducing the principal balance, ‘fixing’ adjustable interest rates, increasing the loan term, forgiveness of payment defaults & Fees, or any combination of these. The loss mitigation department will evaluate the current financial state of the homeowner and determine what is in their (the banks) best interest. As you begin to learn how a loss mitigation specialists thinks, then you as a real estate investor can begin to devise much more suitable plans for both you and the homeowner.
There Is Tremendous Opportunity Right Now
With all the banking crisis that is ongoing, there is an unbelievable amount of opportunity for real estate investors to cash in on this once in a lifetime situation. Keys to your future success will simply be taking rapid action, learning how to deal with a few simple situations, and then start your new beginning as a real estate investor.
By admin • Posted in Real Estate Investors • No Comment