Asked by A. Martinez – A  Home Seller In Chicago:

“I own multiple properties and two of them were cited with violations such as the need to replace the porch in both buildings and a possible deconversion. These repairs will be way too costly for me and may not be a able to afford the repairs and possible deconversion. What are my options?”

Wednesday
March 26, 2010

This morning, I was re-reading Roberty Kiyosaki’s (“Rich Dad, Poor Dad”) book Conspiracy Of The Rich. At one point in the book, he makes the statement that when you invest in capital gains, you are actually gambling – gambling that prices will go up. Because if prices go down, you loose your investment.

5 years ago that statement would have been difficult to grasp. However, in today’s environment, it is clear: real estate prices do NOT always go up!  And although he does not limit his statement just to real estate, it is probably the easiest example to point to in today’s economy.

In real estate terms, investing in capital gains is “flipping” – buying low, fixing a property up a bit and selling high. I know several investors that are doing very well these days “flipping” foreclosures – and it is a formula I have taught both in my case studies (click here now to see those) and in my live teleseminars. You can even find my “Investment Formula For Success” in my free report “High Yield Returns In Wholesale Real Estate” available by filling in the form to the right >>>>.

However, Robert Kiyosaki warns against “flipping”. And he is not wrong. The SAFEST way to invest is to invest in cash flow. Now, any investment carries with it a certain degree of risk. But then life itself carries with it a certain amount of risk! As Mark Twain said: the only certainties are death and taxes. However, when you invest in cash flow, you are less concerned about what values are doing. To invest successfully in cash flow, it is important to be able to buy at a price that is low enough that the property can generate cash flow. And the less money you borrow to purchase the asset, the more likely you will be able to see cash flow from it.

Until recently, it was virtually impossible to buy apartment buildings at a price at which they would cash flow – unless you paid cash for it. Apartment buildings were not bought for cash flow – rather they were bought for their potential to earn capital gains: i.e. to convert into and then ”flip” as condos. Nowadays, that no longer is the case. With the huge inventory of broken condo developments, it is once again possible to purchase apartment buildings at a price at which they will cash flow.

If this is a subject that interests you, I invite you to call me. I would love to spend a few minutes over a cup of coffee discussing the opportunities available to investors in today’s economy. As Rich Dad says, this is an environment where fortunes can be made or lost. My goal is to help you succeed!

“To Your Success!”
mary!
888-834-7085

Tuesday
March 16, 2010

According to a report released by FICO* at the end of February, recent credit behavior has shifted significantly from historical trends. Dr. Mark Greene, CEO of FICO, says:

“We’re identifying situations that to our knowledge have never been seen before. Economic instability is creating unknown risk in lender’s credit portfolios as well as counter-intuitive trends in consumer behavior.”

In 2005, credit card accounts were 3 times more likely to become 90 days delinquent than mortgages.  In 2008, credit card accounts were 1.6 times more likely to become delinquent than mortgages. 

For the first time in 2009, 0.3% of consumers with FICO scores between 760-789 (generally considered by lenders to be an excellent score worthy of their best loans) defaulted on their mortgages vs. 0.1% that defaulted on their credit cards! It is difficult to speculate what is causing the shift in people with high FICO scores to default on their mortgages rather than on their credit cards. However, the more value a home loses, the more likely an owner will consider what’s known as a “strategic default”. (See my article: “Should You Default On Your Mortgage?”) One possible reason may be that if a homeowner is faced with losing their home anyway, there is little reason to continue paying the mortgage. However, keeping their credit cards intact allows them to use the money to buy groceries or keep the lights turned on.  

In addition, FICO uncovered evidence that lenders tightened their criteria for new loans in 2008-2009 and began to “cherry pick” the kinds of borrowers they would extend credit to. In 2005, nearly 46% of consumers who opened a new mortgage had FICO scores below 700. In 2008, this dropped to just 25%. The credit card industry experienced a similar shift: in 2005, 51 % of consumers with a new credit card had FICO scores below 700. That dropped to just 38% in 2008.

To learn how you can prevent losing your home, go to my “Foreclosure Prevention” section now.

“To Your Success!”
mary!

 (*FICO is a trademark of the Fair Isaac Corporation which first developed a credit scoring system in 1958 to assist lenders in determining the creditworthiness of consumers. Lenders use a consumer’s FICO score to determine how much to loan and at what interest rate. )

Thursday
March 11, 2010 

 

Many first time buyers, anxious to take advantage of the $8000 tax credit that is quickly expiring in just 50 days, call our company wanting to look at foreclosures. The idea is that a buyer will be able to pick up a foreclosure at a lower price than a ‘conventional’ sale. However, once they get inside the property, they begin to understand why a foreclosure is priced so much lower than other properties.

 

Most properties that have been taken back by the banks have been sitting empty for quite some time. It is amazing how many bad things can happen to a property that has been sitting empty for awhile! And that is before taking into consideration the vandalism done by the vacating owner. Sometimes the vandalism is purely malicious – because the homeowner is upset about losing their home. At other times, it is economic. The fixtures are being sold for whatever money they can muster. 

 

One property I looked at recently, the owner had removed the heating system and punctured a hole in the water main coming into the building. When I went down into the basement, there was a fountain of water coming up from the floor and a resultant moutain of ice sitting in the middle of the basement. With warm weather approaching, mold will most certainly begin to grow where  previously there was ice.

Broken Water Main

Missing Furnace

  

Ice From Broken Water Main

 

Occasionally, we will come across a property that is in relatively good condition. With the downturn in the real estate market, many contractors have found themselves out of work. A home completely rehabbed by a contractor who just couldn’t bear to vandalize the work he himself did will often be a great bargain for a first time homebuyer. But those properties are the exception, not the rule. And you have to kiss a lot of frogs before finding your prince.

Bottom line:  most first time homebuyers are not equipped to handle the repairs required in purchasing a foreclosed home. They will do better to look at an estate sale or perhaps a situation where the seller – for personal reasons – must sell quickly. There are many reasons why a seller may need to sell quickly – either a job transfer, a divorce, a marriage, a pregnancy or some other change in their life’s circumstances.

For more information on purchasing properties at “wholesale”, download my free report now >>>>>

“To Your Success!”
mary!

Curious as to how you can take advantage of current market conditions? Click here now!