Category Archives

Archive of posts published in the category: property
Aug
18

Cost Per Funded Loan – Building a Book of Business

There are many essential metrics that must be considered when a determination is made on how to spend valuable marketing dollars. The acceptable cost per funded loan varies depending on where an individual sits in the organizational chart and how much of a stakeholder one is in the long term growth of the company. Successful lead generation firms are aware of this and for this reason there products are designed to cater to different segments of the mortgage professional population.

A mortgage banker will seek to increase volume and can tolerate slimmer margins immediately sees the benefit of of increase overall lead volume. A cost per funded loan of $400 to $700 per funded loan is acceptable and very profitable, because the bank will draws revenue from the originated loan in more than one way.

There are a number of different ways to market a reverse mortgage. However, they fall into two basic categories: 1.) Waiting for a qualifying senior homeowner to walk through your door with and request the product from you or 2.) Market to the target demographic in a clear and informational manner and let them know the product is available.

Waiting In the Office for Warm Referrals: Lowest Cost Per Funded Loan
The easiest is to rely on warm referrals from past clients. In the reverse mortgage industry this would amount to simply waiting for someone who has previously reverse mortgage there home to go to a friend or family member and to extol the virtues of the FHA HECM or private equity loan that the recently received.

Ideally, they will have excellent comments to share regarding the company that provided the loan as well as the benefits of the loan itself. In this scenario the cost per funded loan is nearly zero and the profit margin associated with the loan is high.The downside to being dependent entirely on warm referrals of this type, particularly for growth oriented firms is easy to see.

First, senior homeowners tend to keep financial matters private and may not discuss financial matters openly. Second, for many seniors, their personal network of trusted people is shrinking as opposed to growing each year. Third reverse mortgages have been available for decades in one form or another and prior to the massive increases in home values associated with the real estate bubble, which substantially reduced the loan-to-value of many properties and increased the available equity, very few loans were done when this was the primary means of communication.

A quick visit to the FHA website or review of the year-by-year statistics reveals this to be undeniable.

Marketing Programs: Growth-Oriented Referrals
Growth oriented firms, particularly those with an exit strategy that includes being bought out by a larger firm or group of investors, will require more than just walk-in to build their businesses. Even large banks and financial institutions market heavily in the communities their agents service.

Anyone familiar with the reverse mortgage industry understands that eventual sale of the business entity or the …

Aug
16

How Scenario Analysis Helps Measure Risk When Real Estate Investing

Scenario analysis is used by real estate investors and investment property specialists because it provides a good way to measure risk when evaluating real estate investments.

What is scenario analysis? It involves estimating a range of variables that will have the greatest impact upon the likelihood of an investment performing according to an investor’s minimum expectations. Rental income, for instance, is subjected to scenario analysis when the analyst wants to gauge investment property performance based on various rent scenarios. In other words, how well does the property perform in the event rents decline or increase?

Scenario analysis typically considers three scenarios. In this case, we will assume that our scenario analysis is intended to explore what influence changes to rents would have on property performance.

  1. Worst-case – if rents decline or do not change at all
  2. Most-likely case – the most realistic rents that can be obtained
  3. Best-case – rents beyond our wildest dreams

Assume, for example, you are evaluating a rental property consisting of five units rented at $900, producing $54,000 annual rental income, and resulting in a cap rate of 6.23%. Though you are interested, you feel that the cap rate is too low (you prefer a cap rate of 7.0%). The seller will not drop the price (which would raise the cap rate), so you are faced with a dilemma to either pay the price (against your better judgment) or walk away.

This is where a rent scenario analysis can help. Rather then making a decision blindly, you can explore the influence that various changes in rent would have upon performance. In other words, at the very least, you can see what rents would have to be collected to achieve your cap rate, and whether they are likely or pie-in-the-sky.

In this case, you would consider all three scenarios: worst-case, most likely case, and best case. If your desired cap rate were attainable within the first two scenarios, it would indicate that the property’s current rents are low and it does provide some “upside potential.” So you might want to pay the asking price confident that you can increase rents and thus improve the property’s performance. Otherwise, if rents would have to be raised beyond your wildest dreams to attain your cap rate, you might want to walk.

How do you construct a rent scenario analysis? You can use a spreadsheet or purchase a real estate investment software program. Just remember what it is you want to achieve. You want to see the outcome on essentials like cash flow and rates of return based upon a range of rent scenarios. You might be amazed what you uncover about the property.

Aug
15

Understanding Mortgages – What is a Lien?

When discussing mortgages, one term that often arises is “lien.” A mortgage is not a loan, but a lien on the property that keeps the loan secure. It is important to understand this confusing term in order to properly understand mortgages and property ownership.

A lien is a hold on your property so that is can be used as collateral for money or service you owe to another party. A lien can keep the borrower from selling a piece of property by preventing the transfer of property title to a new party. Liens are often involved in situations in which one person or party has loaned money toward a substantial item in the possession of a borrower, such as in a mortgage. A lender can force the sale of any property that has a lien in order to collect money owed from the borrower. If instead the borrower decides to sell the property, he or she must pay the lien-holder before the property title can be transferred to the buyer.

One common example of a lien is a construction lien. When a property needs repair, maintenance, or renovation, the property owner often hires someone to do the work. After the work has been completed, the property-owner is legally obligated to pay for the improvements to the property. The lien exists in order to help ensure that a construction worker can be properly compensated without having to sue the property owner.

If you have decided to purchase property, you should make sure that there is no lien on the property. A lien on the property may mean that the person attempting to sell the property is not the legally recognized property owner. Therefore, a lien can prevent you from securing a clear title, and you may not fully own the new property you have purchased. You can hire an abstract company to conduct a title search by delving through public records concerning the property’s history to be sure that no lien exists. The title search should also indicate if the seller is legally recognized as the property owner, the description of the property, and details of any lien or other holds on the property.

A mortgage is one type of lien. Therefore, a mortgage is not a loan in and of itself, but rather a way for a lender to secure property rights while the borrower still owes money. Although the term “mortgage” is often used interchangeably with “loan,” the two are indeed different. Before deciding to buy or sell property, it is important to be fully informed about legal issues surrounding mortgages and titles to be sure that you fully own the property.

For more information about loans, mortgages, refinancing, and other issues, visit the website of the Milwaukee bankruptcy lawyers of the DeLadurantey Law Office, LLC.

Aug
14

How to Open a Halfway House Or a Recovery Home

To begin with, let us tell you that this article is going to smash any preconceptions out there regarding opening a halfway house in the USA. You do not need a license, permit, or any other document to open a halfway house. If any person, government official, government agency, zoning commission, etc. tells you otherwise, they are engaging in illegal and unfair practices. Know your rights (see bellow links to know your rights).

NATIONAL LAWS (ADA) ALWAYS SUPERSEDE LOCAL LAWS.

Just for a hypothetical situation; let’s say that 3 people who have depression decide to become roommates in a home. Should they be shut down and kicked out of the neighborhood because of their disability? Does that mean they have to get a license or permit to stay? Of course not. They are protected under the ADA (Americans with Disabilities Act), as well as other determinations (see links below) against such discrimination. Havingchemically dependent persons in a home is no different!!! Alcoholics and addicts have the same laws to protect them.

It is a well known fact that City Councils have tried to stop halfway houses in their neighborhoods by stating that a halfway house with alcoholics and/or addicts, in other words disabled persons, (and alcoholics and addicts qualify as disabled under the ADA), must not have roommates (as in 2 people in a room at a house), which prevents most halfway houses from opening.

If you have a house, and you want to open a halfway house, and your mortgage payment is $700.00 per month (see additional expenses at the bottom of this paragraph), there are many things to consider before accepting residents into your house. Let’s say, hypothetically, you follow licensing and zoning guidelines. With the average charge to a resident with a substance abuse problem, being around $125.00 per week, you can see that if you went with what the license division / politicians tell you, (which are illegal tactics), you would be out of business shortly. Keep in mind that in addition to your mortgage payment are things such as: utilities, phone service, water, food, furniture, cooking utensils, beds, sheets- basically everything you would need to survive, etc.

On the other hand, if you did not license your house, you could put in 2 or 3 people in a room and keep your halfway house open. In other words, helping others to get a hand up at living sober. Please read more details below…

NATIONAL LAWS (ADA) ALWAYS SUPERSEDE LOCAL LAWS.

How to open a Recovery Home, Halfway House, Sober Living Home OR starting a Half Way House/Recovery Facility*- Resources to assist you. This article includes information on the standards and requirements of opening and operating a Halfway House/Recovery Home- NOTE: Not every county in the United States approaches standards and licensure in the same way- it is best to contact your local licensure department and/or zoning division.

The first thing you should know about opening a halfway house is that you do not need a …

Aug
12

Commercial Real Estate: The Importance of Population Trends

While commercial real estate can be an excellent investment, it’s all but impossible to succeed in this competitive environment without some sort of game plan. The most successful professional real estate investors are those who are able to look at a given area and accurately predict which parts of a given city are likely to experience the most growth in relation to other areas in or near that city. Those who are able to gauge such trends can enjoy enormous advantages in the real estate investment marketplace.

One of the major advantages of this approach is the investor’s ability to often purchase properties at significant discounts to their future, improved market values. One example of this in urban areas is where some neighborhoods go into decline over a period of years. Property values decline, but local populations remain high. Should the city council decide to “re-zone” or offer incentives to developers to rehabilitate the neighborhood, savvy investors have an opportunity to come in while real estate prices are still “low.” Thus, they can enjoy excellent profits once those blighted neighborhoods begin to turn around.

One of the methods used by these professional real estate investors is a thorough analysis of current and future population trends. Tracking the trends in population growth and population movement can provide an accurate predication of which neighborhoods are likely to succeed and which ones are doomed to at least short term failure.

Over the past several years it has been those markets with the strongest and fastest population growth that have been the hottest markets in the country. This trend has held true both in residential and in commercial real estate, and those investors who took advantage of this fact were able to realize excellent profits through the buying and selling of residential and commercial properties.

It is easy to see how population movement and population growth impact the housing market, since a higher population density increases the demand for local real estate. In turn companies looking to open new facilities or new branches often look to areas with high population growth, causing a spike in commercial real estate prices as well.

The movement of population from one area of the country to another can also be an accurate predictor of when it is time to sell. The nature of the neighborhoods in which investors own property can sometimes be difficult to determine, especially from a distance. So, tracking population trends can be a big help to business owners and owners of commercial real estate around the country.

Whether you are planning to buy commercial property, sell commercial property, or do a little bit of both, paying attention to the growth and movement of the local population can be a huge help. Real estate investors need to be cognizant of the trends which could effect their investments and population growth is one of the most important to track.

Aug
11

What Are the Dangers of Sweetheart Leases in Real Estate Investing?

There are certain dangers in existing leases with existing tenants when you are contemplating the purchase of a rental or single family home (SFH) property. While the majority of investors buy single family homes to wholesale, rehab or wholetail, many other investors look at an income stream from a property as their goal.

In a purchase of a property without a tenant in the property, the closing is straightforward. The taxes are accrued through the closing date and any other prorations are settled at the closing. However, in the closing of properties that have tenants, other considerations become very important.

The first is any deposit the tenant has with the former owner. These deposits are usually required to be placed in a separate escrow account. Some states, counties and cities are very strict about the escrowing of these funds. New landlords often use the lease deposits of the tenants as part of their operating capital and assume when the tenant leaves, they will have the funds available. The fact that a few landlords never intend to refund deposits has caused all landlords to have to be penalized by well-meaning legislators with restrictive escrow laws.

The second issue is the lease the former owner had with the tenant in the property. Some of the more important terms of these leases include the amount of rent, when and how the rent is paid, the length of the lease, reasons for eviction, sub-lease provisions, cure periods for violations of the lease and renewable terms. Very important are the specific terms for the return of a tenant’s deposit because of the implications when the lease ends with the new owner and the tenant leaves.

The importance of reading and confirming every tenant lease before the closing is very important. If a tenant does not have a lease, he is potentially a squatter and may have to be removed by court order. Court-ordered eviction without a lease can be a lengthy and always an expensive process.

Often a seller of an income property will tell a perspective buyer that the rents can be increased above what they are with the current tenants. This may or may not be true, depending on rent controls, the terms of the tenant’s lease, competition in the local area for tenants, and the condition or location of the property. Do not assume that rent increases can be made automatically with new tenants.

The most onerous issue with existing tenants is those with low rents and long leases. These so called “sweetheart” leases can be between the landlord and a relative, or friend but the new buyer must abide by these existing leases until they expire or the tenant is evicted for cause. These sweetheart leases are sometimes re-leased (sub-leased) to other tenants and the differential amount is a profit to the former tenant.

One way to stop these existing sweetheart leases is a buy-out by the landlord. This may sound expensive but do the math on how much you are …

Aug
10

Property Finance For Foreigners In Thailand

Are foreigners allowed real estate finance in Thailand? Can foreigners in Thailand borrow money to buy a villa or condo?

Are you looking to buy a villa, condo or different property in Thailand? And are you in need of finance? Then scan this report with all you need to know concerning property finance for foreigners in the Land of Smiles.

Property financing for foreigners in Thailand is possible nowadays. But within the past foreigners typically could not acquire a mortgage from local Thai banks to finance their dream condo or beachfront pool villa since most of the money establishments in Thailand solely provided finance for property purchases to Thai nationals and Thai Corporations.

But things changed in 2005 after I saw Bangkok Bank PLC offerering loans to foreigners in their Singapore branch and once more in 2008 when I witnessed Bangkok Bank finally issued foreign loans via their Thailand primarily based branches virtually like we see it in our home countries.

Within the past mortgage lending by native banks to non-thai-nationals was just about extraordinary in Thailand, but lately I actually have seen a considerable amendment in policies to permit foreigners limited access to financing.

Initially this was launched by the Thai government’s eagerness to increase tourism and to stimulate economic development in Thailand.

When we want to purchase a property in our home country, one of the main things we consider is financing.

Whether or not you have adequate funding and liquidity to purchase, financing is largely seen as a way of smoothing our investments.

For people with less access to funding, financing is a very important vehicle they use to own that home of their dreams.

Thailand do not differ from any other country in this instance since most of the banks (but not all of them) in Thailand give loans for real estate purchases to native Thais and Thai firms primarily based on similar criteria we are used to in our home countries.

But for foreigners the similarities do finish here when buying property in Thailand!

Some Thai banks do offer mortgage services to foreigners but they impose quite strict terms and conditions for the foreigner to qualify.

One overall important condition is that the property has got to be owned in the foreigner’s own name and hence the property should be registered as a condo under the Condominium Act because foreigners are not allowed owning other sorts of properties in Thailand.

Also the buyer must pay minimum 30% down with the remainder 70% financed over 3 to 20 years, depending on the age of the borrower.

You can only borrow money in the bank if you are less than 65 years old – and the mortgage must be paid back in full when you turn 65 years old. So if you are say 55 years old today you can borrow the money for 10 years.

Bangkok Bank PLC was the first financial institution in Singapore to provide this kind of financing services to foreigners. But in …

Aug
9

Pros and Cons of Home Inspection

Millions of Real Estate transactions happen on daily basis and it is important for buyers to protect themselves in as many ways they can. One of the simplest is to hire a home inspector. Home inspection offers both the immediate and long term benefits to the buyer. It can also be beneficial for the seller as it can avoid deal-breakers. If the issues and problems can be resolved before being identified by a potential buyer the seller has more chances in getting their asking price. In general, it’s worthwhile to get the inspection done for both, sellers and buyers.

The buyer gets benefits in several ways.As the buyers invest a sizable chunk of money to buy a home it is important to identify any deficiencies that may cost extra money and stress, an inspection by a qualified third-party will disclose the facts. All the serious, major and minor defects are revealed. In some cases there may be some critical structural defects that may be as good as rebuilding the house. Or, the defects may eat away a lot of money and time to rectify them. They may not be able to use the house at all till those are taken care of. There can be some problems related to the safety of occupants, which are to be removed before moving in.

Another benefit inspection offers are that the buyer can get quotes for needed repairs and uses them to negotiate the price with the seller. Moreover, a home inspection eliminates buyer’s remorse about the problems later on.

The home inspector will check and report about ins and outs of the property, areas like basement, structural, construction and safety issues, condition of the roof, and electrical, water lines and heating, air conditioning or ventilation systems. That will ensure to the buyer what all needs attention to repair or replace and he can get the quotes for evaluating the costs involved and the buyers can plan what should be done when and make their budget.

When it comes to disadvantages of hiring an inspector, there isn’t really anything major, except incurring some expenses for inspection. The cost is small in comparison to saving that can be achieved. Of course a qualified and in-depth inspection is key here.

A seller also benefits from a home inspection as he/she can avoid problems later on. Before listing the house for sale, a home inspection will help the seller to recognize the potential problems with the home and they can be addressed before showing the property to buyers. Multiple quotes fir repairs can be obtained and a proper job done as oppose to making urgent repairs 2 weeks before closing. This cant cost a fortune.

Most importantly, all issues and problems resolved before the buyer shows up. If a seller is not ready to allow inspection, and is firm on the price as is, the likelihood of a fast sale or a sale at all is very small.

A home inspection gives confidence to both seller …

Aug
7

What is a Short Sale and How Does it Connect to the Foreclosure Process?

The term short sale has been brought up more and more in the real estate world as the property market has corrected to a more sustainable growth level. Depreciation of home values ​​over the last few years has led to homes that are worth less than the mortgages that were used to finance the purchase. This situation coupled with a nationwide recession that has created the need for people to sell their homes permanently being "underwater" has led to the recent popularity of short sales.

What Is an Underwater Loan?

A home loan or mortgage that is higher than the actual value of the home is said to be underwater. Over the last few years this situation has become a common occurrence as homeowners who bought at the peak of housing prices with little or no money down have seen their property values ​​decrease, sometimes dramatically. They began with a $ 300,000 loan on a home that appraised around that value, and now their mortgage amount is around the same, but that same house appraises for less than $ 250,000.

With the rise in unemployment, many homeowners who have found themselves in this difficult situation have been forced to sell their home because they can no longer afford the mortgage. The problem that occurs is that even if the homeowner sold their home for $ 250,000, they would still owe the bank the additional $ 50,000, which holds up the sales process. This hurts everyone involved because the original owners can not pay the mortgage, so they default on the loan. The new buyers who are excited about the home are not allowed to buy it at the new market price. Finally, the bank that holds the mortgage will not let the original owner sell, does not receive a payment each month for the mortgage, and must now go through an expensive and time consuming foreclosure process to get possession of a home they will only be able To sell for less anyways.

Buying and Selling a Home with a Short Sale

This is where short sale comes into play. In a short sale the original homeowner who is underwater will get an agreement from the bank to complete a short sale and put their home on the market at the current local price. When a buyer decides to purchase the home, the bank agreements to let the sale take place and take a loss on the original mortgage. Ultimately, this type of legal settlement allows the homeowner and bank to avoid a costly and credit damaging foreclosure process. The owner will still take a hit on their credit score and the bank will lose some money on the transaction, but the overall solution is much better than foreclosing on the home.

Foreclosures and Short Sales

Short sales are becoming more common with our current correction in home prices and high unemployment, but many bands still make the process very difficult for the owners because they do not want to …

Aug
6

Terminating the Co-Ownership of Hawaii Real Property

There are times when co-owners of Hawaii real property are engaged in a dispute and no longer wish to continue co-ownership of such property, or one party is no longer making payments on the mortgage and the paying party wants to remove the non-paying party from title. The question that usually follows is what are the co-owners’ options if they wish to sever such relationship.

In the event that there is no prior written agreement among the co-owners setting forth each owner’s obligations and the procedures for resolving disputes, the co-owners are basically left with two options:

(1) work out some agreement to resolve the dispute or

(2) terminate the co-owner relationship through a court supervised partition action pursuant to Hawaii Revised Statutes Chapter 668 (Hawaii’s Partition of Real Estate Statute).

The co-owners should first try to resolve their differences and come to some compromise. By reaching such a compromise, the co-owners would not need a Hawaii partition action which can be a very costly process. However, if seeking such an agreement proves to be a dead end, then a Hawaii partition action is necessary.

In a Hawaii partition action, one or more of the owners files a lawsuit against the remaining owner(s). The filing party is also required to join as a party every person having or claiming to have any legal or equitable right, title, or interest in the property described in the lawsuit.

Once a Hawaii partition action is filed, the court has the jurisdiction to partition the real property by (1) partition in kind or (2) partition by sale. A “partition in kind” occurs when the court physically divides the property and each owner ends up controlling an individual portion of the property. A “partition by sale” is accomplished by selling the entire property at a public auction and dividing the proceeds among the owners according to their respective interests in the property.

The courts tend to favor a partition in kind first, but if such a division is not feasible, then the court will proceed with a partition by sale. As you can see, terminating a co-ownership relationship of real property is not that simple and can be costly. Therefore, you should seek consultation with a Hawaii attorney experienced in resolving co-ownership disputes of Hawaii real property.