Hotel gurus and those that post to forums normally don’t have a formal credit background to truly understand the nuances of note buying. In this installment, we explore 7 things that can erode your lien position when you hold a note.
Collateral and Dangers of LTV Read More »
Recently, I wrote an article about confusing acronyms. Real estate-related investing is no different. Two of the acronyms that keep popping up are MBS and CMBS. These common acronyms stand for “Mortgage-Backed Securities” and “Commercial Mortgage-Backed Securities” respectively. They are the vehicles by which our real estate market moves forward.
Mortgage-Backed Securities Read More »
The saying goes, “The road to Hell is paved in good intentions.” Our society attempts to solve problems by throwing money at them and increasing government regulation. Well, money can’t buy happiness, or solutions for that matter. Neither is government ever the most efficient solution to our problems. The current economic upheaval left in the aftermath of the Covid-19 crisis has only been exacerbated by government intervention.
Chickens Coming Home to Roost? Read More »
It has been told that King Solomon charged one of his servants to find a ring that would make a happy person sad when they wore it and, if a sad person wore it, they would become happier. When the servant told the wise king that he could find no such ring, King Solomon commissioned a jeweler to inscribe a ring with the saying “This too shall pass.”
The Lesson of the Ring Read More »
The real estate loan industry seems to be in turmoil at the present time. Buyers and sellers alike are struggling to make sense of a seemingly changing world. Buyers are concerned about the future of their jobs while sellers have grave concerns about the lack of buyers that are out looking for properties during the pandemic. Our real estate practice is seeing fewer buyers that are actively searching, but the ones that are searching are very serious about buying.
Certainty in an Uncertain World Read More »
I remember sitting in my office in 2006 in Downtown Tampa watching all the cranes slapping up new condo buildings like there was no tomorrow. It turned out that there really was no tomorrow as soon the market was glutted with housing without enough buyers to fill them. The story was the same all over the country. Housing inventory was through the roof.
A Shock to the System Read More »
In addition to all of the consulting work we do for smaller investors and larger investors, we have our own funds, manage the funds of other entities, and we have a real estate practice that operates on the West Coast of Florida. It’s that real estate sales practice that gives us some of the most important information. It’s a canary in a coal mine, and I don’t mean the awesome song by The Police
Canary in a Coal Mine Read More »
There is an old saying that goes “If you’ve been sitting at the poker table for more than 15 minutes and you don’t know who the patsy is, you’re the patsy.” That’s pretty harsh, but it’s true. So many note and real estate investors try to jump into the market with both feet without having a strong background in the field only to make mistakes. The problem with making mistakes with a 6-figure property is that it can be a very expensive mistake. I’ve made mistakes. I call my mistakes “tuition”…very expensive tuition.
Most people find bank underwriting guidelines to be very confusing. When many apply for loans, they are filled with self-doubt and questions as to whether they will be approved or not. The single most important factor in determining whether a borrower qualifies for a loan is arguably not the borrower’s credit history or the collateral value. Most lenders feel the borrower’s ability to pay is the single most important factor that goes into the loan approval process. At the center of this question is the ratio of the borrowers debts in relation to their income which is called Debt to Income Ratio (or DTI) on consumer loans for Debt Service Coverage Ratio (DSCR) for commercial deals. Many, however, find the formula a mystery. Let’s demystify it by first looking at what debts are included in the calculation.
What Debts Go Into the Debt to Income Calculation? Read More »
Getting financing for your first few flips can be quite expensive. As I’ve mentioned in earlier posts, banks and federal banking regulators absolutely hate to lend to smaller real estate investors. The struggle that many newer investors have is that they are accustomed to seeing the rates that are being charged to owner-occupant home buyers. They fail to take into account the level of relative risk to a lender that a real estate investor imposes on the institution, therefore, they struggle to understand why rates for real estate investors are higher than they are for owner-occupants.
How Lenders Make Money Read More »
Entering into a new partnership is exciting. Your head is dancing with the possibilities that the new venture could bring. You must, however, protect yourself. There are so many sayings that fit so well in this particular situation. I’m reminded of two saying that I use a great deal.
Good Fences Build Good Neighbors Read More »
We’ll call the seller “Mike”. Mike was selling a home that he had renovated and immediately got several showings. One of the selling agents, we’ll call her “Cheryl” brought “Bob” through the house and he loved it. The next thing Mike new. He was fielding offers.
An Ethical Dilemma Read More »
When I was a child, our next-door neighbor, Ann, had already lived a long and full life. Born at the tail end of the 1800s, Ann had seen it all in her lifetime. She had lived through the roaring 20s, the Great Depression, both World Wars, and so many other points in history. We always thought it was odd how frugal she was. She made popcorn balls for Halloween and she folded and saved her used aluminum foil. To us at the time it was odd, but she remembered times when she had nothing and had to conserve.
New Free State of the Real Estate Industry Webinars Read More »
If you are in a real estate-related business, you undoubtedly work with contracts and agreements in your business. Although we are taught to read everything carefully before you sign a contract, most people simply gloss over the highlights before signing. If you are part of the minority that actually reads everything that they sign, they you have probably encountered a term called “Force Majeure” buried somewhere in the legalese.
Yamamoto famously had serious concerns over plunging Japan into a war with the US. He thought very little of America’s naval leadership, but he understood America’s industrial capacity should it get backed into a corner. Although there are no records of him ever saying this, he is often quoted as saying “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve” after the bombing of Pearl Harbor in 1941.
The Sleeping Giant Read More »
Watching HGTV would have you believe that buying a foreclosure property at auction is super easy. You simply look at an ad in the newspaper over breakfast while you get the kids ready for school, you drive down to the courthouse steps where you and 6 other unsavory-looking characters stand in a semi-circle and then you start bidding. Of course, you always seem to win the deal. That’s real life…right?
Buying Homes at Auction is Easy…Right? Read More »
In a dimly lit restaurant, our clients and vendors rubbed elbows at one of our networking events in Florida. Our associate that was responsible to vetting contractors brought me a gentleman that proclaimed that he and his business partner would be the best contractor that we ever had if only we would give them a chance. Our associate spoke highly of him, so I gave them three of our renovations to see how they did.
Ten Things You Should Know Before You Hire a Contractor Read More »
Most of the residential loans in the United States today or not owned by big banks. They’re owned by funds. Conservative investors that seek safer investments, in this case real estate-based loans secured by real property, wish to protect and mitigate against downside risk to the portfolio. As most investors see a mortgage fund to be relatively safe, they are usually willing to accept a smaller return on investment.
Buying Notes from a Fund Read More »
In 2007, the housing and mortgage markets crashed hard…very hard. The real estate market began to spiral downward in a self-feeding crash that left many families in the US facing homelessness. In 2010, the Federal Government created the Hardest Hit Fund (HHF) to help families save their homes. Originally, $1.5 billion was allocated to assist families, but available funds have increased to $9.6 billion. This means that note buyers have a tool to not only convert nonperforming loans into more profitable performing loans, but they have the opportunity to help families in need.
When you have been doing something as long as I have, you sometimes think that everyone knows what you know about a particular subject. I have been dealing with real estate lending and collections for nearly 30 years. I speak at national conferences on the subject to an audience that has a background in buying loans and real estate. Sometimes when I speak about purchasing first mortgage loans, a question I often get is “what happened to the bank?”
But What About the Bank? Read More »
Fear is rampant all over the globe over the Covid 19 Virus, commonly known as The Corona Virus. The unprecedented steps that have been taken by not only governments but also the private sector have most feeling angst over the state of the economy. Many are asking about the short and long-term impacts of the Covid 19 Virus response on the real estate sector. Although there are many concerns, there is also tremendous opportunity for homebuyers and investors alike.
The Corona Virus Impact on Real Estate Markets Read More »
Levers and pulleys have been used in construction since before the ancient Egyptians built the Pyramids. They allow force to be multiplied so that, if enough levers are used, a person can move a large, heavy stone. The ancient Greek mathematician Archimedes famously stated “Give me a lever long enough and a fulcrum on which to place it and I can move the world.” Similarly, borrowing, or using leverage as it’s known in the industry, can help multiply your investment efforts as well as your returns, but it also can have dire consequences to your portfolio if things go wrong.
Archimedes Was Right Read More »
Everyone knows that elephants are grey in color. That’s just common sense. If I asked a third grader to color in a picture of an elephant, they are probably going to reach for a grey color, but have you ever seen a white elephant? They would certainly be unusual. They are different and stand out from the crowd. In our society, being different is a good thing…except when it comes to real estate investment. White elephants aren’t something that can be easily valued.
Taking out a loan against your primary residence could benefit your tax situation in a couple of ways, but you should talk with your tax advisor. Full disclosure…although my degree was in accounting 30 years ago, I have never practiced as an accountant. Be sure to talk with your tax advisor for what I am about to tell you.
Investing and Taxes Read More »
Not all deeds are the same. When property is transferred, the language in each deed will provide certain warranties from the seller. It’s important to understand the types of deeds that are out there as you might not be getting the protections that you deserve with some deeds. In this article, we are going to discuss three common types of deeds and what they generally cover.
Not All Deeds are Created the Same Read More »
