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 »
I remember Lucy, an admin that we had at a finance company I used to work at early in my career. Lucy brushed her teeth…a lot. Every time she would drink a beverage or grab herself a quick snack, she brushed and flossed. You see, Lucy was engaged to be married…to a dentist. Teeth were the main focus in her household. That’s just the way it was. Four out of five denists recommend brushing and flossing after you eat anything…well, I’m not sure that it’s four out of five, but that’s what I’m going with for the sake of argument.
Brushing and Flossing Read More »
I really hate drug company commercials. What I hate most is the explaining I must do when a prophylactics commercial pops up in the middle of Dora the Explorer. A close second to that would have to be all the acronyms I’m expected to know. COPD, ED, IBS, ABC, XYZ…I can’t keep up. I’m not a doctor, yet everyone thinks that I should automatically know what IC stands for. Every industry has their acronyms. Unfortunately, every industry also forgets that not everyone understands what they heck people are talking about when they are used.
Acronyms, Acronyms, and More Acronyms 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 »
My first job out of college was this a consumer finance company. We would make small loans to consumers at incredibly high interest rates, but I justified it as if I was actually helping people. I was a young, naïve kid and I should have known better. The interest rates we were charging sometimes approached 39%, but more important than the rate was how the interest was calculated.
The Precomputed Interest Abyss 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 »
I periodically peruse industry blogs to catch up on what is going on in the real estate and nonperforming loan fields. Most of the posts I see are uninteresting or they are just downright stupid. Sometimes, I see a post that is not only stupid, but it makes me think. One in particular that stuck out was a question that I see pop up from time to time, “Is it me or (do) most of these realtors (stink) at their job?” Two things come to mind when I read the question. Many, if not most realtors do not really bring value, but more importantly, are you the right customer for a good realtor?
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.
In our last installment, we talked about what debts lenders count towards your debt service coverage ratio or your debt to income ratio. In this article, we’ll look at the other side of the equation, your income.
Banks and the Income Calculation Read More »
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 »
Most real estate gurus really tick me off. People looking to make a better life for themselves and their family decide that the gateway to make their dreams come true is real estate. They sign up for a “free” seminar at the Days Inn and the first thing that they are told to do is to call your credit card company during the break and up your limits. When you return they have you run to the back of the room to pay for “training” that will be the only way you can find out the secrets of real estate riches. The trouble is that the “training” and the trips to the back of the room never stop. You also never get any closer to learning how to be an investor, a note buyer, a wholesaler, or whatever you are wanting to be. One thing that they do drill into you is that “it’s all about the cash flow…don’t worry about the debt,” but is that right?
Getting into wholesaling is not for the faint of heart. It’s exciting, but it’s full of heartache and anguish. The internet is full of advice on how to be a wholesaler. We’re not going to teach you that in this article, but we are going to give you five things to take to heart as you enter the wonderful world of wholesaling.
5 Tips to Becoming a Better Wholesaler 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 »
Borrowing money to complete a flip allows us poor people to get into the real estate game. If you aren’t careful, however, the time value of money when using hard money will eat up any profits that you hoped to make on a project.
Rehab Costs, Hard Money, and Time 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 »
