Archive for

No Money Down Real Estate Investing

If you really want to make a wealth of money in real estate you must learn to leverage a small amount of your resources to control a lot of property. One of the techniques I like to use is Subject To financing.

Although some states are attempting to pass legislation to regulate or ban this practice, it is still one of the best ways to easily finance a purchase. My advice is to check with a local attorney to verify if laws have been passed in your state relative to purchasing Subject To the existing mortgage.

What makes Subject To financing so powerful is the ability to take title (ownership) to a piece of property while leaving the existing financing in place. In other words, ownership passes to the Buyer, but the loan remains in the name of the Seller, or more precisely, in the name of the original Borrower. You can easily see why this is such a powerful tool: you can fund most or all of the purchase price of a home with the loan that is already in place! The buyer simply makes up the past due payments to bring the loan current, and commits to the Seller to make on time payments in the future, but does not need to secure new financing.

What about the due-on-sale clause that most mortgages contain today? It’s true. The lender does have the right to call the loan due – but NOT the obligation to do so. In fact, it doesn’t make sense for a bank, an institution that is in the money business, to call a performing loan due and risk forcing it into foreclosure. After all, a bank would rather have the on-time payments than the real estate.

What about the Seller? Why would they agree to placing their credit at risk? Since the loan remains in their name, they remain financially responsible. A motivated Seller however, is desperate to eliminate the responsibility for payments. They’re usually facing foreclosure. You’re offering the opportunity to remove the burden, AND at the same time improve their credit rating with on-time payments made in their name.

Are you currently using this powerful technique in your real estate business? Unless your state prohibits it, Subject To financing should become one of your first options for the purchase of investment properties. The bank benefits by having the loan payments caught up and current. The Seller benefits from debt relief and credit improvement. And best of all, you benefit by leveraging a small amount of money to finance your real estate transactions.

Best of Success & Abundance,

Lou Castillo

How to Keep Your Spouse Safe in Business

As a structuring adviser to investors and business owners we often come across a widespread mistake that many people make.

That is a spouse being offered as a guarantor to the financial institution, landlords or creditors of a business. Often their personal guarantee is even needed for the agreement to proceed yet it is given.

Why? Because the advisers do not defend you and point out that it’s not required.

The upshot is that if total business or investment collapse happens, both spouses are fully liable rather than just one. Sure, the creditor, bank or landlord asking for your spouses guarantee will explain it is necessary 100%.

This is because it is in their. Yet it is not in your interests. My advice is NEVER give your spouses guarantee in business or property transactions if you can keep away from it.

I have developed over 80 million dollars in property, and guaranteed a number of numerous business and banking obligations, purchased multiple investment properties, – and my wife has never signed a personal guarantee on the transactions. Why?

To protect her from the potential risk and obligation. How did I avoid her being liable? By saying ‘no’ to the banks and creditors when they asked. Did it interfere with her legal or matrimonial rights to recuperate the property if we separated?

No, — she still receives the assets because she jointly controls the Trusts and numerous borrowing. This is not about removing power away from your spouse and potentially wealth, it is simply to do with reducing your risk to your family.

Examples of this include:

1. Borrowing funds from a lender to buy an investment property or even your family home. If one spouse is a homemaker, has no income or their income is not required to meet debt servicing criteria of the bank, then why allow the bank to take their guarantee?

The only purpose of the guarantee will be to use more pressure to your household if you have difficulty, and both spouses go bankrupt rather than one (which may be viewed as malicious in this light).

2. Handling land-lords when it comes to commercial leases and guarantees. Ensure you attempt to divide leases out into separate ‘tenancy companies’ and make one spouse a director of this company.

Your opening position should be no personal guarantee, and if ‘no personal guarantee’ is a deal breaker with the landlord, then only the director/one spouse gives a guarantee.

Try not to give an unlimited guarantee, limit it to say XX months rent, or a fixed sum as a cap.

3. Dealing with creditors over personal guarantees. Creditors in business will normally ask for a personal guarantee.

Decline to give it if you can get away with it, and most of the time you can. Where you have to give one, just as with a landlord ‘limit the guarantee’.

In summary, protect your spouse from liability if you can help it. Personal guarantees and spouses should not go together. If you are negotiating with a landlord or creditor as a business owner and have to supply a guarantee, try not to give a guarantee at all, or limit the guarantee to a fixed sum

(Eg: 6 months rent. If your spouse has no income, you should be able to avoid their guarantee being given to a lender/bank)

Try using a mortgage broker to achieve this. Usually the banks (if dealing direct) will be very difficult to manage on this issue, especially in this recessionary climate.

How to Find Good Investment Property

The topic that will be explained in this article is the way to find good investment property. Owning rental real estate seems to be more and more popular as investor tire of the swoops and swoons of the stock market. As for our information, not everyone has what it takes to be a landlord. But those who do may find out that rental will be a good way to build wealth. After we have decided to buy rental property, our real work begins. To find a profitable rental property usually takes a long time, connections and plenty of research.

To find good investment property, we need to know our time horizon. As it is the same as any other investment, we must have a plan or idea on the period we want to own a rental property before we buy it.

The longer the period we plan to own the property, the more we’ll probably need to invest in maintenance, improvements and repairs. If we’re keeping it for 20 or 15 years, at some point, it means that we will be putting a new roof on that property. In addition, we will be putting in new appliances and doing some major repairs. If we are only planning to own a property for four or five years, by contrast, we will probably want to avoid making any major improvements unless we are confident that we can recoup the cost with a higher sale price.

There will also a greater risk that we will face within a shorter time horizon. Although our rental will almost certainly appreciate over 15 years, but it could easily lose all the value in the following next five, especially if we are buying in an overheated market. We will need a higher amount of potential annual return to make up for that risk.

As for small investors, they might prefer long-term ownership. We will have plenty of time to achieve great result in the market, and rental income can make a nice supplement to our day job. Find more rental properties, and being a landlord may become our daily job.

Lastly, we need to develop a network. Landlords that have greater experience might find their properties in a variety of ways. Some of them will hunt for foreclosures, making friends with bank employees and city hall clerks or who has information on which properties are about to be sold. Some of them run promotion in local newspapers. Meantime, others might work with real estate agents that keep their eyes peeled for possible buys. Some of the landlords might be joining a local landlord and property owner’s association to make contacts and good relationship. It is believed that when we begin to own rentals, all the other investors start coming out of the woodwork.