Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties, purchased income properties out of state. California investors bought houses in Florida, Texas, and Oklahoma. Florida investors purchased houses in Louisiana. Texas investors purchased in Las Vegas. Many of these investors made millions of dollars because of the appreciation in hot markets.
On the other hand, in 2005, some beginning investors lost their hard-earned investment capital or only made a meager profit because they failed to do their homework on the out-of-state area’s real estate market and customs.
If you ‘re thinking about buying investment properties in a different state than you’re accustomed to, beware of these five surprises.
Surprise # 1 - ‘These (extra) costs are the norm in this state!‘
Besides extra closing costs like pricey surveys, common in Florida but rare in California, other surprise costs included higher transfer fees and taxes. Property taxes in Florida cost much more for investors in Florida than in California. On the other side of the country, out-of-state investors were shocked by California’s state tax held in escrow: 3.8% of the property’s SALES price, no matter the actual profit made. In other words, an investor who made a quick profit of $20,000 on a fast flip could have more than the profit held until the next year’s income tax filing.
Surprise # 2 - ‘You can’t lease this property!‘
New home developers and many Homeowners’ Associations (HOA)s prohibit property owners from leasing their properties. Some of these restrictions got passed, without the investor being notified, during the property purchase phase. You must read the fine print to see if any clauses prevent the rental of the property. Home builders, to keep the value of the neighborhood up, added restrictions requiring the purchaser to occupy the home as a primary or secondary residence.
Surprise # 3 - ‘This house will only rent for $750 per month, not $1200!‘
This was one of the top mistakes made in 2005. Large real estate investing groups, selling out-of-state properties to local investors, inflated the rental income. Because so many houses were purchased in a limited area by investors, a rental glut lowered the expected income. This created hardships for investors who suddenly had to pay out hundreds of dollars a month instead of reaping promised profits.
Surprise # 4 - ‘You can’t sell this house, now!‘
Some investors who couldn’t rent the out-of-state property decided to sell because the values did rise significantly while the house was built or during the purchase time. However, many investors were stunned when they were told they couldn’t sell the property within the first year after purchase. Restrictions prohibiting real estate investors from quick-turning their properties is a trend that is growing increasingly popular with some developers.
Surprise # 5 - ‘Houses don’t appreciate 30% per year here!‘
Perhaps you’ve attended or been invited to a high-power investment seminar that promotes out-of-state real estate investing. Some of these ‘investor clubs’ really are promoters who receive kick-backs in real estate commissions, property management fees, mortgage loan fees, and even fire insurance premiums. They tell stories of huge appreciation gains, which are probably true. However, not all areas enjoy significant appreciation–year after year.
Don’t make the costly mistake of not fully researching the complete market customs and restrictions in the area where you’re thinking about investing. If you can’t afford to go check out the area in person, choose another area that you can visit.
Copyright ? 2006 Jeanette J. Fisher
About the Author: Jeanette Fisher offers FREE “How to Start Real Estate Investing Teleseminar,” free ebook, “The Truth about Making Money Flipping Houses” http://doghousetodollhouse.com
Tags: Clauses, Home Builders, Homeowners Associations Hoa, Income Tax Filing, Investment Capital, Investment Properties, Meager Profit, New Home Developers, Positive Cash Flow, Property Owners, Property Taxes In Florida, Purchaser, Quick Profit, Real Estate Investors, S Real Estate, S Sales, State California, State Tax, Surprise Costs, Texas And Oklahoma
When you use private money for real estate investing there are several clauses your lending agreements should never be without. One of those clauses is the ?No Pre-Payment Penalty? clause. Here?s how it works.
When you borrow private money for real estate investing, you?re accomplishing a great deal. You?re protecting your credit, and maximizing your borrowing potential, as well as gaining access to a ready and flexible source of money.
It would be a shame to go through all of that and leave yourself open to harm in one critical area? what if you?re stuck with a repayment term that?s too long?
The sure way to avoid this issue is to put a ?No Pre-Payment Penalty? clause in every private money for real estate investing agreement you make. That way, when you?re ready to pay the loan off and free up those funds for a new investment, you?re not stuck paying a hefty penalty.
Here?s how the clause should be worded.
?”The Borrower reserves the right to prepay this Note (in whole or in part) prior to the due date with no prepayment penalty”
Without this clause, you would be obligated to pay the lender the full interest due on the loan for the entire term, no matter how long it is. That?s not the kind of flexibility you want in a loan of this type, and flexibility is one of the main reasons to use private money for real estate investing.
Protect yourself and your borrowing capacity when you’re accessing private money for real estate investing by including the above clause in every one of your private notes and contracts. You?ll be glad you did.
Tags: Borrowing Capacity, Clauses, Contracts, Critical Area, Due Date, Flexibility, Flexible Source, Investing Money, Money Investing, Penalty Clause, Prepayment Penalty, Private Money, Private Notes, Protecting Your Credit, Real Estate Investing, Real Estate Investor, Repayment Term, Shame, Successful Real Estate, Tom Dunn
Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties, purchased income properties out of state. California investors bought houses in Florida, Texas, and Oklahoma. Florida investors purchased houses in Louisiana. Texas investors purchased in Las Vegas. Many of these investors made millions of dollars because of the appreciation in hot markets.
On the other hand, in 2005, some beginning investors lost their hard-earned investment capital or only made a meager profit because they failed to do their homework on the out-of-state area’s real estate market and customs.
If you ‘re thinking about buying investment properties in a different state than you’re accustomed to, beware of these five surprises.
Surprise # 1 - ‘These (extra) costs are the norm in this state!‘
Besides extra closing costs like pricey surveys, common in Florida but rare in California, other surprise costs included higher transfer fees and taxes. Property taxes in Florida cost much more for investors in Florida than in California. On the other side of the country, out-of-state investors were shocked by California’s state tax held in escrow: 3.8% of the property’s SALES price, no matter the actual profit made. In other words, an investor who made a quick profit of $20,000 on a fast flip could have more than the profit held until the next year’s income tax filing.
Surprise # 2 - ‘You can’t lease this property!‘
New home developers and many Homeowners’ Associations (HOA)s prohibit property owners from leasing their properties. Some of these restrictions got passed, without the investor being notified, during the property purchase phase. You must read the fine print to see if any clauses prevent the rental of the property. Home builders, to keep the value of the neighborhood up, added restrictions requiring the purchaser to occupy the home as a primary or secondary residence.
Surprise # 3 - ‘This house will only rent for $750 per month, not $1200!‘
This was one of the top mistakes made in 2005. Large real estate investing groups, selling out-of-state properties to local investors, inflated the rental income. Because so many houses were purchased in a limited area by investors, a rental glut lowered the expected income. This created hardships for investors who suddenly had to pay out hundreds of dollars a month instead of reaping promised profits.
Surprise # 4 - ‘You can’t sell this house, now!‘
Some investors who couldn’t rent the out-of-state property decided to sell because the values did rise significantly while the house was built or during the purchase time. However, many investors were stunned when they were told they couldn’t sell the property within the first year after purchase. Restrictions prohibiting real estate investors from quick-turning their properties is a trend that is growing increasingly popular with some developers.
Surprise # 5 - ‘Houses don’t appreciate 30% per year here!‘
Perhaps you’ve attended or been invited to a high-power investment seminar that promotes out-of-state real estate investing. Some of these ‘investor clubs’ really are promoters who receive kick-backs in real estate commissions, property management fees, mortgage loan fees, and even fire insurance premiums. They tell stories of huge appreciation gains, which are probably true. However, not all areas enjoy significant appreciation–year after year.
Don’t make the costly mistake of not fully researching the complete market customs and restrictions in the area where you’re thinking about investing. If you can’t afford to go check out the area in person, choose another area that you can visit.
Copyright ? 2006 Jeanette J. Fisher
About the Author: Jeanette Fisher offers FREE “How to Start Real Estate Investing Teleseminar,” free ebook, “The Truth about Making Money Flipping Houses” http://doghousetodollhouse.com
Tags: Clauses, Home Builders, Homeowners Associations Hoa, Income Tax Filing, Investment Capital, Investment Properties, Meager Profit, New Home Developers, Positive Cash Flow, Property Owners, Property Taxes In Florida, Purchaser, Quick Profit, Real Estate Investors, S Real Estate, S Sales, State California, State Tax, Surprise Costs, Texas And Oklahoma
When you use private money for real estate investing there are several clauses your lending agreements should never be without. One of those clauses is the ?Substitution of Collateral? clause. Here?s how it works.
Wouldn?t it be great to be able to just swap one property for another on your mortgages? Of course it would, and when you use private money for real estate investing, you can? just by including one little clause in your private lender?s notes.
Here?s how the clause would read.
“Borrower reserves the right to substitute like collateral of equal or greater value” Did you see what just happened? By inserting one tiny little phrase in your private notes, you?ve created a scenario where you don?t have to pay off your loan and get a new one every time you sell and buy property. The flexibility and power this one little clause will give you is outstanding. Suppose you own a duplex that you used private money for real estate investing to obtain, but now you have the opportunity to sell at a large profit. Instead of worrying about the hassle of paying off the note and getting a new loan for your next property, why not just go out and find an equal or greater value property to invest that money in.
Once you finalize the transaction, it?s important that you file your lender?s security against the property with the appropriate government agency, normally your county clerk. Your lender will most likely insist on having a mortgage or deed of trust on file to protect their interest.
The flexibility and leverage this clause gives you is yet another great reason why using private money for your real estate investments is a wise idea.
Your investor will be happy to keep his money working, and you will too. It?s a win-win for both of you, and it?s possible because you thought to include a ?Substitution of Collateral? clause in your private money for real estate investing note. For more information visit http://www.private-money-real-estate-investing.com
Smart? very smart.
Want a shot of adrenaline for your beginning real estate investing? Tom Dunn writes “DealFiles - Real Estate Investor Stories”… stories of real investors just like you and their real deals. Why not check it out right now? It’s FREE!
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Tags: Clauses, Collateral, Deed Of Trust, Duplex, Flexibility, Government Agency, Hassle, Information Visit, Invest Money, Investor, Leverage, Money Investing, Money Investments, Mortgages, Phrase, Private Lender, Private Money, Private Notes, Real Estate Investments, Wise Idea
When you use private money for real estate investing there are several clauses your lending agreements should never be without. One of those clauses is the ?No Pre-Payment Penalty? clause. Here?s how it works.
When you borrow private money for real estate investing, you?re accomplishing a great deal. You?re protecting your credit, and maximizing your borrowing potential, as well as gaining access to a ready and flexible source of money.
It would be a shame to go through all of that and leave yourself open to harm in one critical area? what if you?re stuck with a repayment term that?s too long?
The sure way to avoid this issue is to put a ?No Pre-Payment Penalty? clause in every private money for real estate investing agreement you make. That way, when you?re ready to pay the loan off and free up those funds for a new investment, you?re not stuck paying a hefty penalty.
Here?s how the clause should be worded.
?”The Borrower reserves the right to prepay this Note (in whole or in part) prior to the due date with no prepayment penalty”
Without this clause, you would be obligated to pay the lender the full interest due on the loan for the entire term, no matter how long it is. That?s not the kind of flexibility you want in a loan of this type, and flexibility is one of the main reasons to use private money for real estate investing.
Protect yourself and your borrowing capacity when you’re accessing private money for real estate investing by including the above clause in every one of your private notes and contracts. You?ll be glad you did.
Tags: Borrowing Capacity, Clauses, Contracts, Critical Area, Due Date, Flexibility, Flexible Source, Investing Money, Money Investing, Penalty Clause, Prepayment Penalty, Private Money, Private Notes, Protecting Your Credit, Real Estate Investing, Real Estate Investor, Repayment Term, Shame, Successful Real Estate, Tom Dunn
Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties, purchased income properties out of state. California investors bought houses in Florida, Texas, and Oklahoma. Florida investors purchased houses in Louisiana. Texas investors purchased in Las Vegas. Many of these investors made millions of dollars because of the appreciation in hot markets.
On the other hand, in 2005, some beginning investors lost their hard-earned investment capital or only made a meager profit because they failed to do their homework on the out-of-state area’s real estate market and customs.
If you ‘re thinking about buying investment properties in a different state than you’re accustomed to, beware of these five surprises.
Surprise # 1 - ‘These (extra) costs are the norm in this state!‘
Besides extra closing costs like pricey surveys, common in Florida but rare in California, other surprise costs included higher transfer fees and taxes. Property taxes in Florida cost much more for investors in Florida than in California. On the other side of the country, out-of-state investors were shocked by California’s state tax held in escrow: 3.8% of the property’s SALES price, no matter the actual profit made. In other words, an investor who made a quick profit of $20,000 on a fast flip could have more than the profit held until the next year’s income tax filing.
Surprise # 2 - ‘You can’t lease this property!‘
New home developers and many Homeowners’ Associations (HOA)s prohibit property owners from leasing their properties. Some of these restrictions got passed, without the investor being notified, during the property purchase phase. You must read the fine print to see if any clauses prevent the rental of the property. Home builders, to keep the value of the neighborhood up, added restrictions requiring the purchaser to occupy the home as a primary or secondary residence.
Surprise # 3 - ‘This house will only rent for $750 per month, not $1200!‘
This was one of the top mistakes made in 2005. Large real estate investing groups, selling out-of-state properties to local investors, inflated the rental income. Because so many houses were purchased in a limited area by investors, a rental glut lowered the expected income. This created hardships for investors who suddenly had to pay out hundreds of dollars a month instead of reaping promised profits.
Surprise # 4 - ‘You can’t sell this house, now!‘
Some investors who couldn’t rent the out-of-state property decided to sell because the values did rise significantly while the house was built or during the purchase time. However, many investors were stunned when they were told they couldn’t sell the property within the first year after purchase. Restrictions prohibiting real estate investors from quick-turning their properties is a trend that is growing increasingly popular with some developers.
Surprise # 5 - ‘Houses don’t appreciate 30% per year here!‘
Perhaps you’ve attended or been invited to a high-power investment seminar that promotes out-of-state real estate investing. Some of these ‘investor clubs’ really are promoters who receive kick-backs in real estate commissions, property management fees, mortgage loan fees, and even fire insurance premiums. They tell stories of huge appreciation gains, which are probably true. However, not all areas enjoy significant appreciation–year after year.
Don’t make the costly mistake of not fully researching the complete market customs and restrictions in the area where you’re thinking about investing. If you can’t afford to go check out the area in person, choose another area that you can visit.
Copyright ? 2006 Jeanette J. Fisher
About the Author: Jeanette Fisher offers FREE “How to Start Real Estate Investing Teleseminar,” free ebook, “The Truth about Making Money Flipping Houses” http://doghousetodollhouse.com
When you use private money for real estate investing there are several clauses your lending agreements should never be without. One of those clauses is the ?No Pre-Payment Penalty? clause. Here?s how it works.
When you borrow private money for real estate investing, you?re accomplishing a great deal. You?re protecting your credit, and maximizing your borrowing potential, as well as gaining access to a ready and flexible source of money.
It would be a shame to go through all of that and leave yourself open to harm in one critical area? what if you?re stuck with a repayment term that?s too long?
The sure way to avoid this issue is to put a ?No Pre-Payment Penalty? clause in every private money for real estate investing agreement you make. That way, when you?re ready to pay the loan off and free up those funds for a new investment, you?re not stuck paying a hefty penalty.
Here?s how the clause should be worded.
Without this clause, you would be obligated to pay the lender the full interest due on the loan for the entire term, no matter how long it is. That?s not the kind of flexibility you want in a loan of this type, and flexibility is one of the main reasons to use private money for real estate investing.
Protect yourself and your borrowing capacity when you’re accessing private money for real estate investing by including the above clause in every one of your private notes and contracts. You?ll be glad you did.
