Investing Trends

Ah, the American Dream beautiful suburban home on a dead end street with a white picket fence and a dog in the yard playing around the swing set. Unfortunately, for some, this may seem like just that, a dream. There are many people who are struggling just to put food on the table and pay the rent, much less purchase a home. Many people live in an apartment or rented home until they think they have saved enough money for a down payment on a home.

The opportunity to own a home may be closer than you think. When a person buys a house and cannot make the payments, the government comes in and puts a foreclosure on the home, making the person leave the home and offering it for sale, usually at a much lower price than the home is worth. This home will fall under the jurisdiction of the US Dept of Housing and Urban Development, or HUD. HUD will put this house up for sale or auction. They will usually put an ad in the paper, but there is a more up-to-date list available online for all HUD homes.

Individuals can find out information regarding the home such as square footage, number of bed and bathrooms, etc. as well as selling price of the home, then determine whether or not they are interested in purchasing the home. It is also a good idea to have someone research whether there are liens against the property to ensure that there won't be anyone contesting the sale of the home.

These properties are generally not in move-in condition and will require some work. Many times, the properties could be back to normal condition with just a little paint and elbow grease. There are other properties that were run down before and since sitting empty for some time, they have gotten in worse conditions. These homes could require several months of work, but generally are offered at much deeper discounts.

Most of these homes do not have to be paid for up front. It is possible to negotiate payment terms with a government representative or get a mortgage loan from a bank or other lending institution. When getting a mortgage loan for a HUD home, the important thing is to remember to make the mortgage payment on time to avoid your home becoming a HUD home once again.

If you find a HUD home that interests you, your personal realtor can normally show you the home so that you can determine if the house is right for you. Once you have determined that you would like to go ahead with the purchase of the home, you will need to go down to the local office of Housing and Urban Development to get the proper forms completed as well as put down any necessary down payment on the home.

The probability that you will be offering against other interested parties is greater in some areas than others, so remember that many people will purchase a HUD home to fix and sell for a profit. Many people "flip" houses as their full time job, and bidding against these people will prove difficult.

Purchasing a HUD home is a great way for a do-it-yourselfer to achieve the American Dream. If you feel strong enough to handle the obstacles that may get in your way, check out the local listings for the Department of Housing and Urban Development.

Real estate in California is generally a hot topic of discussion. People come to California for the weather and then want to stay and need to purchase a home. As we approach the summer of 2007 we find ourselves with the unenviable dilemma of looming foreclosures on some of these homes.

It is not only the newcomers to California who will find themselves in this position, but all of the homebuyers who purchased homes in the last two or three years with little or no down payment and an adjustable rate mortgage. Delinquency on these loans is increasing, even though the rates are lower than for the United States as a whole. Many of these borrowers were either self-employed or had poor credit. Poor credit is defined as someone having a FICO score of less than 620.

These loans are termed sub-prime and have been the target of consumer protection groups who see the next two years as crucial for the survival of these loans. Although the California housing market appears to have stabilized, people are now looking at these loans to see what effect, if any, they will have on the overall real estate market. Sub-prime loans have grown in the past few years so that currently they account for about 15% of all home loans made in California.

The problem arises when these loans reset from their original low interest rates to fully indexed rates. This happens after one or two years, depending on how the original loan was written. Many of those who took out these loans in order to be able to purchase their home initially will find themselves in a difficult spot. When the loans reset the payments increase significantly and borrowers may not be able to make these larger payments easily.

The economy and job growth in California has continued to grow, but that may not be enough for some borrowers. Lenders will work with those unable to make the larger payments by offering several different options because foreclosure is costly for them and for all parties concerned.

This will be the first time that the market has dealt with the possible default or foreclosure of homes due to sub-prime lending to marginally qualified buyers. Whatever happens during the next two years will be indicative of how loans will be underwritten and what qualifications will be required before buyers are able to purchase homes with little or no down payment.

Lessons will be learned during this time that will enable the lenders to take whatever action is deemed necessary and prudent to avoid problems like these to occur in the future.

So, you are getting started in real estate investing and have selected wholesaling as your entry into the exciting and lucrative real estate investing business. Congratulations.

Wholesaling is an outstanding, low risk way of learning your local real estate market, mastering finding motivated sellers and earning a significant income while learning the real estate business.

So, here are 6 steps to a six figure income as a real estate wholesaler.

1. Establish yourself as a real estate investor

The first step is to get set up and in business as a real estate investor. I do not recommend spending a lot of unearned money on your business as first, but it sure helps to have some of the basics when you first get started.

First, get some business cards. You do not need very expensive ones (at first, or really ever), but you will want a professional way to let people know that you are in business and a means for you to pass on your contact information. That leads into the next thing you need to get started, a business telephone.

You do not need to get a separate line into your house or buy a second cell phone, but I might suggest that you change the message on your cell phone number to a business voice mail. Something like this is fine, "Thank you for calling Susie Smith's Real Estate Services. Unfortunately, we are working with other clients right now or are otherwise unavailable, please leave a message and we will return your call as soon as possible."

Once you have your business cards and cell phone, you have the bare minimum tools you will need to get started as a wholesaler.

2. Find motivated sellers

The next step is where you will be spending the majority of your time as a new wholesaler. I am a huge believer in spending money on advertising to find deals, but you can find deals through various free methods like searching the Multiple Listing Service with a real estate agent or calling on for sale by owner signs and ads in the newspaper or websites.

3. Analyze deals

Once you find deals, you will need to analyze each one to see if it really is a great deal that you can wholesale. If it is, then continue to the next step. If not, then you will need to go back and find more motivated sellers.

4. Negotiate deals

You should be negotiating from the first contact with the motivated seller by building up rapport and common ground, but when you have analyzed the deal and are trying to put it all together, your negotiation skills come to the forefront.

5. Control properties

Once you have negotiated a great deal, the next step is to put it down on paper so that you have control over the property and can legally resell the deal for a profit.

Most wholesalers use one of two things to control a property: an option or a purchase and sales contract. You can get both forms from your local office supply store or by searching the internet. You might also be able to get the paperwork you need from a real estate agent especially if you are working with them to find the house and they will be paid when you buy. As you do more deals, you will probably want to consider upgrading to forms that are specifically designed for what you are doing in your business and were written for your particular market.

6. Liquidate properties to collect your paycheck

Once you have control of the property, it is your job to liquidate them and collect your paycheck. Your ability to quickly find another investor to flip the deal to or a retail buyer to purchase the property is a huge factor in how successful you will be as a real estate wholesaler.

Rinse and repeat this process as often as you can to earn a huge income finding great deals and quickly liquidating them as a real estate wholesaler.

Harness the power of real estate and alternative asset investing in an IRA to make tax-free or tax-deferred profits for the rest of your life!

After completing a successful real estate transaction, do you ever wish a chunk of the profits didn't have to go back to the IRS for taxes? Do you ever dream about how many more real estate deals you could do or how many more properties you could buy if profits weren't split with the government because of taxes?

Well dream no more. Realizing tax-free or tax-deferred profits on real estate and alternative asset investing is a reality.

Government sponsored retirement plans such as IRAs and 401(k)s allow you to invest in almost anything (including real estate), not just stocks, bonds and mutual funds. And all the benefits those plans provide, tax-deductions and tax-free profits, apply to whatever investment you choose, including real estate.

The Power of Tax-Deferred and Tax-Free Profits

"The most powerful force on Earth is compounding interest." - Albert Einstein

One of an IRA's greatest features is that it allows Americans to enjoy the true power of tax-deferred compounding interest. Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment sum, but also on the interest earned from the original sum.

Compound interest can occur with any investment you make, but the "true" power of compounding interest is obtained when you make an investment in a tax-deferred environment, like an IRA.

By taking advantage of an IRA's tax-deferred status, you do not have to pay tax immediately on your earnings (like the sale of a property or rent collected). Thus, you are able to enjoy the power of compounding on ALL of your profit, not just what is left after taxes.

Now apply those benefits to your real estate or alternative asset investing. Tax-deferred profits on your real estate transactions allows greater flexibility to make more investments, or to just sit back and watch your real estate investment grow in value, without worrying about taxes.

Is This for Real?

Most investors don't know this opportunity exists because most IRA custodians do not offer truly self-directed IRAs that allow Americans to invest in real estate and other non-traditional investments.

Often, when you ask a custodian/trustee, "Can I invest in real estate with an IRA?" they will say, I've never heard of that" or, "No, you can't do that." What they really mean is that you can't do this at their company because they only offer stocks, mutual funds, bonds, or CD products.

Only a truly self-directed IRA custodian like Equity Trust Company (www.trustetc.com) will allow you to invest in all forms of real estate or any other investments not prohibited by the Internal Revenue Service.

Is This Legal?

It sure is. For more than 33 years and through the management of $2 billion in IRA assets, Equity Trust has assisted clients in increasing their financial wealth by investing in a variety of opportunities from real estate and private placements to stocks and bonds in self-directed IRAs and small business retirement plans.

IRS Publication 590 (dealing with IRAs) states what investments are prohibited; these investments include artwork, stamps, rugs, antiques, and gems. All other investments, including stocks, bonds, mutual funds, real estate, mortgages, and private placements, are perfectly acceptable as long as IRS rules governing retirement plans are followed (To view IRS Publication 590, please visit www.trustetc.com/links/irspubs.html).

Getting Started

"Is it hard to do?" is a common question about investing in real estate with a self-directed IRA. It is really simple and is very similar to the way you currently invest in real estate. The following five steps demonstrate how easy it is to invest in real estate, or just about anything else, with a self-directed IRA.

1) Establish an account with a self-directed IRA custodian.
First, you must establish an account with a self-directed IRA custodian and Equity Trust Company is your best option. For more information on why Equity Trust is the right choice for your self-directed IRA needs, visit www.trustetc.com.

Setting up an IRA account with Equity Trust usually takes only minutes to complete by filling out a simple application and sending (or faxing) it to our office.

2) Fund your account.
Next you have to fund the account, and this is just as easy as opening a self-directed IRA account. There are two ways to fund your account.

• Contributions
You can contribute to your account through a check or wire transfer and contribution limits range from $4,000-$50,000 depending on which account you choose.

• Transfer/Rollover

In most cases, if you have an existing retirement plan such as an IRA, 401k, or 403b these funds can be transferred to a self-directed IRA allowing you to make real estate IRA investments.

3) Investment found: You're set to go!
Now that you've got your account established, funded and you've identified a real estate investment, you are ready to make an investment.

Making a real estate investment with your IRA is straightforward if you remember a few simple rules. First, complete a Direction of Investment (DOI) form. A DOI instructs the custodian where and how to remit funds from your self-directed IRA for your real estate purchase.

Information contained on the DOI includes the property address, cost, funding instructions (check/wire) etc. In addition to the DOI, the custodian will need accompanying investment documents to ensure proper titling of the investment.

4) Ensuring proper title: You and your IRA are not the same.
One of the most common mistakes (and cause of delays) in real estate IRA investing is when the property is titled incorrectly. Frequently the IRA owner will incorrectly put their personal name on the title of the property.

Remember you and your IRA are two separate entities, and as such, the property needs to be titled in the name of your IRA and not you personally.

• The correct title for a real estate (or other asset) IRA investment is:

Equity Trust Company custodian FBO (for benefit of) YOUR NAME IRA

5) What happens after your IRA owns the property?
Now that your IRA has purchased the property you need to remember two things:

• Expenses: Any expenses associated with the property (maintenance, improvements, property taxes, condo association, general bills etc.) must come from the IRA.


• Cash Flow/Profits: All net profits must return to the IRA, meaning all income (rent) and profits (selling of property) are deposited back into your IRA account—tax-free!

That is all there is to it, it's as simple as 1-2-3. In no time at all you can be investing in real estate and other alternative assets receiving tax-free or tax-deferred profits for the rest of your life.

Don't delay in opening an account. Every day that passes is one less day your investment can benefit from the Earth's most powerful force (at least according to Einstein), compounding interest.

What I am talking about is Adjustable-Rate Mortgages (ARM)...

The definition of an ARM is: A home loan that permits the lender to adjust its interest rate periodically during the life of the loan on the basis of changes in a specified financial index.

ARM's typically start with a lower interest rate that gradually rises over time. If the financial index to which the loan is tied decreases, the interest rate of your ARM follows suit. Similarly, if financial index rate rises, so does your loans interest rate and monthly payment.

I would caution you with this type of loan because almost half of all American households have adjustable rate mortgages. When their payments go up, they can't afford the new payment. After you are done rehabbing your home, be cautious of the type of loan the buyer is getting. Make sure you are working with an ethical loan officer that is if you refer your buyer to your loan officer.

I also want to caution you on wearing too many hats. Don't be the rehabber, the loan officer , the title company, and the insurance agent. If you are more than one of those make sure you disclose it and make sure they sign something stating that they were aware of the no-arms length transaction.

I have only scratched the surface with these great tips for finding money to fund your deals and how to handle your contractors. In my system, Renovate Your Success, I can show you what you need to know about rehabbing property and the tools you need to be successful.

Mention college to most parents, and their first thought is mostly likely how much it will cost. But a growing number of savvy real estate investors—parents or not—are thinking of college as a way to make money rather than spend it because students all need a place to live. Three key demographic, sociological, and economic factors are coming together to create a lucrative trend for student housing investors.

"First of all, more than 80 million people will turn 18 over the next decade," says Michael H. Zaransky, author of Profit by Investing in Student Housing: Cash in on the Campus Housing Shortage (Kaplan Publishing). "Second, more young people are pursing college educations than ever before. Finally, state budget deficits are causing a serious shortfall in university-owned housing. Someone is clearly going to make money from the convergence of trends—so why shouldn't it be you?"

The budgets of colleges and universities across the country are stretched by the demands of funding enrollment, research, and hiring more professors. In many areas, older dorms are being torn down and replaced with new classrooms, reducing the availability of campus housing. Increasingly, these schools are looking to the private market to supply off-campus housing.

You can approach the student housing market from two primary angles: as an investor who owns property and provides the housing or by managing properties for other owners. Zaransky says the easiest and lowest-cost way to get started in the student housing business is to purchase a single-family home or condo in a college town and rent it to students. However, keep in mind that aging housing stock may not have the amenities today's students demand. Your chances of success are increased when your properties offer student tenants spacious rooms, private baths, air conditioning, storage, cable television, and high-speed internet access.

Zaransky offers these tips for investors:

The property should be located near a school with a low bed-to-student ratio. Zaransky says that the national average school-owned housing capacity is 30.12 percent of the total student population, which means almost 70 percent of college students need to find some type of off-campus living quarters.

- Think public, not private. Private universities tend to apply greater restrictions on housing and may even require students to live on campus. Housing for public university students will usually make more economic sense.

Avoid schools located in large cities. Typically these schools have a significant number of part-time students and commuters who don't need housing.

Approach areas with a substantial amount of new construction and an abundance of property opportunities with caution. Zaransky prefers to invest in areas where property is hard to come by. He points out that too many owners wanting to sell at the same time could be an indication that they are having difficulty finding tenants.

Be sure your NOI projections make sense. Be thorough in calculating your estimated net operating income; don't overlook any potential source of income or expense.

"Never forget the discipline required to walk away from a deal that's overpriced and doesn't provide enough cash flow to cover expenses, contingency reserves, mortgage payments, and a reasonable return on the equity investment," says Zaransky. Even with that caution, he says that the time is right for both new and seasoned investors to profit from this real estate investment niche.

TYPES OF PROPERTIES FOUND AT AUCTIONS

This short article proposes a guide to assist you in understanding the value of the UK Property Auction market. Literally thousands of properties are available week in and week out. At any given time properties are coming under the hammer in auctions, most of which are sold at prices far below market value. This is happening throughout the UK and in the USA.

Nevertheless it's vital to know the latent pros and cons when trading at auction. Moreover, you should aim to understand where the major bargains are obtainable. The details of thousands of low-priced, repossessed, auction properties are also available at Property Auction Bargains. It's absolutely reasonable to anticipate paying 15% to 40% less for a property at auction than you would for the equivalent property through an estate agent. For instance, at a recent auction a studio flat was sold in London for a measly £9,000.

In another, a 2 bed flat right on the south coast with a market value of up to £100,000 sold for just £14,000 at auction. And those are just a few examples of the countless bargains that individuals find at each and every week.

TYPES OF PROPERTIES FOUND AT AUCTIONS

Repossessions - Sadly for the previous owners, repossessions can often be picked up at bargain prices through auctions.
Investment properties – these are properties, which are valued due to the return on investment that they provide. Includes everything from individual office/shop investments to blocks of flats.

Badly maintained properties - Auctions are fantastic places to find properties that are in a state that causes them to be unsaleable.
It may not take a great deal of extra effort to bring them up to market condition. The attraction here is if you can get such a property in a good location at a cheap price it's perfectly possible to refurbish and resell on at handsome profits. Indeed there're individuals and organisations that make their living doing this.

Unshakeable properties come under the following categories: Derelict or in derelict areas. Subject to severe disrepair. Subject to
local authority notices. Subject to closing orders.

Offered with ambiguous legal titles – some properties are sold with a lack of legal documentation and thus they are less desirable to the general property investor.

Sold without access. Sold with major fencing, paving, drainage or other similar responsibilities.

Sold subject to covenants or restrictions, which prevent normal use.

Exceptional properties - Include ones that have historical meaning and plots which 'get in the way' of major development projects.

There is a batch to cognize about investing. It all depends on
what type of investment you are interested in as well. There
are many different types of investing options out there. So
what is investing, specifically?

When you invest, you are paying in a certain amount of
money
that you anticipate to turn with time. Most investings are
considered long term investings significance you will not get
your money back right away but if you go forth your money in,
it can multiply dramatically over time. Types of Investing:
Real Number Estate Investing, Bonds, Stock Investing, Mutual
Funds,
401K. With stock investing, many of the younger investors
see the market as a manner to get rich quick. They are quick
to sell off the stock that they have got when it travels up or if
they see it travel down a little, they get nervous and sell it
off. If they throw the investment and drive it out, they are
much more than likely to see it grow.

If you are going to be investing, the cardinal to success is
plus allocation. You need to change your assets by
investment in more than than one type. So just how make you make this
exactly? Well, you need to cognize what the 4 major types are
first.

(1) U.S. Pillory are one. They are represented by the S&P
500
Index (2) Foreign Pillory is another; represented by EAFE
Index (Europe, Commonwealth Of Australia and Far East) (3) Real Number Number estate,
represented by the National Association of Real Estate
Investing Trusts Equity Index (4)
Commodities;represented
by the Goldman Sachs.

The cardinal to a growth portfolio is finding a balance
between the ups and down feathers of these many assets. For
example, if one twelvemonth pillory look to be down, existent estate or
trade goodss may be up. So if you are ready to get started
with investing, what make you need to know? First, you need to
make up one's mind how much money you have got to put safely.

If you make up one's mind to put in common funds, you will be asked
if you desire a high, medium or low hazard stock. If you invest
in high, there is of course, more than hazard involved but if it is
successful, you will see much higher returns. If you travel with
a low risk, you will not lose as much if it doesn't work
out but you will not derive large amounts if it is successful. It's really all about how much money you have got and how
much
you experience comfy with risking.

Whatever you choose, there is really no ground not to
invest. There are so many chances that tin be tried
with small investing and small hazard of loss. If you are
considering it,it is easy to learn a small more than about it to
constitute your determinations of which manner to travel and then put your
money and ticker it grow! The money you put may return
money for your college, kid's college, retirement, to purchase a
house or whatever your needs are. There's no ground not to
get started today.

There are many reasons to be investing these days, and too much opportunity to not have your money working for you.

However, I believe the majority of people dread having to deal with investment matters, and tend to jump into purchases and then hold their breath hoping for the best. After a long day at work and taking care of the family, it's hard to get excited about reading up on your 401(k) options, Morningstar ratings and fund performances.

If this sounds like you, there are basically 3 choices.

You can have your investments professionally managed, you can continue as you have in the past & keep your fingers crossed, or you can find a methodology that objectifies the investing process (that's buying and selling investments) and helps you maximize your long-term results.

To determine if you need help managing your investments(and this doesn't necessarily mean having to pay for advice) you might want to ask yourself these questions:

=> Do I really have the time and interest to follow the market closely on a daily basis?

=> Have I done well in the past managing my own investments?

=> Do I really want to add another layer of work and responsibility onto an already busy schedule?

If you're like most people, you would answer yes to some and no to others, so how do you decide? If you think you could have or should have done better with your investments, then you need some help. Don't feel bad. Having counseled hundreds of people over the past 15 years I can honestly say that everybody needs some help, whether they are aware of it or not.

Why? This could come as a surprise, but, in fact, your financial life is a lot shorter than your physical life?

Most people who end up investing don't really start working and making money until they are about 25 years old. Considering the average retirement age of 65, this gives you only 40 years to save and invest wisely.

If you make a poor investment decision, such as trying to stay fully invested during a bear market, you could lose big both in terms of diminished dollars and wasted time.

To drive home this important point, let me give you an actual example involving my own portfolio. For ease of illustration I have adjusted the beginning portfolio balance to $10,000.

During the period from 1/25/91 to 10/13/00 my $10,000 investment grew to $37,840, which is a 14.67% compounded annual return.

On 10/13/00, based on a methodology I was following, I liquidated all of my domestic mutual fund positions and moved 100% to the safety of my money market account. Thanks to this move, my portfolio retained 100% of its value on that date.

As we now know with hindsight, most people held on to their investment positions and have so far lost on average 50% to 60% of the value of their portfolios. For this example let us use 50%.

If I had held onto my position, my portfolio would be down to $18,920. Last time I hit that level on the way up was in 1995.

In other words, not only would I have lost 50% of my portfolio I would have lost even more by having used up 20% (8 years) of my total financial life.

How can you avoid mistakes like that in the future? Spend a little of your valuable research time looking for investment methodologies that allow you to side-step bear markets and let you move back in during bull markets. In other words, invest your time looking at methodologies instead of investments themselves. This will lay the foundation for more effective use of your money and time.

If you find a methodology that you like, and it matches your investment philosophy, stick with it for the long term. It should have the aspect of telling you when to get out of, as well as when to get into, an investment.

I suggest you follow these broad guidelines:

Don't be afraid to take a small loss to avoid bigger disasters.

Stay away from commissioned sales people (because they have incentives other than your best interests), and if you use an advisor, be sure he or she is fee based.

Above all, don't get overwhelmed by news, rumors and predictions that are irrelevant to your strategy.

If you take this advice, I guarantee that pretty soon sleepless nights will be a thing of the past and you'll be on your way to more confidently and successfully (that means profitably) managing your investments.

I truly find it comical when I hear about people using Dietary Supplements and complaining or calling consumer reports stating that the product is a scam and it does not work. It seems that they cannot understand how when they took several minutes to pry open the container, get the cotton out, then franticly digest the product that they were not instantaneously transformed into a body supreme. I really don't mean to be callous or crass, but seriously...this scenario manifests itself in many different areas of our lives. It's the simple (and silly) belief that we can actually get amazing results without putting out any effort other than taking a pill or making "that" phone call or...you get the idea. We've all been guilty of it in some way at some point in our lives.

I see this scenario all the time with salespeople working real estate leads. Where's the effort? How many times do we have to see it before we acknowledge it for what it is?

On just about every Dietary Supplement on the market there is a very clear statement, worded in different ways, but with the universal message: For best results combine this Dietary Supplement with an intense workout and nutritional program. Further complaints seem to arise when the individual does 5 push ups and eats a bagel instead of a donut figuring that should be good enough. At this point either denial kicks in and the product is dismissed as another 'scam,' or common sense takes over and the individual realizes he/she might have to work harder for the desired results.

Hmmm....I guess if I get real estate leads I probably should call them to see what I can do for them.

When I put real estate leads in a 'bottle' (pipeline) for real estate professionals, the back of the bottle clearly states: For best results please combine this lead with an immediate phone call and a very aggressive follow up system. I don't expect any effort I didn't put forth myself as a real estate professional. That's how I did it. That's how every savvy real estate professional does it.

The comedy/tragedy ensues as the agents receiving real estate leads immediately complain about the lead because they made two attempts to contact with no reply, one via email and another leaving a message on an old answering machine where the recording sounded like the teacher from the 'Peanuts' cartoon. Now these real estate professionals are immediately beside themselves, fuming that the real estate leads are bogus. They immediately want to stop the money going into that lead generation source whether it be Internet, Sunday Paper, Open Houses or whatever because they feel it is not working.

These are the agents who drive by a house 4 months later...a house with a For Sale sign in the front yard...the very house they determined was a 'bogus lead' after only 2 email attempts. They cannot believe their eyes as they try and rummage through month old notes to clarify that, indeed, was the same house that showed up in their real estate leads.

Now see how quickly they begin to believe that lead generation tool again.

Real estate leads are endless, just like dietary supplements and, also like dietary supplements, they're not a substitute for effort and your "body" of real estate leads must be nurtured to receive the maximum "nutritional" value. You just have to be willing to put in the effort to achieve the best results. Work your real estate leads thoroughly, and you will see results!

Foreclosure filings against homeowners have increased dramatically in the last few months.

In some areas, this increase is 30-40% higher than it was last year. Experts say that foreclosures have doubled over the last three years in many places.

Homeowners have struggled to cope with high prices, rising interest rates, and mortgages that are adjusting. This is the fallout.

Over the past few years, mortgage lenders devised many new loans to help buyers afford homes. "1.00% MORTGAGES!!" "$800/MO FOR A $300,000 HOME!!"

Buyers came out in record numbers. 100% financing and record-low interest rates helped some people who previously could not afford homes, become homeowners, and that helped stimulate the most incredible real estate explosion on record.

In Nevada, where I live, nearly 62% of all mortgages are interest-only and ARMs. We are second only to California. However, today interest rates are higher. Combine this with a soft real estate market and you now have a squeeze on homeowners who are struggling to make the higher payments on adjustable-rate mortgages or are forced to refinance their loans to attempt to lower their payments.

For example: Let's say you did 80% financing on a $300,000 home in 2004 and you did a 3 Year ARM at 5.000% with a margin of 2.75%. Your mortgage payment was $1250 per month. It was tight but you figured you could afford it.

When that loan adjusts this year (margin + current index) you could be facing an adjustment to 8.000%. This would increase your payment to $2000 per month. You cannot afford your home any longer.

Sure, you can refinance it and maybe only increase your payment by $100-$200 per month from the $1250 but what if life circumstances have changed? Like your credit is not as good? You may have a lot of equity so you are still OK, but what happens in a slower market where you are not gaining much? Or you have removed all of your equity through a credit line? Or your home has depreciated since that purchase? The slower real estate market compounds the problem.

In recent years, homeowners with risky mortgages could take advantage of the rising value of their homes by refinancing at lower rates. Or by selling.

With housing prices stabilizing or decreasing, the refinancing option is not available. With a vastly inflated inventory of houses on the market and a 30% sales decline from last year, selling is not as viable an option. Quite simply, rising interest rates and decreasing home values spell disaster.

In 2003, when the market was on fire, the amount of 30 day delinquencies was half what it is today. Foreclosures are much more common today and many experts believe they are going to increase substantially in the coming years.

OK, so what does this mean to you and your buyers? OPPORTUNITY!!!!

Buying a property out of the foreclosure market is one of the best opportunities available in all of real estate. However, it is not easy and takes a lot of work.

It's not unusual to save from 10 to 30 percent of the market value on a foreclosure property if you know where to look.

However, don't be lured into thinking this is a get-rich quick scheme. Most foreclosed properties sell for less than 5% off market value. The key is research, preparation, patience and persistence.

Experts say that the investors who do best in the foreclosure market spend 30 – 40 hours per week working it.

There are many internet websites like www.realtytrac.com that detail these properties and you can also get a list of properties going into default from the marketing rep at your preferred title company.

There are many different stages to the foreclosure process but two are most important to you.

The first is notice-of-default (NOD). This is when the lender notifies the borrower that a default has occurred and that legal actions COULD proceed. This is very early in the process. Once you get an NOD you probably have a few months to cure the default before you are actually foreclosed on. This is the best place for you as an investor to try and get the property with the best possible discount.

The next is notice of trustee sale (NTS). This is much more serious. This means the lender has set a date to sell your home at a public auction. As an investor, you will have to bid against the competition.

The margins here are much tighter and you need to have much more knowledge about the property, its value, and its potential before moving forward. The investing window of opportunity opens the day the Lis Pendens, the notice that a legal action is pending, is filed. The window closes the day the property is sold at auction.

The time between these two events enables an investor to work with the homeowner and lender to create a workout strategy or a purchase of the property from the homeowner before the sale date.

The amount of time the window remains open depends solely on state and local laws, as well as the behavior of the property owner. Most states sell properties within 90-120 days from the first notice of default.

There are many books and internet sites that tell you how the many different ways to buy pre and bank-owned foreclosure properties. For the purpose of this newsletter, let's stick with the most profitable method. The pre-foreclosure.

Let's examine the best way to try and get you or your client a home at a serious discount.

Here is what you need to do:

Get pre-qualified for a loan so that you can act quickly if you find a property.

Find out what properties are in default thru one of the websites like realtytrac.com or thru your preferred title company.

Evaluate these properties and narrow your selections based on most possible return.

Contact the homeowner. Inspect the property thoroughly and the default loan documents.

Determine the homeowner's needs…does he need quick cash or to simply get out?

Know all of the liens on the property and the payoffs that a purchase will require.

Calculate your selling price and the potential profit based on current market conditions.

Negotiate with the lender, the owner and any lien holders.

Close the deal, repair as necessary and sell for profit!!

This is much easier said then done. Keep in mind, the homeowner is being slammed with letters from the bank, attorneys, and bill collectors. Some may even be showing up at his door.

You are not alone in this idea. There are other investors like you contacting him as well. You all have three ways to contact him. In person, by mail or by phone.

You have to understand, many people being foreclosed on become upset with the amount of negative contact so they are not in a very responsive position to listen to what you have to say.

It's best to start with mailings. Let the homeowner know that you are interested in his financial problem, you have a solution and as a real estate investor, you specialize in homes in his area. Let the homeowner know in your mailing that you can help him stop this foreclosure, possibly still save his credit, and maybe even get him some additional cash.

Be creative and different with the mailing! A former client of mine used to send a $50 bill to each pre-foreclosure property owner with a simple note that basically said, "I care about what you are going through. Please find $50 to help out. When you call me to thank me, let's discuss some ways I can help further." It was expensive, but brilliant and it worked! I shared this with a 27-year-old investor I work with and he has been having success doing the same thing.

After you send this first letter out, don't be overly aggressive. Give the borrower a few weeks and then follow up by mail or phone. As you get closer to the auction date, stress the urgency. Always stress that you want to help.

Always be courteous and understanding. This person is facing one of the most difficult financial challenges of their life and they are being completely overwhelmed by attorneys and creditors. You need to be the "savior," not another person hounding him.

All you want to do for now is get a meeting to determine if he is even a candidate for your assistance. When you get your meeting, make sure the homeowner has all of his loan, mortgage and insurance documents available, as well as the foreclosure notices.

You need to carefully review these to determine profit potential. If you are going to make an offer on the property, you must have the loan, ownership, and debt or lien information. You must also assess the condition of the property.

Combined with the market value and the default amount, you have all the ingredients necessary to formulate your offer. Some investors in foreclosures even make the very courageous move of visiting the property in person without an appointment. One of my investor clients firmly believes in going door-to-door.

However, you have to be prepared as you may end up meeting with an angry homeowner who doesn't appreciate you showing up at his door. Be polite and leave if you are asked to. Never, under any circumstance, snoop around, inspect or generally trespass unlawfully on somebody's property. You are there to be a "savior," not a snoop.

When you finally get your meeting, you need to quickly assess the needs of the homeowner. Is he looking to save his credit? Is he looking for cash? Does he just want to be bailed out? Is he on the verge of bankruptcy? Is there something else he fears? Does he want to stay in the home on a rent-back basis until he can get his feet on the ground?

If you meet his needs, he will be much more receptive to your offer.

Inspect the property with the homeowner as you were a home inspector. Use an inspection checklist and record your information and estimated costs of repair.

Many owners of homes that go into foreclosure have been struggling financially for a while before they give up. This likely means the house has not received needed repairs or general maintenance for a while. Experts say to NEVER make an offer at this point or give the homeowner any money.

If you like the property and think you want it, make an appointment to meet with him again, go home, crunch the numbers, analyze all of the liens and payoffs, and come back with your offer. Make sure you factor in all closing costs before determining this price.

These homeowners are not as likely as savvy as you. They are also very skeptical. Changing the offer once made because you made a calculation error will not come across as a simple mistake. It will likely kill your deal.

Make sure you carefully review all liens on the property that have been filed. You will also want to ask the homeowner if there are any other liens that may "pop" up later.

If you want to be taken seriously as a buyer, you must be realistic when preparing an offer. Homeowners, regardless of their situation, aren't likely to give properties away. They know the value of their home on the open market and will likely lose it before making a deal where they feel ripped off.

Experts say the typical offer is 80% or less of market-value.

REO stands for Real Estate Owned and describes bank-repossessed properties.

Back in the late 1980s and early 1990s there was a rash of REOs on the market spawned after several years of creative financing intended to work-around ungodly interest rates. Anyone who sold real estate in those days would agree it was like the wild-wild west of real estate.

Banks, overly eager to make loans during a time when property sales were at a virtual stand still, threw caution to the wind and became more-than-willing to make loans to just about anyone able to propose a creative lending idea.

But we reap what we sow--within a few years, when it came to pay the piper, borrowers seemingly had no creative way to maintain the loan and many in turn lost their property to foreclosure. In response, this time eager to dump an overbearing load of repossessed properties, banks got the creative idea to sell them off through a specially-formed department they called REO.

It was like witnessing a financial train wreck. Fortunes were lost, reputations destroyed, and for many, the idea of ever sharing the American Dream got blown off the steps of courthouses across the nation into kingdom-come like piles of ashes.

For the decade following, banks tightened their lending practices and REO, with the exception of a few occasional foreclosures, became history.

But history does have a way of repeating itself. About five years ago banks again threw caution to the wind and seemingly decided to loan money to just about anyone breathing—whether they had the means to repay or not. In fact, they made it easy. Many loans got approved with zero down and included creative interest rates to keep the monthly payment low—at least for five years.

Can you guess the outcome? I believe we are about to see another outbreak of REO. In my area foreclosures are rising, and sources in Southern California are telling me there are clear and visible signs that it is just a matter of time before we see an REO pandemic--again.

My advice to real estate investors is to start watching the market for properties that must get sold (at below-market prices), and be prepared to react. If it sounds ghoulish to consider getting a good deal on the misfortune of others, keep this in mind: we are surely not wise enough to prevent it, but at least not so foolish that we would miss the opportunity.

What is a Short Sale?

A short sale happens when a lender is willing to sell a property for less than the total amount owed by the borrower. The property is worth less than owed therefore, has no equity and the homeowner is seriously behind in payments. In many circumstances more than one lender is involved. Even if the property is worth at or slightly above the amount owed, the owner could still be upside down when other factors are considered such as agent commissions, delinquent taxes, homeowner dues and other standard closing costs. A short sale could offer a workable solution for all parties involved, helping the distressed homeowner avoid foreclosure.

Who are the players?

Let's say you have a motivated seller who absolutely must sell otherwise face foreclosure. They have missed many payments and yet do not want the property to go into foreclosure. The seller consents to the buyer or agent negotiating with the lender to accept a short sale. What needs to take place in order for this to happen? The process can be somewhat complicated however, many say worth the hassle since discounts are often in the tens of thousands of dollars. Intrigued? Read on.

Why are lenders giving away instant equity?

Foreclosures are skyrocketing and most experts agree that this trend will only increase in 2007 and beyond. In fact, The Center for Responsible Lending conducted a study in which predicts that 1 in 5 sub-prime loans issued in the past two years will enter some stage of foreclosure. Since sub-prime loans account for approximately 25% of all mortgages issued, the expected impact is thought to be staggering.

Lenders do not want to be stuck with houses they cannot move. Since lenders are not in the property management business, they figure it is better to accept a discounted amount than to take the property back in foreclosure and risk having to hold it for an indefinite period of time. If they do foreclose, aside from costly legal fees, they also face high carrying costs including tax payments, insurance, homeowner's dues and other maintenance issues. In addition, vacant properties sitting for long periods of time are at risk and more costly to insure.

Additionally, lenders need the cash reserves and bad loans on the books also affect their borrowing power. Adjustable rate loans are resetting and homeowners are not able to meet new monthly payments. Initial low rate terms are coming due and already strapped homeowners are not able to keep up with payments.

Therefore, short sales can be a win/win/win situation for all parties involved. These conditions allow for many bargains to be snapped up by investors who are paying attention and are at the ready to purchase the undervalued properties. The seller is able to avoid foreclosure, which can be a very detrimental mark on their credit and the lender is able to move the property off their books and avoid costly legal fees. There are however, tax implications that the seller needs to be aware of before agreeing to a short sale. All borrowers should consult with tax and legal professionals to understand the tax and/or legal ramifications involved in their situation before agreeing to a short sale.

Show me the money? Let's look at an example.

Let's say a property was purchased for $500,000 with anticipated repairs of $45,000 and after value repairs estimated at $615,000. Now, after 1 year's time and a declining market, the property is worth only $495,000 after the repairs were made, and an offer comes to the table of $435,000 from Mr. Investor. There are two lenders involved and both agree to take a loss just to sell the property and get it off the books. Between the two lenders, over $65,000 is discounted off of original purchase price. This does not account for a significant amount of other closing costs also paid for by the lender. Many opportunities like this exist in short sale investing however, just like any investing tactic, does not work for all situations. Yet, who can resist coming in with $60,000 of instant equity which is why short sale experts believe this is a tactic worth pursuing.

Generally, the buyer/investor gets a property well below market. Not to mention the benefit to the agent(s) in commissions if one is involved. Short sales are a great tool for those investors looking for undervalued properties (isn't every investor) because the lender(s) are willing to take a significant discount so long as the sale adheres to their guidelines. Most investors recognize that their profit is made in the purchase and, when they walk in with instant equity, they have many more options available to turn a profit.

Financial salespeople such as investment advisors and mortgage brokers are recommending 'new' types of mortgages for improving cash-flow, freeing up money to invest, and having money to take that dream vacation. Their sales pitches sound so enticing. But here's what they don't tell you.

In the past, the only decision to make when getting a mortgage was whether you wanted a fixed or adjustable rate. Now, seniors are being pitched interest-only mortgages, option-ARMs and reverse mortgages. It's easy to become confused and overwhelmed. The result is you can spend thousands of dollars in fees and end up with a mortgage that doesn't meet your needs.

In a traditional mortgage, part of each monthly payment covers interest while the rest goes to pay down the principle amount you borrowed. With each payment you are decreasing the amount you owe and increasing your equity.

Interest-only, option-ARMs and reverse mortgages function quite differently from the traditional mortgage. Instead of decreasing the amount you owe, you will most likely be maintaining the same level of debt. In some cases you will actually be increasing the amount you owe—you will be going further into debt with each payment you make!

With an interest-only mortgage, you pay the amount of interest due each month for the first 10 years. This is still a 30-year mortgage, but you don't begin paying down principle until year 11. Since there isn't any money going to principle, your monthly payments will be less than with a traditional mortgage only during those first 10 years.

This can make sense in certain situations—especially for cash-strapped seniors. Since the monthly payment is lower, it will reduce what you take out of your retirement account. That means you won't have to pay income tax on that retirement money. It can continue to grow tax-deferred.

I only recommend this strategy as long as there remains at least 25% home-equity. Also, it's not a good idea to tap into equity during the refinancing to buy a new car or take a fancy vacation. This isn't free money. Spending the equity in your home is no different than spending the money you've invested in a CD or mutual fund.

The option-ARM is being heavily promoted these days—but watch out! They're sold based on their low introductory interest rate (as low as 1%) and a special low payment. And they give you the 'option' of the kind of payment you make each month. You can make the special low payment, you can pay the interest-only, or you can pay principle and interest just like a traditional mortgage.

On the surface this sounds good, allowing seniors to increase cash flow or to free-up their home equity so they can invest it in other, 'better' investments such as equity-indexed annuities.

But don't do it. People buying this mortgage think they are getting a great deal because of the low interest rate and the low payment. What they don't realize (and what isn't properly explained to them) is that each time they make that special low payment they are going further into debt.

Think about it. Let's say you borrow $200,000 and the interest-only payment is $1000 per month. If you instead make a payment of $400 then the $600 in interest you didn't pay is added to what you owe. So next month the interest due is based on owing $200,600. Do this for a year and you have dramatically increased what you owe. Instead of saving money like you thought, you were actually spending the equity in your home on other things.

The low introductory rate only lasts a short time, often just a few months. After that, you can end up paying a higher interest rate than if you went with a traditional mortgage in the first place. The costs of getting an option-ARM are higher as well. These only make sense in a few isolated situations. Most people should stay away from them.

Next week I'll talk about the advantages and disadvantages of reverse mortgages. I will also share stories from my readers that illustrate the shady mortgage-related sales pitches that are now being used. Don't buy one of these mortgages until then.

Give this a thought. Whichever house you stumble upon is more than likely to be fine. But a house purchase is like a garage sale; only instead of trading used cd's and clothes, you're buying and selling the garage. You will never find a flawless home, not even a builder home will be without flaw as far as a home inspection is concerned. But, you may certainly find the perfect home for you. For these reasons, it is absolutely important that your purchases are gone over thoroughly by a licensed professional. The purchase of house is at all times negotiable, and a proper intermediary assessment is a tenant of the agreement that you'll desire to always remain tightly on. Place it in writing, and have it signed. Leave no item to the dice.

Here are a small amount of ideas to think about:

If there is lumber present on the house, you may possibly wish a totally separate termite and insect inspection of the home. Common home inspections focus mainly on structural and mechanical aspects. They don't usually check for termites. Here once more is an opportunity to make friends with your inspector. Termites, ants, mice and other bugs may badly deteriorate doors, floors, attics and shelving. They can burrow through cabling and be the cause of electrical troubles.

Skilled inspectors will most likely begin with the settlement, searching for major cracks, unlevel site, and/or proof of water stains (i.e. water marks, bacteria, mildew, and mineral deposits). Some inspectors will also examine for the presence of radon gas in the atmosphere. The residence is examined as a structural whole; angles and joints and frames must come together at appropriate places to make certain a sturdy foundation. Plumbing and electrical mechanisms are reviewed for issues, wear, and to be clear they conform to industry regulations. Pipes are reviewed for holes, corrosion, lead, and other substances. In tandem with this, some inspectors measure flow-rate and water pressure. It is important to have good functioning electrical devices. Be weary of faulty cabling, uncovered outlets or receptacles, faulty grounds, inadequate or malfunctioning circuit breakers, or bad quality GFCI trips (those little red buttons in the center of your outlets which perform as miniature circuit breakers). A.C. and heating units will be inspected for duct leaks, the state of filters, and adequate capacity and flow. It is also imperative to ensure that the thermostat is in proper working order. Attics are inspected for the correct framing and strength, paying attention to any water leaks or clear damage. The roof is checked for rips or holes, wobbly shingle, weaknesses, and to be certain that vent pipes are mounted properly. Appliances (i.e. stove and water heater) must act in accordance with with standards. If there is a propane or wood-burning stove, these are required to be examined for physical integrity and proper performance. Carpets should not show signs of bad deterioration or water damage. All faucets must be examined for drips.

In addition to these important aspects, your inspector might examine a variety of different systems. you will receive a thorough account of his or her inspection, and as the buyer you may use these defective notations as bargaining tools during the negotiation phase. As a seller, this professional inspection may be completed before listing, so that problematic items can be granted consideration before the home gets to the real estate market.

House inspections can be hard o the wallet, but a few hundred dollars may well save you from much more in the long-run, and there is something to be stated about peace-of-mind with your home and knowing it is in acceptable condition.

Many books and articles have recommended new investors put their money into real estate. For investors just starting out, they probably do not have the backing or cash in the bank to purchase real estate on their own. The Real Estate Investment Trust (REIT) is a good way to invest in real estate with minimal funds.

REITs are mutual funds that own real property assets or mortgages, called debt-based securities. They allow even the smallest investor the opportunity to own a piece a real estate investment without going it alone.

Real Estate Investment Trusts came into their own during the housing bubble with attractive dividends, some of which paid 300 percent since the end of 1999. With the current real estate market, however, REITs are losing favor amongst investors.

According to a January 29th article in BusinessWeek, many Real Estate Investment Trusts are currently overpriced with dividend yields that are less than Treasury bills. In January, REITs were yielding only 3.6 percent. That is 1.3 percentage points lower than Treasury bills.

Current REIT investors can only hope that payouts will increase or the underlying property values rise. Real Estate Investment Trusts legally must pay out 90 percent of their taxable income in dividends; so, an increase in payouts is doubtful — cash flow does not grow fast enough to offer substantial increases within a short timeframe. Of course, the current real estate market means that property values are not steady. Where real estate values used to steadily rise year-after-year, positive value changes are no longer reliable. Many are still falling, especially in the office and apartment REIT investment arenas.

In 1997, Real Estate Investment Trusts were trading at 33 percent premium to their underlying property values, called the net asset values (NAVs). After the market bottomed in late 1999, they were discounted by 20 percent. In January, they were traded at a seven percent premium to NAV.

While market optimists believe REITs still have some running room, many investors believe the NAVs are now inflated. That means the REITs were taken out at a price significantly higher than their NAV estimates, inflating the property valuations. Some industry analysts justify the inflation, since REITs are in an asset class separate from bonds or stocks. They are considered to have matured as an asset class, making them an increasingly important part of many investment portfolios.

Though many investors and money managers are exiting out of Real Estate Investment Trusts, no one is recommending investors rid their portfolios entirely of REITs. Analysts only suggest you reconsider investing in new REITs and trim your current holdings.

Most people just starting out in real estate investing focus on buzz phrases like, "property analysis" and "due-diligence". The relationship between these two is important to any real estate investor, both experienced and inexperienced alike. The other aspect that is equally important, if not more important is self-analysis.

Now I don't mean psychological self-analysis either. Self-analysis is about taking a good look at your own financial situation, knowledge of investments, resources, strengths and weaknesses, and personal preferences. When we first began our real estate investment company, we agreed that personal guarantees for loans for any project for the company was not in our best interest. This is an example of a personal preference. This obviously has an impact on how we conduct our business.

Many real estate investors face the reality of having to borrow money in order to begin purchasing real estate. A great place to start analysing is your own wallet. Then match that to your personal preferences. For instance, if you were to consider buying a "fixer upper" and you had $5000 in your bank account. You would have to consider your options based not only on the amount of money in your bank account, but also the implications of borrowing money. This includes your credit, your personal assets, your family situation and the risks involved.

Bullets are always nice, so here are some to help you focus on what should be considering before "going for broke" (which is what you want to avoid):

Money in bank


Access to more money if needed


Credit

Possible risks to credit


What do these risks mean to you (how much do you care about them)?


Family - how will this effect your family?


Current assets


Current debts

Take these bullets and then match them to the following:

What are the potential problems that may arise?


How well prepared are you to handle these challenges?


How well do you handle pressure?


What experience do you have?


What are some resources you can use that can help you?


What money sources can you access if needed?


Who do you know that can help you?


How can you meet people that can possibly help you?


Do you want to do what it takes to actually start meeting people in the business?


What if you lose all your money?


What if your credit is destroyed?


What if you lose everything you have?

On a scale of 1 - 10 (1 = Absolutely No Risk and 10 = Extremely High Risk), how risky is the investment strategy?

Those "what if" questions are probably the most scary out of the bunch and they are also the root of what keeps many people from taking the first step toward making that first real estate investment or starting their own business. Regardless of these questions, if you want to start investing in real estate or start your own business, these questions have to be asked honestly.

But look at the entire list also! Part of the power of the "what if" questions are that they overshadow all the other options. The self-analysis you do is an absolute must. Any person who is considering real estate investing as a viable option for wealth building has to answer these questions on their own. No one can answer them but you.

Self-analysis is important because knowing yourself is the first building block to success. You've got to understand yourself and be honest. If you sugarcoat it, you will ultimately fail. There are so many different ways to begin a career or business in real estate, it's almost unbelievable. But no matter what path you choose, you've got to sit down and look at yourself seriously. Where there are strengths, grow them and where there are weaknesses, work on them. Real estate investment success or business success in general, does not happen overnight, neither does self-analysis. Sit down, figure it out. Then go out and make money!

©2007 noobdogs.com

The "2 year cash flow" is one of the most important concepts you'll learn when building a property portfolio. It's a simple formula that most people forget to calculate prior to committing to buying a property, yet it will guarantee the long term health of your portfolio, even through market downturns.

In most cases people will work out the initial acquisition costs and as long as they have to the funds required to purchase this they will dive head first into purchasing.

Funnily enough even though some of these people will consider the monthly mortgage they will neglect things like service charges & ground rent. Whilst this is a problem by far the biggest problem lays in the fluctuations in interest rates.

Capital growth will make you money but not having capital growth is nothing more than a frustration. The real major issue is a lack of cash flow to pay the mortgage and interest rates are the thing that most affects your ability to pay your mortgage. (I've never heard of a house being repossessed due to negative equity but l know 100s that have been due to not paying the mortgage (lack of cash flow).)

I have a client who every time that interest rates go up 0.25% he has to find an extra £4500 each month. You can imagine how much that would hurt if he hadn't made allowances.

OK, so l think we both realize how essential it is to consider the cash flow of each property. So now let's consider the mechanics of working it out to ensure you both take full advantage of your capital and don't take any unmanageable risks.

Before you consider purchasing an individual property you will also need to consider the cash flow impact of the purchase over the entire portfolio. We will talk about this further soon, lets now jump into the 3 aspects that we must consider with regards to cash flow.

- Your income

- The properties income

- Trading capital for cash flow

You spend your income and I will spend your capital.

Centered at the heart of my portfolio building philosophy is my belief that you spend your income and I will spend your capital This simply means that you shouldn't sacrifice your lifestyle to build a property portfolio, you should only enhance it, lifestyle that is. This assumes that you have equity available to invest, if you don't then you will need to use your income to supplement, save or borrow the cash flow for the property.

Is 130% mortgage coverage still applicable?

The second aspect of cash flow is creating a difference between the rent you receive and the expenses you pay out. This is rarely positive when you first purchase a new property and if interest rates are high but if you can achieve a positive you will need to consider the effect of interest rate fluctuations. I also believe that the days are gone of having 130% coverage on all property. This is certainly the trend in other similar countries.

Trading capital for cashflow

The third involves a principle l call trading capital for cash flow. It works like this and involves a delicate balancing act between your equity or capital and your cash flow.

In the 100s of clients l have supported over the years, most have their own home and have developed considerable equity in it.

Now assuming you stopped paying the mortgage but you were in a situation where you had a huge amount of equity and owed a little on your mortgage this would theoretically not stop your property from being repossessed. This is because even though you have equity you do not possess the cash flow pay the mortgage.

Now if you refinanced the property in such a way as to allow access to the equity as you needed it (through what we call a line of credit or sometimes called a flexible mortgage) You would the be able to use this money for whatever purpose especially to fund the monthly shortfall of rental on a property.

We call this trading capital for cash flow and it is fundamental if you are to build a substantial portfolio.

How long should you consider cash flow?

Now the only thing left to consider is how long do we need consider the implications of cash flow. As a rule I use 2 years. This is simply because a lot happens in property in two years, property prices will go up, interest rates will go up or come down or both, the market will change. If you have a new property it will give the property plenty of time to settle into its surroundings and ensure a stable rental market is established.

Given the above, in 2 years you should theoretically be able to refinance, sell, or at least have some flexibility to make changes that will allow you to recalculate the cash flow for a further two years.

Once I explain my 2 year cash flow rule people will ask one of two questions.

Is 2 years too short?
If you track a number different factors that affect the property market you will find that the only time that 2 years may fall short from a cash flow perspective is as interest rates begin the rise. Normally though we can approximately work out how high interest rates are heading and simply adjust the cash flow accordingly.

Is 2 years too long?
The only time it is too long is when the market in at low interest rates and property prices are galloping upwards. In this case you will normally be able to refinance or re-mortgage within the two years and take some more money out.

Regardless of what you actually believe the facts are that you will need to consider the ongoing cash flow of the property in order to fully be prepared for all markets in the property cycle.

British television's property darling Amanda Lamb may have ranked the Cape Verde Islands at number 12 in her top 20 Best Places to Buy in the Sun but the recent introduction of direct flights to the Cape Verde Islands is what is really going to get people moving to this stunning location.

Industry insiders such as Property Club International are already reporting an upturn in the country's emerging property market, thanks to the fact that potential investors to this excellent value location have had their formerly protracted journey eased significantly. Astraeus Airlines launched a weekly direct flight from Gatwick and Manchester to Sal Island, with Cape Verdean TAVC Airlines offering an alternative route between Birmingham and the new international airport at the country's capital Praia on Santiago Island.

"These islands are rapidly establishing themselves as a new and different destination with a number of environment-sensitive property and hotel developments taking place throughout the main islands in the group," said Jonathan Hinkles, commercial director of Astraeus. "It is, however, a relatively new holiday destination for discerning travellers – but has only previously been accessible by air via southern European or African airports, or by sea."

Until now, travelers to Cape Verde have had to fly via Amsterdam or Lisbon. Cape Verde, whose latitude is roughly that of the Caribbean, is now as accessible as the Canaries but property prices are much lower and, as such, the country is being touted by those in the know as one of the best emerging property markets out there. Get in there while you can!

Mexico could inarguably be classified as one of the most exotic of pleasure vacations globally. The occasional or the compulsive traveler alike would find Mexico the most idyllic of locations for all vacationing activities.

Mexico then could well be defined as a subtle blend between modernity and traditions. Hotels for sale in Mexico then is evidently one of the most prolific of activities in present times!

Profiling

Serene and scenic colonial cities, happening beaches – Mexico has it all – it is scarcely amazing then that Hotels for sale in Mexico are the buzzword – with the dense tourism traffic that Mexico takes pride in!

The potential customer seeking hotels for sale in Mexico would well need to research and introspect before initiating the buy considering that the options available are innumerable and the buy is but once!

The Options

The more discerning of buyers would well be advised to first explore the options available which could well be one or more of these:

► Beach Resorts

► Sailing locations

► Country resorts - which rejuvenate and relax

► Golfing Retreats

The options then could well be diverse and hotel properties in Mexico could well be equally rewarding – all it needs is to identify and profile of choice which could well depend on the multiple factors like – core strengths, personal preferences and logistics!

The Preferred Option

Mexico is strategically located – being surrounded by four seas and has around four hundred and fifty beaches! The preferred location for travelers to Mexico on weekends and the year around alike – which makes hotels for sale in Mexico beaches the most lucrative of all deals. The scope for activity conceptualizing at beach resorts is simple and lucrative – be it surfing the big waves or simply relaxing under the shady palapa which has few alternatives.

The Cultural Connection

The more culturally driven would well find the experience of a lifetime in this American country which has been credited with twenty six heritage sites reckoning in a list of 830 properties world wide – in the World heritage sites list.

The traffic to these sites is tremendous and considering that some of these are located in the offbeat tracks too – a hotel for sale in Mexico located here could well be value for money and the potential untapped in the present day scenario!

Heavenly Locales

Los Cabos or The Capes – as it is more commonly connoted is undeniably one of the most idyllic and scenic locales of Mexico. This offers an array of activities which could range form scuba diving and kayaking to the most romantic of getaways. The thirty four kilometers highway connecting Cabo San Lucas to Jose del Cabo is the most scenic of drives and is the perfect location for those seeking hotels for sale in Mexico!

Mexico then is the most perfect of locations for a hotel – all it needs is making an informed decision!

Anyone who's been fishing knows that one of the keys to catching the big one is having the right kind of bait. Many in the financial services industry understand this truth all to well and they've come up with the perfect enticement to hook unsuspecting investors. It's called the equity-indexed annuity (EIA) and chances are, if you've visited a traditional advisor recently, you've heard its compelling pitch.

Of course, for bait to be effective, it has to be something the intended target will happily swallow. Insurance companies have created a wonderful presentation that uses smoke and mirrors to give investors the impression that equity-indexed annuities are the answer to all their financial problems. But the reality doesn't live up to the promises.

The marketers of financial products know that one thing older investors want is simplicity. Seniors don't want to have to wade through a lengthy sales pitch or be overwhelmed by financial techno-babble. Salespeople know if they can offer an apparently simple solution to investors, their chances of making the sale are greatly increased.

Equity-indexed annuities are presented as being a simple way to have risk-free growth of your nest egg. They promise a guaranteed minimum return, while keeping the growth potential of the market. They promise that you can't lose any money and many even sweeten the pot with first year bonuses and riders that allow you to access your money for nursing home care and other early withdrawals. It all sounds so good and it's so simple. But is it, really?

The answer is no. Equity-indexed annuities are actually very complicated.

Let's take a closer look at how complicated equity-indexed annuities really are by starting with their chief claim, the guaranteed minimum return. Most investors have the impression that on a year-to-year basis they receive the guaranteed minimum return or the market return, whichever is higher.

But that's not true. You either get the indexed return or guaranteed minimum return for the life of the contract, whichever is greater. So if it's a 15 year contract, at the end of the 15 years, the insurance company looks back and figures whether you'd have earned more, at the guaranteed rate or the market return for the entire 15 years. So suddenly the guaranteed minimum isn't too impressive.

To make matters more confusing, on some contracts you don't get the guaranteed minimum return on all of the money you put in. For instance, some pay a 3% guaranteed minimum return on just 80% of your initial investment. So in essence, you're really guaranteed only 2.4%. That doesn't sound as good, does it? When the list average on a short term Certificate of Deposit is around 5%, why would you want to lock in a 2.4% rate for 15 years?

How the index return is calculated is much more complicated. You'd think that the insurance company would just tie your market return to an established index, like the S&P 500, and mirror its return. Unfortunately, it's not that simple. There are over 40 different methods in which these rates are determined and they vary widely from company to company. The explanations for these calculations are so complex, there's no way the average consumer could even hope to understand them. Even professionals find these methods extremely confusing.

Even if you could understand how your index return is calculated, it doesn't matter because the insurance companies can change how they calculate it from year to year. They can also modify the maximums, minimums, participation rates, asset fees, other charges at their own discretion. And there's nothing you can do about it.

Why would insurance companies do this? That part is very simple. Insurance companies understand the importance of keeping their flexibility and control, because they know that the markets and interest rate environments can change dramatically over the life of your contract. They put these safety valves in place so they make sure they make a profit. Of course, that can reduce how much you make.

If insurance companies put a high priority on maintaining their flexibility and control, shouldn't you? Be smart and don't take the bait purveyors of equity-indexed annuities are offering. Use your head and don't get sucked into a deal that, like many others, you may soon live to regret.

Mr. Voudrie is a Certified Financial Planner, nationally syndicated newspaper columnist and President of Legacy Planning Group, Inc., a Private Wealth Management Firm in Johnson City, TN. He can be reached at jeff@guardingyourwealth.com

Looking for private money for real estate investing? Well then, you're already in the right place… the internet! If you have spent much time online, browsing or doing concentrated searches, you have probably already found several websites that focus on using private money to fund your real estate deals.

One search you should do immediately is "private money for real estate investing." You'll be amazed at the number of sites that are returned. One recent search on Google yielded 6,150,000 results. Of course, not all of them are tightly focused on the topic – in fact, MOST probably aren't – but the top 20-30 were very relevant. Some of those also proved to be quite informative.

You could shorten your search term to "private money real estate investing" or simply "private money" and see what kind of results you get. A recent MSN search on that term yielded 36,543,981 web page results. Wow… try surfing those in an evening!

The great thing is, you really only need the first page or two of results to gather some top-notch information, much of it free or low-cost.

Many of the search results also include the term "hard money lender" so don't get confused. Hard Money is definitely NOT the same as Private Money for real estate investing purposes. Hard money is usually a very high cost option focused on higher risk, short term rehab transactions. Private money, on the other hand, is simply using a network of private, non-institutional lenders to fund various types of real estate transactions. The cost is often LOWER than conventional financing alternatives.

Don't be fooled by hard money sites masquerading as private money lenders. They're NOT the same.

There is a place you can go for advice and information about developing a private money network of your own. Called simply private money for real estate investing, you can find it at http://www.private-money-real-estate-investing.com.

There is also a page of private money for real estate investing best sites.