Archive for March, 2008
Easy Cash Flow for Retirement by Carrying Paper
March 20th, 2008 categories: Seller Financing
Do sellers carry paper on purpose? Actually, yes, they do. About 5 years ago I bought a small commercial property from an older couple who were ready to retire. They had purchased the building for their travel agency 27 years previously, and they had paid off the mortgage knowing that eventually, carrying paper would be a significant part of their retirement income. In fact, they paid off their commercial building before they paid off their house!
Well, this was lucky for me, because I would have had a hard time qualifying for a commercial loan. As it worked out, the sellers accepted 15% down and carried at 3.75% for 18 months, and 7.5% after that, which is where it’s at now. The building carries itself.
The timing was good for both of us. They were having a hard time selling because there was a moratorium on new business licenses at the time. For over 10 months, no one knew what type of businesses would be permitted in that space.
And they got to defer capital gains and have their money working for them at rates that were a whole lot higher than any bank CDs at the time. So it really was a win-win all around.
A lot of times I run into distrust of seller financing amongst real estate professionals, at least in my part of town, and I’m not really sure why. There seems to be a general perception that only desperate sellers carry paper, and sometimes that’s true, but a lot of people use the installment sale as a financial planning tool. And it can be such a great technique to get transactions closed, especially in a market where even great buyers have a hard time getting loans.
I like the idea of embracing ideas that give us more tools for closing transactions regardless of market conditions. One of the most satisfying things is teaching weary landlords how to convert their labor intensive real estate assets into relatively hassle-free paper assets. It’s fun showing sellers how to get top dollar by offering terms. You just have to set the transaction up right.
RELATED READING: Become the Bank and Kiss Your Hassles Good-Bye!
| Discussion: 2 Comments »
Tree Hugger Embraces RSS Hugger
March 20th, 2008 categories: Seller Financing
I’m new to the blogging world, which means I only recently discovered this funny little icon. The thing I like about it is that it’s my favorite color, and it’s very simple and well . . . icon-ish. You can spot it in a flash no matter how busy a website is. And, it matches the color theme of my website perfectly . . . almost like they had me in mind when they made it . . . I love those guys.
And then I actually discovered what it meant, which was even better. I was recently trying to explain it to a friend of mine who hadn’t heard about “readers” (all this time he thought he was one). Instead of having to check back repeatedly to several different websites to see if there have been any new posts, you can just have new posts automatically sent to the “reader” of your choice. It’s like creating your own daily newspaper, adding only the sections that you actually want to read. And, it doesn’t have to clog up your email, either. (For a better explanation from someone smarter than me, read What is RSS?) To see where I stole this cute image from, click here.
Well, there are even other places, like RSS Hugger, that compile a bunch of different blogs in one place under different category headings . . . like one giant reader. You can go on and peruse at your leisure, maybe discovering something you hadn’t heard of before, and signing up for the blog feeds that interest you. I think it’s a great idea, and can help narrow down the overwhelming choices on the internet.
On this site, you can find almost any type of blog. Of course, there are real estate blogs where you can find $1 homes . . . but you might be more interested in being Gourmeted to death with Spicy Garlic Chicken Tenders . . . and if you’re still hungry, you can always go for the traditional Green Eggs and Planet by MixedMarketArts . . . and if you’re STILL hungry, you’ll just have to visit HotGirls4U. (Don’t worry, RSS Hugger doesn’t allow any pornographic material).
It’s not only a good service for consumers, but bloggers can get more exposure (and ideally, more subscription readership) by linking up and networking with sites like RSS Hugger. Go orange, hug an RSS.
| Discussion: 2 Comments »
Loan Resets Have Owners Feeling a Bit Vulnerable
March 18th, 2008 categories: Real Estate News
If you have a variable rate, or a loan that will be resetting, you’re not alone if you have a sense of impending doom. Often times mortgage payments are almost doubling over night. This usually puts home owners in a fairly vulnerable position — even the ones that like white water rafting.
And by this point, of course, they’re usually upside-down, owing more than their property is worth, so it can get feeling a little hopeless.
So what can people do? If you qualify, some lenders are doing loan modifications, fixing rates, lowering rates, forgiving a portion of the debt, adding delinquent amounts to the back of the loan, etc. But what if, after all the banks contortions, you still can’t really afford the payment?
I usually see people doing one of two things:
- list the property, hoping the bank will approve a short sale so their credit isn’t as trashed and they can avoid at least some of the humiliation of the foreclosure process
- stop making the payments, let the foreclosure process run its course, and stay in the property for free as long as they can, sometimes even squeezing out more time with legal manuevers
I guess each course of action has its merits, it just depends on what’s most important to you. I regularly work with sellers who find themselves in difficult circumstances. Whether I help them negotiate with the bank for a loan modification or a short sale, the bank will usually need to see the following:
- hardship letter (the story of what happened)
- financial statement (income and expenses)
- 2 months’ worth of bank statements
- 2 months’ worth of pay stubs
- 2 years’ tax returns or W-2′s
Being in a tight spot is definitely uncomfortable, but it’s not hopeless . . . there are life jackets that will work regardless of how high the tide gets.
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