Indianapolis Real Estate Blog and Real Estate Investments Resource

Whether you are an advanced real estate investor or just getting started, real estate options can be an ideal investment technique. A real estate option is a way to control a property without owning it and it locks in the buying price for a specified time.

Most investors don’t understand how to use a real estate option, which is unfortunate because it is one of the most powerful tools in real estate investing. In fact, super successful investors such as Donald Trump routinely use real estate options for maximum leverage.

Here are 7 reasons why options are ideal for real estate investors, beginner or advanced.

1. Since you don’t own the property, you are not obligated to make house payments. You also don’t have to deal with repairs, holding costs or tenants. Imagine how flexible you can be if you don’t have to deal with monthly mortgages or on going repairs.

2. Getting started with real estate options doesn’t require a lot of cash. In many cases, we have controlled a $100,000 property for $10. This is especially important for a new investor since startup capital is often an issue.

3. Options are great at generating quick cash. Once you have the option locked up, you can market the property to create quick cash. You should focus on making at least $5,000 per option deal, and there’s no practical upper limit to how much you can make (one of our colleagues made over $300,000 on a land option deal)…all without having to deal with tenants, repairs or holding costs.

4. Using options is a great way to enter the luxury home market or control properties in hot markets. Since these are higher priced homes, you should expect to pay a higher option fee. We have controlled $500,000 properties using $100 to $1000. In many markets, a $500,000 is a starter home but the point is that you can control a lot of real estate for a very modest fee.

5. Options are scaleable because a single real estate option can be used to control a small deal or a large one.

6. Options offer multiple exit strategies. You can either exercise the option to buy the underlying property; you can sell or assign the option to another party; or you can ensure that the seller has to pay you off because the option creates a flaw in the title.

7. Using options allows you to convert dead leads into viable ones. For an experienced investor, this alone can add tens of thousands of dollars to his business because most deals that are not viable with other techniques (foreclosures, short sales, etc.) are often great candidates for real estate options.

8. BONUS REASON: Real estate options are very flexible and can be used with all types of properties including single residential homes, multi-units, apartment buildings, commercial properties and land. You can also specify the option period, which offers additional flexibility. In many cases, you can even extend the option period, often for an additional modest fee.

In summary, using a real estate option is an ideal investment technique for beginners because options don’t require much cash and can generate cash quickly. For advanced investors, using options to convert dead leads into deals can add tens of thousands of dollars per month. About the Author

Alex Nghiem is the co-founder of Wealthautopilot, which provides coaching and educational products/events for real estate investors who want to turbo charge their results immediately. To get a weekly free newsletter on cutting-edge real estate tips and a 6-part course on real estate options, visit http://www.wealthautopilot.com/course-a

Written by: Alex Nghiem

As the owner of over $5 million worth of quality real estate investments in the Indianapolis and the surrounding area, the Crager-Bartels Real Estate Team knows what it takes to own, rehab, purchase, and sell investment properties. Looking to invest in something other then the stock market? Let us sit down with you and discuss your real estate investing options. Check out pictures of some of the real estate we own at http://pictures.zionsvillehomesonline.com

Technorati Tags: real estate investing, real, estate, homes, residential, buying, commercial, rehab

(March 24, 2006) — Selling a home is getting more difficult these days and sellers are going to be asked some difficult questions that buyers in tighter markets may not have had the time or inclination to ask.

Here are five questions a seller should think about and be able to answer — just in case they are asked.

1. Why are you selling this lovely home? The buyer wants to know just how desperate the seller is. Desperation equals a lower offer, so answer carefully.

2. How much did the seller pay for this house? The amount is a matter of public record and a real estate professional can find it easily. One answer a seller might consider is some variation of this: “I got a bargain purchase price when this was a run-down shack before I renovated it so my purchase price is irrelevant to today’s market value.”

3. What defects does the home have and have there been any recent professional home inspections? It’s a good idea for the seller to have a home inspection before the home is put on the market, so any defects can be repaired or, at least, potential buyers can be told about them before they make an offer.

4. What problems have you had with this home? In most states, court decisions and statutes do not require home sellers to reveal past problems that have been corrected.

5. What is the quality of the public schools? Even buyers who don’t have children can be concerned about this and a seller should know the answer.

Source: Inman News, Robert Bruss (3/24/06)

Would you like to know the value of your home for free? Just go to http://MyIndianapolisHome.com and fill out the simple form. You will receive a free CMA via email, no obligation to you!

Technorati Tags: real, estate, selling, purchase price

(March 24, 2006) — The hottest business for real estate flippers these days isn’t starter homes — it’s hotel rooms.

Investors buy individual hotel rooms with a relatively modest capital outlays. The least expensive opportunities are in yet-to-be-built hotels. There’s no upkeep for the finished unit. In addition to being able to stay in their rooms whenever they want, investors make money by leasing out the units to others.

Most hotel operators run services that will match rooms with customers and send a healthy fee to the room owner. James Dubois, a hotel-condo investor in London, says he made a solid 6.7 percent return in the past year on his $410,000 purchase of a room by renting it out through the building’s developer, GuestInvest.

The larger payoff can come by investing in rooms in hot locations and hoping they rise in value. Joel Greene, president of Condo Hotel Center, says the big bet is that condo-hotel rooms can be resold to affluent buyers looking for prestigious, no-hassle second or even third residences.

Source: Business 2.0, Elizabeth Esfahani, (04/01/06)

Would you like to know the value of your home for free? Just go to http://ZionsvilleHomesOnline.com and click on “FREE CMA” at the top of the page. You will receive a free CMA via email, no obligation to you!

Many of the richest people in the world have earned their wealth through real estate. That’s why real estate investing is touted as the avenue to riches, but while it is estimated that 80 percent of the world’s wealth is held in real estate it is owned by a very small percentage of the population — less than 20 percent, according to a new book on real estate.

Lisa Vander is founder of Pacific Blue Investments, a real estate investment advising company, and author of The Real Guide to Making Millions through Real Estate: Start Your Own Portfolio With as Little as $3000.

Her nearly 300-page book details how to begin the investing process. Filled with tangible information, worksheets, and hot tips — you have a wealth of knowledge in one resource book.

Here are some tips from the book on what investors need.

Have an understanding of the timing of the market.

“You’ve got to understand how the market cycles so that you’re not disappointed or having unmet expectations when the market is going to do what it is naturally going to do, which is go up and down,” says Vander.

Have an understanding of how to analyze real estate numbers.

There are four parts of understanding the numbers of real estate: appreciation, cash flow, loan reduction and tax benefits and how they work together to produce a rate of return on equity that you have in a property.

“You’re shifting your mentality from an ‘Oh, the property is gaining in value’ which is appreciation to how hard is the money, that I have in the property, working for me,” explains Vander.

Have an understanding of the economic environment where you hold real estate.

“How diverse is the economy that I am putting my money/capital into and what’s the likelihood of my investment being there today, tomorrow and into the future,” says Vander. She says there are six economic indicators to consider that help to determine the health and viability of a market where you plan to invest in real estate. They are: mortgage interest rates; affordability indices; supply and demand; demographic information; commercial real estate; and health of the job market.

Vander also points out that, savvy investors take time to research both macro and micro economics when purchasing real estate.

“Macro economics is the study of how large economic forces impact the health and stability of an economy,” writes Vander. She says things such as: recessions/depressions; nationally based loan interest rates; wartime; and demographics of the nation are areas that investors should research.

Micro economics is a look at individual sectors of the economy, concentrating on local and regional areas. Vander names the following as factors that will affect real estate: local and regional recessions/depressions; local or regional disasters; age; seniors; youth; diversification of the job market; unemployment rates; affordability indices; supply and demand; new housing starts; existing housing for sale; permits being pulled; commercial real estate; types of vacancies.

Making millions through real estate is possible and with the help of Vander’s new book — how to do it is no longer knowledge just for the wealthy.

Technorati Tags: real estate investing, real, estate, commercial

The nation’s three major credit data reporting agencies have joined to create a single system for calculating credit scores.

VantageScore information is initially sketchy — the current leading credit score system (FICO) provider, Fair Isaac has had years to develop vast reams of consumer information — but consumers can look forward to purchasing their new uniform score by year’s end and more details in the weeks to come.

Credit information reporting agencies, Equifax, Experian and TransUnion have created the single system in a move designed, they say, to make it easier to apply for a loan.

A credit score, used by the vast majority of lenders to approve or deny a mortgage application, is a statistical analysis of a consumers’ creditworthiness generated, in part, from information on a credit report. A credit report tracks credit consumers’ payment records on individual credit accounts and reveals how well or how poorly each account is being paid.

Today, three different credit scores, one from each agency, are based on three different scoring models. Under the new VantageScore system, you could still get three different scores, but they’ll all be based on the same system which the partnership says will make scoring less confusing.

The system uses a numerical score, like previous systems, but also a letter grading system scoring consumers from A to F.

* 901-990 is an A

* 801-900 is a B

* 701-800 is a C

* 601-700 is a D

* 501-600 is an F

The dominant FICO score ranges from 350 to 850 with no letter grading system.

In both cases, generally, the higher the score the more likely you are to qualify for a home loan and the lower the interest rate and better the terms.

It’s not yet clear what this will mean for FICO and other scores. The new system is being marketed to lenders, but it’s up to them to buy in or not. That could leave some of the confusion the new score is designed to eliminate.

“This score provides a new and unique option to the marketplace. There will continue to be multiple scoring solutions in the market that meet business needs. VantageScore will compete on the merits of its consistent, predictive power,” the Big Three said in a prepared statement.

The three also said the same VantageScore model will be used across all three companies, but differences in scores can occur when one agency has underlying data that is different from another agency.

VantageScore was developed from a national sample of approximately 15 million anonymous consumer credit profiles pulled from across the three major credit reporting companies (five million from each source).

The big three claim the new score predicts the likelihood of future serious delinquencies of 90 days late or greater, based on a 24-month performance period.

Depending how severe it is and how long it lasts, winter tends to reduce regular contact with your neighbors.

Even the kids won’t go out in very cold weather. The fact that the days are short and it’s already dark before people begin arriving home from work limits general socializing.

Springtime, with its warmer temperatures and lengthening days, reverses that trend, and already neighbors are beginning to congregate on the street to share news and to keep an eye on the little ones at play.

It’s during the more pleasant times of the year that things can get really unpleasant between neighbors. Cars parked in front of driveways. Noisy kids using the yard as a transit way. Stray cats and dogs. Stuff from dogs never cleaned up. Unmowed lawns or, what’s worse, lawns being mowed at 7 a.m. on a Saturday.

And let’s not forget construction work. The carpenter’s truck parked on the street, even if it isn’t blocking anything, is often considered an inconvenience even by neighbors whose lives aren’t being affected by the work being done on your house.

People who seem perfectly normal and friendly often behave in the most unexpected ways.

About 10 years ago, in my old neighborhood, we experienced what I could best describe as a well-focused tornado. The damage was limited to a narrow path running parallel to the telephone lines at the bottom of our backyards. The lion’s share of the damage was restricted to fallen trees and branches, although a couple of houses close to the path lost shingles and roof gutters.

The tree from one person’s yard fell on the adjacent neighbor’s deck, doing perhaps $500 worth of damage but delaying the planned party for the neighbor’s daughter’s graduation.

When the deck owner approached the tree owner about homeowner’s insurance compensation, the tree owner told him to take care of the damage himself.

“I’ve got my own problems,” the tree owner said.

The deck owner considered suing, but instead took care of the problem himself, and the graduation went on as scheduled.

About three weeks later, the tree owner was served with a summons by the city, at midnight, no less. It seems the deck the tree owner had built had been done without a permit. This was not unusual, since no one liked dealing with the city. The fact that the summons followed the dispute between the two neighbors so closely wasn’t lost on anyone.

In the same neighborhood, one homeowner’s yard was littered with trees that had fallen from the adjacent neighbor’s property. The homeowner assumed the removal costs herself, realizing that the tree owners were elderly and on a fixed income.

It takes all kinds to make a neighborhood. By the way, I was only an observer in both cases, but I was touched by the woman’s generosity as I was secretly glad the first tree owner got his comeuppance.

From the e-mails I receive, it’s clear to me that few homeowners know their rights when it comes to their relationships with their neighbors. If your neighbor’s tree doesn’t fall, but its branches are hanging over the fence and over your property, do you have the right to cut the branches, or should you ask your neighbor? What if the neighbor says no, and threatens you if you touch it? Do you have any legal recourse if talking doesn’t work?

It depends on where you live, says lawyer Cora Jordan in the fifth edition of Nolo’s Neighbor Law: Fences, Trees, Boundaries and Noise. Under something called “the right of self-help,” the neighbor can trim the dangerous branches up to the property line. If the tree owner decks the trimmer in response, then we get into more serious and criminal issues, such as assault.

The trimmer cannot go on to the neighbor’s property to trim the tree, however, unless it is necessary to avert danger; nor can he cut down the tree or do anything that will result in the death of the tree.

How the neighbors handle the branches issue probably are governed by the municipality. That’s why you should call the city or town before you act. You and your neighbor may be doing the right thing as far as the two of your are concerned, but the city can be that fly in the ointment.

Remember, when you buy a house, you buy a neighborhood, and your happiness is only as certain as the relationship you develop between you and your neighbors. Jordan’s observation about neighbors — “they wouldn’t be so bad if they didn’t live next door” — should not be your experience.

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