Indianapolis Real Estate Blog and Real Estate Investments Resource

Got a call from the owners of 4 duplexes we purchased from on contract. The owners dad wants to get rid of some commercial property he owns in Muncie. Getting to old to manage it now.

Wants to see it to us on contract with nothing down.

Has 5 acres, 3 businesses established on the site, built 25 years ago.

I do not have other numbers at this time, but if I don’t buy, I have other investors from out of state that may want to purchase. I just have to many things going right now!

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!

It seems during a slowing market, the last person to get the message that the house needs a lower price is the seller. After all, the seller has the most to lose by “improving” the price and it’s a tough decision to let go of a dream of cashing out.

A sellers market builds over time. If new jobs enter a particular area and housing doesn’t keep pace, home shortages create a sellers market where prices increase and bidding wars begin. Then, one of two events happen to make a market cool down: the economy stops growing or prices become too expensive (combined with an ample supply of rentals). A normalized/buyers market is born and sellers need to get on board or hit the showers.

In the Washington, D.C. area, jobs are continuing to enter the market at a projected rate of 65,000 in 2006 (which is on top of more than 70,000 new jobs in 2005). According to the Center of Regional Analysis at George Mason University, the area has a deficit of housing by about 160,000 units. With plenty of rentals available this past year and skittish buyers, the area has just come off one of its hottest markets ever. It’s cooled, slowed, normalized.

When people ask if it’s crashing, I just point out that if you were driving at 120 mph and slowed to 75 mph, how would it feel? The lower speed limit may seem a lot slower, but it’s still faster than the speed limit. We’re running at that fast, but slower pace, now.

Nevertheless, as inventories grow and days on market increase, those in the business know what will sell a house more than anything else — a price correction. Call it “reduced,” “price cut,” “realignment,” “price improvement,” “repositioning,” or whatever you want — the price needs to come down to where the buyers are biting.

I’ve collected quite a few excuses that sellers and some agents hold onto, instead of biting the bullet and bringing down the price.

“My house is worth it.” Well, according to who? Usually, this statement is followed by a shopping list of items that have been added to the house: hardwood floors, 9-foot ceilings, new appliances, upgraded bath/kitchen, you name it. Yeah, your house is unique, just like everybody else’s. The reality is while your house may have all those neat amenities, so do the other dozens, scores or hundreds of homes in your market area that are also on the market.

“It’s a great looking house.” It better look great if it’s going to beat out the competition. Location, price and condition will always be a factor in any market. It may look great, but looks have nothing to do with real value. When you start thinking that your house pales all the competition it means one thing you probably haven’t seen other houses like yours on the market.

“I have to get this much or I can’t sell.” Oh, I really like this one. What a seller needs doesn’t matter to the buyer. The buyer is looking for as much value in a community of high-priced houses. In the DC area, the average price lingers around $550,000. For that price, many buyers want the house to look good, have plenty of amenities and be connected with a realistic seller who is motivated.

“If I can’t get my price, then I’ll take it off the market.” My question to that statement is: “Then why are you on the market to begin with?” Look at what it’s going to take to sell your home and realize your true goal — getting that next property. Looking at only what your house will draw is too short sighted. The real question is, “What kind of deal can I get on the next house?”

The reality of most sellers, when they are dropping the asking price, is that they are still walking away with a boatload of money, just not as much as they wanted. They really haven’t “lost” anything. They’ve doubled their gain. When pricing your house, look at these hard-core realities: what were the last few “solds” in my type of home; what is my true goal — to get a certain amount of gain, or to get to the next house; and, finally, am I really in the game or am I playing around? Get serious. Price right. Get the next home of your dreams.

Related Articles: # Practical Things to Remember When Home Shopping # The Bath: Enjoy It Before You Sell It # Pricing as Much Art as Science

Written by M. Anthony Carr June 9, 2006

Wondering What Your Home Is Worth? Want Free Home Listings Via Email? — Let me show you.

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Real estate flippers got a new set of marching orders last week — at least those flippers who want to use FHA mortgage financing.

The Federal Housing Administration issued long-awaited final regulations on property flips last Wednesday. The rules take effect nationwide July 7. Flipping involves resales of houses or other real estate shortly after acquisition, typically at a substantial price markup. Say you buy a rundown rowhouse at a bargain price, do cosmetic fixups, and then sell it a month later for twice what you paid for it.

Sounds like a high payoff short-term investment, right? It is. But the FHA found that too many property flips using its insured mortgage program involved outright fraud — hyped appraisals, shell games where property flippers never actually took legal title to the house before selling it for huge profits, sometimes overnight.

Often the end purchaser of the flipped property was not financially qualified, and used fraudulent income, employment and assets information to obtain the FHA loan. Then the buyer quickly defaulted, leaving FHA with insurance losses and a house that was worth nowhere near its appraisal valuation. The flipper, meanwhile, pocketed all the sales proceeds financed with the FHA mortgage.

To rein in such practices, FHA proposed — and last week adopted in final form — new restrictions. Specifically, FHA will now require that:

* Only owners of record — listed as such in the local court house real estate recordations — may sell properties that will be financed using FHA insured loans.

* Any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing.

* For resales that occur between 91 and 180 days where the new sales price exceeds the previous sale price by 100 percent or more, FHA will require additional documentation of the property’s true value before insuring the mortgage.

* The agency may also require additional evidence of the accuracy of appraisals whenever properties are re-sold at high price gains within 12 months.

The FHA 90-day no-flip time restrictions will be waived when the sellers of properties to be financed are:

* HUD itself, disposing of its REO (real estate owned) acquired property portfolio.

* Sales of properties that were acquired by the sellers through an inheritance.

* Fannie Mae, Freddie Mac or other federally-chartered financial institutions disposing of REO.

* Local or state housing agencies.

* Nonprofit organizations that have previous approvals to purchase HUD REO properties at a discount.

* Properties located in a presidentially-declared disaster area, provided FHA has issued a formal announcement of eligibility for a specific disaster area.

Real estate investors, particularly those who specialize in rehabilitations of rundown structures in central city areas, had complained to HUD about possible negative impacts on their business activities stemming from the new rules. But HUD decided that banning most 90-day or under flips, and by scrutinizing flips between 91 and 180 days of acquisition where the price markup exceeded 100 percent, FHA should be able to protect itself against the worst abuses.

Investors with questions about the new regulations can call 1-800-CALL FHA for guidance. The rules are contained in HUD Mortgagee Letter 2006-14, issued June 8.

Related Articles: # A Diverse Coalition is Pushing Major FHA Reform Legislation on Capitol Hill # Toxic Reverse Mortgage Gobbles up a 94-year-old Widow’s Home Equity # Title Insurance Pricing, Kickbacks Criticized on Capitol Hill

Written by Kenneth R. Harney June 12, 2006

Wondering What Your Home Is Worth? Want Free Home Listings Via Email? — Let me show you.

Technorati Tags: listings, real, estate, houses, residential, selling, rehab

(Washington - May 17, 2006) - Indianapolis, Ind. was the nation’s most affordable major housing market for a third consecutive quarter in the beginning of 2006, according to the National Association of Home Builders’/Wells Fargo Housing Opportunity Index (HOI), released today.

Meanwhile, nationwide housing affordability remained virtually unchanged from the end of 2005, as slightly lower home prices and higher household income helped offset an upward movement in mortgage rates to keep the index almost flat. The HOI rose marginally from its lowest level on record, 41.0 at year-end 2005, to 41.3 in the first quarter of 2006.

“The latest HOI shows that only 41.3 percent of new and existing homes that were sold during this year’s first quarter were affordable to families earning the national median income,” said NAHB President David Pressly, a home builder from Statesville, N.C. “This is down from just over 50 percent of all homes sold in the first quarter of 2005 that were affordable to the average family.”

“Compared to the fourth quarter of last year, the median price of all new and existing homes that were sold during the first quarter of 2006 declined 1.5 percent, while the national median income, as calculated by the federal government on an annual basis, was adjusted upward from $58,000 to $59,600,” explained NAHB Chief Economist David Seiders. “These factors kept housing affordability from sliding further despite the fact that the national weighted interest rate on fixed and adjustable-rate mortgages rose 18 basis points in the period, from 6.21 percent to 6.39 percent.”

In the nation’s most affordable major housing market of Indianapolis, just over 90 percent of homes sold in the first quarter were affordable to families earning the area’s median household income of $65,100. The median sales price of all homes sold in Indianapolis during that time was $113,000 - down from $120,000 at year-end 2005. Also near the top of the list for affordable major metros was Youngstown-Warren-Boardman, Ohio-Pa., followed by Detroit-Livonia-Dearborn, Mich.; Rochester, N.Y.; and Buffalo-Niagara Falls, N.Y., in that order.

Four smaller housing markets outranked all others in housing affordability this time around, including Lansing-East Lansing, Mich. at the top of the list; Davenport-Moline-Rock Island, Iowa-Ill.; Lima, Ohio; and Battle Creek, Mich., respectively. Bay City, Mich., was the fifth-most affordable market smaller than 500,000 people.

Los Angeles-Long Beach-Glendale, Calif. maintained its standing at the very bottom of the affordability chart in the first quarter, with just 1.9 percent of new and existing homes sold in the area being affordable to families earning the median household income of $56,200. The median price of all homes sold in the metro during the first quarter was $500,000, which was unchanged from the previous HOI. Other major metros at the bottom of the housing affordability chart included Santa Ana-Anaheim-Irvine, Calif., followed by San Diego-Carlsbad-San Marcos, Calif.; New York-White Plains-Wayne, N.Y.-N.J.; and Nassau-Suffolk, N.Y.

Among metro areas smaller than 500,000 people, Santa Barbara-Santa Maria, Calif. was the least affordable housing market. Four other small California markets also fell at the bottom of the affordability chart, including Modesto as the second-least affordable small market, followed by Salinas, Merced, and Napa.

Please visit www.nahb.org/hoi for tables, historic data and details.

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: homes

We have both sides of Vine Street rented out!

One side for $695, the other side for $850. I planned on getting $895, but I can live with $850. We are cash flowing nicely on this one….Payment with taxes/insurance right now is $900/month. Tenants pay all utilities. About $645 cash flow per month.

Well, we did put 32k into this, so it’s about $525-$550 cash flow per month if this is factored in.

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!

Technorati Tags: homes

Have you heard that commercial about interest-only mortgages…the one where you’re told about what a wonderful benefit it is to have a low, low mortgage payment and all the wonderful tax write-offs you will receive?

Before you decide to buy now and pay later, that is pay “big time” later, take a moment to enlighten yourself a bit more about these so-called “interest only mortgages.” Think about it for a moment. If you just pay the interest on your home, will you ever start paying on principal and will you ever earn any equity into your property?

By definition, a mortgage is a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt. Simplified, that means you borrow money from a financial institution and they essentially buy your house and you pay it back. How can this happen if you’re just paying interest? More accurately, interest-only mortgages are a temporary reprieve for paying off a traditional mortgage. You may actually be prolonging the inevitable and eventually making it even more costly to pay off your mortgage.

Far too many people are in debt way over their heads because of interest-only mortgages. They took advantage of attractive offers to buy now and pay later. With an interest only payment you’re keeping the principal at minimum value while continuing to pay interest at 100%. With a more conventional mortgage you’d be slowly dwindling down the total interest amount.

Most interest-only payment schedules are offered on Adjustable Rate Mortgages (ARMs), but they can also be found on a fixed rate mortgage. Interest-only payment periods almost never run for the entire term of the loan which is typically 15 or 30 years. Depending on the terms of your contract, you could be expected to start paying on the principal in five, seven or ten years. Once the interest-only period ends, your monthly payment will go up because then you’ll be paying on both principal and interest.

Conversely, interest-only mortgages can be a good thing for some people. For those people wanting to purchase a bigger/better home for a lower down payment AND who anticipate moving within seven years, the interest-only payment method may be the way to go. However, keep in-mind that in a “down” realestate market you generally won’t be building equity and making money by doing it this way. The majority of the money made from investing in real estate comes from an increase in value to the home. The average person moves every seven years anyway. Gone are the days when people stay in a home thirty years. Hence, if you anticipate moving before you’ll have to start paying on the principal, then an interest-only payment may be ideal for you.

There’s a great deal of fine print to any mortgage. Evaluate your own goals; be vigilant when reviewing the terms on the loan you’re considering before acting.

Technorati Tags: real, estate, commercial

If you are in dire need of money and don’t have the financial means for a large cash transaction to buy a house, then opting for a home mortgage is worth consideration.

Basically, a mortgage refers to a long-standing credit that a debtor obtains from a financial institution or from a property seller.

In most cases, the house is the usual collateral for the mortgage, thus the term “home mortgage”. In turn, the mortgage lender will be entitled to some legal rights upon the property as long as the mortgage is in full force or until the debtor pays back the loan.

A home mortgage serves as security for loans, thus giving the lender the power to acquire the property through foreclosure in the event that the borrower fails to pay the loan on time.

Generally, a home mortgage is comprised of a large loan. That’s why in most cases a home mortgage can take 15 to 30 years before the borrower can pay back the due amount.

In a home mortgage, the due amount to be paid by the borrower stipulates the principal amount of the mortgage and the interest owed relative to the outstanding balance. The real estate taxes and property insurance are also factored into the total mortgage balance.

Some home owners who find it difficult to make their mortgage payments may opt for refinancing of their mortgage. But for those who wish to pay off a home mortgage quickly, there are things to be considered…

First, make sure you have a stable source of income. Organize your overall financial assets to ensure that paying off your mortgage will not over-extend your cash flow. There are many such considerations that should be carefully planned and organized before resorting to pay-off your home mortgage.

It’s also important to your financial security to have a ready reserve of cash just in case of emergencies. This can be in the form of stocks and bonds, a bank savings account, or any other readily available form of cash.

Paying off your home mortgage can be a rewarding experience, but be sure to consider your overall financial status before making the decision to do so. The wrong decision can put you at great financial risk.

If you think that you are ready for the mortgage “experience” and that you have your finances securely organized, then by all means, go for it. After all, nothing beats a worry-free, mortgage-free financial status.

Technorati Tags: real, estate

Really, if you think about it, buying a property and renting it out is nothing new in the world of real estate investing. The practice has been going around much longer than any of the real estate gurus that created these “get rich” real estate courses!

So why is everyone making such a big hoopla about doing lease options?

No Money Down Deals =================

One of the many reasons that lease options are so popular, is the possibility of creating a No, or Low Down payment to purchase the home. This is done by working directly with the seller of the house, and hammering out a deal between you and the seller.

That means, no banks, no credit checks and no qualifying! Of course, not every seller is going to be open to the idea of flexible terms for you, so it would be a good idea to work with motivated sellers.

Working With Motivated Sellers =======================

Although these deals are more difficult to find, they are out there and they exist. You just have to know where to find these deals. Many of these deals can result in no down deals if you offer the seller something that they desire. One such item is the sales price. Offer to pay maximum dollar before repairs to entice the seller to offer you good terms for buying the property.

While other investors come by and offer them low-ball insulting offers, you might get the nod for coming out and offering a better deal.

Remember, these people are in distress some how, and if you put together a fair offer for both parties, you may get the property at a really good price.

Giving To Get What You Want ======================

Nobody likes to be sold. Don’t make your seller feel like they’ve been ripped off! Creative negotiating is the key to securing a great deal. There’s no need to strip the seller of their dignity by insulting them with a totally one-sided offer. Make the seller feel like they are getting something out of the deal and you’ll close more profitable deals faster with less problems.

While you are negotiating with the seller, find out just what they need to get rid of the property and go from there. Most sellers in distress don’t have a lot of time or options and may offer you a very good deal.

Also take in consideration the condition of their property. You cannot pay full price if the house is in need of repairs. A good suggestion would be to only look at houses that are cosmetically damaged, and not structurally damaged.

Needing a new roof or new plumbing installed is different than just cleaning up the yard and putting a fresh coat of paint on. Actually, the more cosmetically unpleasing the property is, the better your negotiating leverage is. You’d be surprise the amount of discount you can get from an unpleasant looking property!

To ensure the property has no major problems, bring along a handyman and have them hand you estimate for getting everything done. Once he does, simply hand that to the seller and show them how much it’s going to cost to get this property back into a livable place. If the seller can’t or won’t fix the problem areas, ask them to add the cost into the final sales price to make it fair for both parties.

Important Tips When Buying With Lease Options ====================================

When purchasing property via “For Sale By Owners” (in other words, no real estate agents), always buy the property on a Land contract or a Contract for Deed. Both of these contracts are used when selling property between two parties without a real estate agent. Sit down with a real estate attorney and have them go over the details with you for a land contract.

If the seller offers a lease option to you, turn the offer down. Here’s why. A lease is another word for renting their property, which means you don’t own it.

If you are simply a renter of the property, the seller only needs to get a court order of eviction and your out of the property. If however you are the owner of the property, the seller will most certainly have to induce what is called a judicial foreclosure. The difference is probably $10,000 dollars or more in attorney fees, court fees and between 8-12 months time for processing.

A judicial foreclosure is very costly and time consuming for the seller, and would probably force him to negotiate more favorably towards you. All the while, the property is in a period of Stay, of course you are still required to pay the seller and follow through with your end of the contract. However nothing can be put into action until after the foreclosure is completed. Wow, that’s a very important point.

Know that this has happen and the people ended up staying in the home mortgage free! They didn’t fulfill their end of the contract by paying the seller their monthly mortgage payment like they should have, yet the seller couldn’t do anything until the pending foreclosure had been resolved. Not even get the buyer to pay their monthly mortgage payment to them!

These are the extreme’s. But it would be in your best interest to see that you are considered an owner then a renter.

Important Tips When You Lease Your Property ==================================

For the very same reasons listed above, when you look to sell your property, you first do it as a lease. If the buyer/renter insist on having an option contained within the lease contract, you write the option on a separate contract. If there was ever a dispute, you may gain an advantage in court since the original lease is basically a renter’s agreement.

The option that you have your attorney write up, simply will include that the option is not an option unless terms of the lease agreement is met. Always make the option contain wording that has the renter fully complete the lease agreement first. A good term for a lease agreement is 24- 36 months. The option would be null and void if the renter moves out before the lease agreement is up or is late on any rental payment within that time.

By doing so, if your renter violates any portion of the lease, you simply file for an eviction and your tenant will need to evacuate the property within the time stated by the eviction notice given by a judge. No judicial foreclosures, no lengthy waiting periods and the defaulted tenant is removed in less than 45 days!

Also ensure that your contract has some type of clarification as to the sales price. Specifically the property should be priced at the market during the time of the sale, not fixed at the time of the lease agreement started. You also want to make sure that you stipulate that as a renter, the renter cannot sub-lease out the property and by doing so would violate their lease agreement. You don’t want another investor in there trying to profit off of your deal.

If there is any violation of the lease agreement you can let the renter/buyer know that you may take them to eviction court if the violations aren’t corrected.

Time To Cash Out Your Option =======================

If the lease agreement is fulfilled as stated in your contract, then go ahead and offer your leaser the chance to own the property outright. Of course, they will have to qualify with a bank and get the whole sales price paid off. By doing this, you would have the funds to pay off your contract with the original seller, and pocketing the difference from your buyer.

Remind the buyer/renter that the sales price is based on what the price is at the present time, and not when they had initially started their lease. A tactic of negotiating for the buyer/renter is that the price should be set back to the price when the house was originally rented to them. You can let the buyer/renter know that you will offer them a 5% to 10% discount on the current sales price for being a good tenant.

With any of the strategies listed here, it is always wise to consult a real estate attorney to find out your legal options of any part of the deal.

Happy Property Investing!

Technorati Tags: real estate investing, real, estate, houses, agent, buying, selling

Are you successful? Have you accumulated enough wealth to make other people envious? Or do you plan to be wealthy in the not-too-distant future?

If you are wealthy enough to be ‘comfortable’, you should carefully consider taking some steps to protect your wealth. What would happen to your assets if you were sued? If you were in a car accident, and it was your fault? If you were disabled? If you died?

It’s important to have a plan in place before anything bad happens. You may never be sued, but everyone dies.

When you die, your bank accounts are frozen, and an executor is appointed to wrap up your estate. This means finding everyone you owed money to, and settling the debts. If you have a family, and all your assets are in your own name, your spouse could be unable to access your funds for up to 2 years.

There are 3 major concerns when it comes to protecting your assets: estate duties, income taxes and lawsuits.

Estate duties When you die, the government claims a percentage of the value of your estate. This amount varies from country to country, and it could be anything from 20% to as much as 55%.

The solution to the estate duty problem is to ensure that your estate is worth as little as possible when you die. Moving your assets into a living trust could be a good solution, as the trust is not taxed upon your death.

Income tax How do you legally reduce your tax liability? One way is to decrease your income to an absolute minimum. Anything you need could be paid for by a business. For instance, if you need a new laptop, it could be paid for by your corporation or living trust. It’s a legitimate business expense, as long as you use it for generating income, and not just for playing games.

The expenses of a business are deducted from its income before taxes are calculated. For individuals working for an employer, taxes are deducted before you even get your paycheck. That means that your personal expenses are paid for with after-tax income. If a separate legal entity can pay some of these expenses, it reduces the amount of money you need to earn, and the amount of tax you need to pay.

Lawsuits The first thing that happens when someone wants to sue you is that their lawyer will try to find out what you’re worth. It’s not difficult to find out someone’s net worth by examining public records. These days, on the internet, it’s even easier. What you need to do is look like a poor target. This could mean transferring as many assets as possible into a separate legal entity, which you do not own, but do control. This could be a living trust, or a corporation.

It might also mean that you ensure that properties in your own name are mortgaged to the hilt, so that your net asset value (the difference between what you own and what you owe) is as low as possible. Ideally, you want your assets and your income to be as small as possible, so that it’s not worth suing you.

In conclusion Everyone has different financial needs. Laws are different from country to country, and from state to state. It is essential that you get professional advice from a competent financial advisor before doing anything.

If you are in financial trouble, it’s already too late. If you transfer assets in order to put them out of reach of your creditors, it may be seen as fraudulent and illegal. You need to have a plan in place before you are sued, and before anyone tries to take your assets away.

You may think that you are too young to worry about asset protection, but it’s not too early to get a plan in place. It’s a cliché, but still true: If you fail to plan, you plan to fail.

Technorati Tags: estate

If you are an investor that sells properties using lease options you no-doubt understand why it can be an appealing avenue for those that need rental history and/or rent credits to help a challenging credit file. But, would YOU consider buying a property using a lease option? You better!

There is a reason that some of the most successful real estate investors, including Donald Trump, use the lease option technique (ok, there are actually several reasons!).

Appreciation: One of the typical advantages of controlling a property using an option is that the buyer retains the right to capture some, if not all, appreciation during the term. The longer the term, the greater the appreciation can be. In the single-family arena, where terms are usually 12-24 months, even moderate amounts of property appreciation can add up. For the buyer, especially, every percentage point of appreciation counts. And, if you’re nice enough to offer (or get) a 24-month term in a market increasing at 3% annually, $6,000 on a $100,000 property is significant.

Principle Pay Down: If an option is accompanied by a lease the possibilities are greater for increased equity build up. By applying a portion of the monthly lease payment amount to the purchase price of the property one has the opportunity to widen the gap between the market value and the loan amount. Depending on whether the monthly rent amount is inline with market rates…this is free money! A 30-year amortized, $100,000 loan at 7% begins at approximately $82 per month of principle payments. A $100 per month rent credit beats that, dollar for dollar, every month for almost 3 years!

No New Loan: Possibly the most noteworthy advantage of using a lease option in the residential market is that when the Optionee begins the purchase process no “new loan” is required. The prerequisite for this may be working with the right and informed mortgage broker but is usually easily accomplished through a refinance. This can mean no additional out-of-pocket monies for closing.

No Down Payment: I know what you’re thinking, “I would never offer such a thing!” You don’t have to. As a real estate investor rich in tools to find motivated sellers, you could get your next home using this lease option technique with no money down. You don’t have to tell the seller that an option fee may be customary!

When you add it all up the numbers are hard to resist, so don’t try! If you’re in the market for a new (or new to you) home, use your own strategy against you!

Technorati Tags: real, estate, residential, buying, refinance, purchase price