Real Estate and Beyond Blog: December 2010

WHAT DOES ONE DO WHEN A LETTER COMES FROM THE HOA?

I just received my first HOA letter in the mail the other day. I had to read it three tiems to understand that they were asking me to fix.

HOA MEANS: HOME OWNERS ASSOCIATION. It is governed by people within the same subdivision that are elected by the home owners for a period time. Everyone is encourage to attend a monthly/quarterly meeting to keep up to date with changes or to voice your opinions.

Did I mention that the people who serve on the HOA committee do not get PAID?

A person is either FOR or AGAINST owning a home in a HOA when searching for a home. This is one of the questions I ask when discussing home options with my buyer.

TOP 3 REASONS TO BUY INTO A HOA COMMUNITY

1. Maintain consistency within the subdivision
2. Front yard maintenance included in the fee
3. Attend regular held meetings to keep up to date with changes

The NUMBER 1 REASONwhy people do not like HOAs because they do not like being told what they can or cannot do with their home. Many people want to skip this part of home ownership.  

All buyers receive a copy of the HOAs CC&Rs(Covenants, Conditions and Restrictions). I heavily advise all buyers to read over this document during the inspection period. The buyer is saying that they agree with them when closing on the home. If there is any concern, then now is the time to cancel the contract. Also, I recommend to the buyer to obtain a copy of their financial statements to see if the HOA is in good standings. That is important to know.

Finally, I have complied with the letter. I faxed over the letter to the property manager stating that the request has been completed. Thank you for doing a fine job.

DEPRESSED ECONOMY AND HIGH UNEMPLOYMENT RATE LET'S THROW IN THE WHITE TOWEL

How many of us keep reading newspaper articles about the depressed economy and high unemployment rate. We see it on the television nightly news reports. It is all over the Internet news reports. Everyone is talking about this around the water cooler. Who is next to be fired? This type of media reporting is crippling the American people in my opinion. It is creating self-doubt in ones ability to make a living in this country. OK-I get it. We are in a bad economy. We will see a wave of foreclosures in 2011. What are we to do? Do we just sit in the corner and be afraid to make a move? I still believe in the American Dream. The boxer in this picture is out. However, the other boxer is the winner. I want to be that person-WINNER.

TOP 10 THINGS TO DO TO OVERCOME THE CURREN AMERICAN ECONOMY

1. Obtain copy of ones credit report
2. Pay off debt
3. Create a realistic budget and cut the fat
4. Car pool
5. Obtain an extra job or two to stay working
6. Network
7. Exercise and eat right
8. Upside down in home-seek professional advice from Realtor, Real estate lawyer, CPA and mortgage professional to make an informed decision
9. Permit oneself to have breaks to be with friends and family
10. Learn more about real estate investing

I honestly believe that they only way to get out of a rut is to train for success. We are forced to adapt to new ways of doing business. Over 60% of the real estate business in my local area falls under distressed properties. Do you think I should learn about distressed properties if I am in real estate? There will be many different kind of races in ones life. Will one every race? No! However, one should strive to finish the race to be ready for the next one. Do not throw in the white towel at this time. We can cross the finish line together.

WHAT MORE CAN BE DONE AT THIS TIME? LOVE TO HEAR YOUR INPUT TODAY 

SELF DIRECTED 401K MONIES PURCHASING REAL ESTATE CHECKBOOK CONTROL TODAY

The Email below is from one of my clients wishing to learn more about self directed 401k real estate investments.

Hi Harry,

I would like to know about converting my traditional IRS into a self directed 401k plan so that I can start investing in real estate for my retirement. Please send me more information on this topic.

Best wishes,

William

I sent William a nice email along with referencing this Email below to give him an overall idea when it comes to self directed 401k retirement accounts. William has purchased one home in 2010. He would like to do one home per year.

I have many people worried about their retirement monies being on Wall Street. Many people have lost up to 50% of their total investments. People are looking for alternative investments to obtain a better rate of return. What is the answer? The answer is real estate. I have many people call into my radio show wanting more information on how to use their retirement accounts to invest in real estate. We give people true checkbook control over their money.

Self Directed Retirement Plan's flexible retirement plans have the following features:

• Investment Options - with Self Directed Retirement Plans, you can invest your retirement plan in real estate, tax liens, loans, local businesses, stocks, mutual funds and a host of other options. You are only limited by your imagination! Self Directed Retirement Plans TRUE Self-Directed IRA or 401(k) offers you greater opportunity by allowing you to choose the investments that are best suited to help you meet your retirement goals.
• Checkbook Control - Self Directed Retirement Plans structures your IRA or 401(k) so that you have checkbook control over your retirement plan assets. No more begging a broker to allow you to invest your own money. You are in total control. Participate in time sensitive investments, including foreclosures and tax liens, without the time restrictions of the custodial paperwork process.
• Limited Custodial Fees- Unlike many of our competitors, Self Directed Retirement Plans's fees are not based on the size of your account or on the number of assets it holds. Regardless of the account size, our IRA clients pay the same low custodial maintenance fee of $190 per year. In addition, Self Directed Retirement Plans's structure all but eliminates transactional, asset-based and holding fees. This can save you hundreds or thousands of dollars per year (when compared to our competitors).
• Support to Succeed - With Self Directed Retirement Plans you have access to the support you need to invest confidently. Self Directed Retirement Plans and its affiliates have set up hundreds of people with their own Self-Directed retirement plan. Our tax experts are available to review any transactions you are considering for adherence to tax law guidelines.....this ensures that you don't do anything that would endanger your retirement.
• Asset Protection - In many states, IRA assets are subject to the claims of predatory creditors. If properly structured, your IRA can build a financial fortress around your hard earned wealth.
• True Diversification - Your retirement holdings can now be truly diversified in a number of different assets. No longer are you limited to only the investments your custodian offers.

We have lender who will lend up to 50% on a residential property on a non-recourse loan. The minimum loan amount is $50,000. So, the purchase price will have to be $100,000 or more to meet the $50,000 minimum loan amount. If you have further questions, please visit my web site at www.deliateam.com or view my profile to contact me directly.

DO I REALLY NEED A HOME INSPECTION WHEN PURCHASING A HOME? 

Email from one of my loyal radio listeners?

Hi Harry,

I was listening to your radio show this past week. You had a home inspector on your show. He was discussing what he does when he preforms a home inspection. I will be purchasing my first home in a couple of months. Do I really need to spend money on a home inspection?

Sincerely,

Bill 

I had written a brief Email to the person above by referencing this blog post below which thoroughly explaining the importance of performing a home inspection on an existing and new home for buyer protection before the purchase is made final.

BLOG POST BELOW: 

I have represented many home buyers in my real estate career. I consider the home inspection vital during the buyer's due diligence period when purchasing a house. The purchase of a home is the biggest investments people make in their lifetimes. Currently, we are in the middle of a foreclosure nightmare. Banks are selling foreclosed homes "AS-IS." Banks will not make any repairs to the house. So, one must be extra careful when purchasing a house from a bank.  A home inspection gives the buyer a piece of mind knowing what one is walking into before signing ones life away at title. The home inspector will develop a detailed report on the house. The Realtor and buyer will review the entire to see if the they are able to take on the house if repairs are needed to the house. A buyer becomes aware of its condition and alerting them to any concerns. This reduces a lot of stress for the buyer. He/she are not walking in blinded. T

The Real Estate and Beyond Network has a direct relationship with 360 DevCo-General Contractor to review any major mechanical, safety or structural issues to the house. One can have confidence knowing that there are a team of professionals with them at every step of the way when either purchasing a house either as a primary or investment.

Here are the benefits of a home inspection below:

• No Surprises: All major problems are discovered during the home inspection
• Knowledge: Fully aware of any potential hazards before purchasing the home
• Savings: A complete home inspection runs around $300. This is money well spent on a detailed report of needed repairs to be made to the house before one owns it.
• Education: The home inspector will walk the entire house with the buyers to educate them on the entire interior and exterior of the home. The home inspector will show one where the main shutoff valves for utilities in case of an emergency.  

Do you know any good home inspectors?

The Real Estate and Beyond Network has developed a solid relationship with Double Tree Home Inspection Services here in Phoenix, AZ. Eric Villaverde has gained respect amongst his peers in the home inspection industry. He is one of the few licensed and bonded home inspectors that offer infrared technology during a home inspection. The infrared camera allows one to see what is behind the walls and ceilings of a house to discover the unknown. This is a huge advantage to the homeowner before purchasing the house. This allows the homeowner to negotiate with the seller to either fix or reduce the agreed upon purchase price or even back out of the contract with the known material fact. Please visit Eric's web site at http://www.doubletreeinspectionsofaz.com/

Do I need a home inspection if I am buying a new home?

Yes, I always recommend a home inspection whether the house is new or not. The builder is able to fix any and all known items on the home inspection list. Also, many builders will warranty up to one year on a new house. So, I call up my buyers in the eleventh month to remind them that their warranty is coming up and encourage them to conduct a home inspection. Some builders here in the Phoenix Valley have been known to take short cuts to keep up with demand during the Housing Boom.

The home inspector can conduct an inspector before the drywall is up. This provides a high level of inspection that most new home builders do not offer to the buyer. There is a greater chance of identifying defects at this point in time. Also, it is easier for the builder to fix at this time. It is a win-win for both sides of the transaction. I have read about people purchasing a new home. Then, six months later the builder must rip into the wall because of a defect found by the buyer after living in the house. Yes, one has a warranty on the house. However, this is also an inconvenience not needed for the family since everyone lives busy lives.

SELLER NEEDS MORE INFORMATION ON SETTING UP A LEASE OPTION CORRECTLY ON THEIR HOME

Hi Harry,

I was listening to your radio show today. You were discussing that sellers might want to consider doing a lease option on their home to avoid discounting their home in this present market. I am very much interested in this option. How do I go about setting up a lease option on my home? How do I protect myself?

Sincerely,

Mrs. Keller

I wrote Mrs. Keller a brief note with a link to the following blog post below:

Setting up Win-Win Scenario

I always advise my investors to treat people the way they want people to treat them. Respect and honor goes a long way with people. What if the seller would send the lease option candidate a $100 gift certificate from Wal-Mart in a thank you note? I believe this act of kindness will go a long way. I have developed checklists for both sides of the transaction to be successful.

Seller Beware Checklist

• Seller will need to conduct full background check on potential lease option candidate including employment check and three reference checks with name and number
• Insist on using your contract with detailed real estate language
• Set the price where lease option candidate will be able to purchase the house in 24-36 months. It must be a Win-Win for both seller and lease option candidate
• Treat lease option candidate as a homeowner. For example-his monthly payment will be referred as a mortgage payment to have home ownership in his/her mind.
• Seller still responsible for his/her mortgage payment, taxes and insurance along with HOA CC&Rs
• Set up quarterly inspections by third party person to inspect interior and exterior along with changing AC filter and other minor maintenance upkeeps to avoid any major damages to the house
• Lease option candidate is responsible for all repairs of the house
• Purchase home warranty on the property for extra protection. Lease option candidate will be responsible for copay-around $45-55 per visit
• Ensure you use both a residential lease and purchase contract along with a document bringing all documents together for extra protection
• Retain the services of a real estate lawyer or property management company in case one needs to evict a tenant
• Require the lease option candidate to participate in a credit consulting program like the one we offer at Praxis Credit Consulting here in Phoenix, AZ
• Record all documents at title
• Be prepared to modify the terms of the contract if market conditions change in the near future
• Give up to 25% of the monthly payment towards the purchase of the house for incentive to make payments on time

Conclusion:

This is just another tool for a Realtor to assist people in need. Homes listed on the MLS consist of 50% or more of bank owned properties. Sellers are competing against the bank. I would advise sellers that it is not the best time to sell their home. I recommend they rent or lease option their house for the next two years until the market goes back up.

FIRST TIME REAL ESTATE INVESTOR WHY REAL ESTATE FOR AN INVESTMENT VEHICLE

Email from potential client from the radio:

Dear Harry,

You put on an impressive radio show. I have been listening to your show for the past six months. I have been thinking about investing in real estate. However, this would be my first time. Please give me some reasons to invest in real estate.

Best wishes,

Susan

Follow Up: I sent Susan to the following blog post to give her strong reasons to invest in real estate. Today, she has obtained one property. I have experienced that first time investors need strong reasons to invest in real estate. Furthermore, they want to know there is support behind them. We were there to assist her with her goals when it came to real estate investing. We are here to serve.  

ANSWER: REAL ESTATE AND BEYOND NETWORK!

Real estate investors are realizing much more attractive returns due to the multiple income streams from real estate investment that include the following:

Appreciation: The Greater Phoenix area has a track record of steady appreciation between 5-6% in a normal market based upon historical data. This is an automatic savings account for many people. The offers opportunity down the road as one holds onto the property as the value continues to appreciate. This provides to open a line of credit to invest in other investments offered by Real Estate and Beyond Network.

Rental Yield: The percentage yield from the rental income. This can be calculated as either gross or net. Experienced real estate investors use the net method.

Inflation: Inflation has a direct relationship with rents since rents increase as inflation increases. Mortgage payments are set in stone on a 30-year fixed mortgage. Currently, the Phoenix market is experiencing heavy foreclosure activity. There are plenty of renters here in the Valley of the Sun.

Leverage: If used correctly, this is one of the ways many people increase one's personal wealth. Leverage does involve risk that must be considered into the equation.

Principal Reduction: An investor will be in much great position if one uses the monthly cash flow to pay down the principal of the loan over a period of time. So, the principal of the loan decreases as the appreciation of the investment increases over time. Again, this is part of the leverage as discussed above.

Distressed Homes: Educated investors seek distressed properties to take advantage of the equity opportunity. The Real Estate and Beyond Network provides services to find, fix, finance and fill with a tenant. We have provided a one stop shop for our real estate investors. Please feel free to visit www.deliateam.com to search for homes.

Tax Advantages: One of your best partners in real estate is Uncle Sam. Everyone has an Uncle Sam on their side. The US Government forces all real estate investors to depreciate one's residential investment. Plus, one can deduct any expenses to the property such as any improvements, property management fees, closing costs, etc. The Real Estate and Beyond Network has a CPA to go over these tax advantages for every investor.

Retirement: The rules have changes on Wall Street. Many people are looking at real estate to be part of their retirement plans. However, many people shy away from real estate because one does not understand the power of real estate. The Real Estate and Beyond Network is here for you. We walk people from A to Z when it comes to real estate investing. Learn more on how to use Self Directed 401k monies to purchase real estate for retirement.

Leave a Legacy: Webster's dictionary defines legacy as money or property bequeathed to another by will. Tell me which parent does not want to better the next generation. We all strive for leaving a legacy. We at the Real Estate and Beyond Network strongly believe in this philosophy. One needs a team of advisors to reach this level. The Real Estate and Beyond Team is here to fulfill that void in one's life. Please listen to Harry D'Elia, host of the Real Estate and Beyond each Saturday from 12-2 Phoenix Time on KKNT 960AM or catch our podcast at www.deliateam.com.

Conclusion: One must seize the opportunity in front of them. Fortunes are made during times like this one. However, the Real Estate and Beyond Network is here to motivate, educate, support and apply all the latest creative real estate strategies for individual real estate investors.

IMPORTANCE IN OBTAINING TITLE INSURANCE IN ARIZONA

EMAIL QUESTION FROM MY CLIENT BELOW:

Hi Harry,

I am a first time home buyer. I just got prequalified for a home loan. I am ready to shop for a home. However, I do not know whether to purchase title insurance or not. Please explain title insurance to me in more detail.

I look forward to your response,

Mark

Real estate is a part of life. We see real estate for sale or lease on a daily basis via Internet, television, radio, and newspaper. The definition of title means an owner has the right to maintain or sell real estate in his/her possession. The owner has the right to enjoy the property. Title is the history of ownership of a parcel of land. Title companies do title searches to ensure that a buyer will have clean title when purchasing a piece of real estate. They want to ensure there is a true hand over of the property to the new owner without any blemishes on title. This service is provided by your local title agency. Title is another word for "right" or "interests" when it comes to real estate.

A title insurance policy is written against the property after thorough research from the title company. Title insurance is the company's opinion concerning ownership and marketability of title on the property. The buyer is purchasing the title insurance from experts. This means the title company is backing their research and willing to issue a title insurance policy on the land. Title insurance policies do not cover the following:

• Defects in title known to the insured
• Liens not on public records
• Easements
• Interests of parties in possession
• Survey matters

The reasons for issuing title insurance are twofold. The mortgage company wants to ensure that they will be able to put a mortgage on the property with no issues. The buyer wants to enjoy the property they just purchased with no problems. The owner wants to make sure that their real estate is marketable and will be able to sell, lease, or mortgage the property with no worries.

The title insurance policy protects the lender if there is a title issue. One must purchase an owner's policy to protect oneself. If not, it would be very costly if a title issue would arise down the road. Many times you can ask for a lower rate if you purchase from the seller's previous title company. I always believe in asking for a discount.

Conclusion

First, I would advise to ask the escrow title officer to explain the title insurance policy in detail in what it covers and does not cover. The escrow title officer is a great source of information since they perform this type of service on a daily basis. Another person to ask would be a real estate lawyer. I would highly advise to hire a real estate lawyer for an hour or two to review the title insurance documentation for one's protection.

MAKE YOUTUBE PART OF YOUR 2011 GAME PLAN

I have been blogging on ActiveRain consecutively since April of 2009. Did I know everything about blogging when I started? Yes! I mean NO! However, I committed to bloggin for six months. Well, I am still blogging so that means it is working for me. I have learned many things over my blogging time. I have decided on key words to blog about on a weekly basis. I have developed much content over the last two years. It is hard to believe that it came from me. However, I blogging gives me a voice on the Internet and makes me a local expert when it comes to Phoenix Real Estate investing combined with my popular weekly Real Estate and Beyond Radio show.

One part of my action plan for 2010 was to start to video blog. So, I created my on YouTube channel named PhoenixFixandFlipaHouse to coincide with my web site dedicated to fixing and flipping homes www.FixAndFlipAHouse.com. I admit that I am in my early stages when it comes to video blogging. However, I will continually improve in 2011. The hardest thing to do is taking the FIRST STEP. That means I have to dedicate time to learn something new on top of my daily responsibilities.

• 2.5 billion photos uploaded to Facebook every month
• YouTube serves 1 billion videos per day
• Average person watched 182 online videos per month
• 200 billion spam emails sent every day!

* numbers came from www.digitalbuzzblog.com

Video

• 1 Billion YouTube Videos are viewed per day on YouTube
• 12.2 Billion viewed on YouTube per Month in U.S.
• Hulu shows 924 Million Videos per month
• Average person views 182 Videos per month in the U.S.
• 82% of US Internet users watch videos online

*numbers click for source and read more

CONCLUSION:

Video is becoming more and more popular on the Internet. Americans do not have time to read. People would prefer to watch a video than read an article. So, I am providing content for people to view who are interested in real estate investing. We can no longer ignore this part of the business. Furthermore, I have increased my SEO rankings by adding video to the mix. It is a Win-Win for ALL. And people told me I had a face for radio.

DIRECTOR'S FAVORITE WORD: ACTION

IT TAKES ACTION TO MOVE TOWARDS ONES VISION.

2011 OPPORTUNITIES IN ARIZONA REAL ESTATE AND BEYOND

We have a week left of 2010 and ready to begin 2011. American still has an unemployment rate of 9% with many people not feeling confident in the economy. That means people are not spending money. Furthermore, retirement investments are doing well for Americans. Many people are forced to working longer than planned due to their investments going down. Furthermore, the current trend is for the grandparents to move in with their children to save money for the family.

 Where are the opportunities to make money in the Arizona economy?

ONE ANSWER: REAL ESTATE

The Phoenix real estate market has experienced many ups and downs over the last three years. Over 60% of homes sales were distressed properties. The state unemployment rate is right at 9.4%. The majority of jobs in Arizona come from tourism and construction. I had the great honor of interviewing Elliott Pollack on the Real Estae and Beyond Radio show. He is a well known expert when it comes to Arizona Economy. One must follow historical numbers to predict future action to get getter. He explained to us that 2011 is going to be another year of recovery.

WHAT ADVICE WOULD YOU GIVE PEOPLE GOING INTO 2011?

He advised this is the year to get ones financial house in order. That means pay off debt and start saving money for retirement. It is not getting any better. We need to get back to basics as our grandparents. Just say No. People need to take more personal responsibility and heavily advised not to depend on Government during the retirement years.

WHERE ARE THE OPPORTUNITIES IN ARIZONA REAL ESTATE?

There are actually 3 areas of opportunities that include the following

1. Rental Homes-1 in 5 homes in Phoenix Real Estate market is owned by an investor. Furthermore, lease rates are increasing. People facing foreclosure would rather rent a home and not an apartment. Families need time to retract and develop a second chance game plan. Most people facing foreclosures will be out of the home buying for the next three years. This leaves plenty of opportunity for rental homes.
2. Vacant Land- Purchase vacant land in the outlaying areas with water/sewer rights are priced right at this time. New home builders will be looking to purchase more land when the market does turn around over the next few years. Farm land would be nice to hold at this time.
3. Apartment Buildings-There is a need for inexpensive living at this time. People will always need a place to live. There is a shortage of rental homes. So, the next option will be an apartment.

CONCLUSION:

I am very optimistic for 2011. I believe getting one's financial house in order is an excellent suggestion. Cutting costs and saving money is always great advice for individuals and businesses across the board. Next, 20% of home purchases are from real estate investors. That is exciting news to me since the majority of my business comes from real estate investors. There is plenty of opportunity for real estate investors in the Phoenix real estate market. The Real Estate and Beyond Team is here to serve for 2011 and beyond.

and remember REAL ESTATE IS A TEAM SPORT

1. MAKE THE CALL
2. SET THE PLAN
3. DO THE DEAL$

LET ME THINK ABOUT IT BUYER HAS HOME UNDER CONTRACT GREAT JOB

I would like to give you an update on the post that I wrote last week that had the following title LET ME THINK ABOUT IT. I want to thank everyone for making it a featured post on ActiveRain. It seems that we have many buyers that want to think about putting in an offer on a property to only lose it to another buyer. I had over 600 viewers that left 54 comments on this subject. The main thing is to have the home under contract so one can do their due diligence on the property including financing options to see if they really want the property. However, most buyers BELIEVE they will lose their earnest money if they cancel the contract. This is not true if one follows the process during the inspection period. Yes, you can have your earnest money back if you decide to back out within the ten day inspection period.

There were a total of eight offers on this particular property. However, two of the offers backed out of the deal because of major septic problems. Well, my buyer new the area and understood that the home had a major septic problem. My buyer has no problem in putting in his own septic tank at his own cost. So, I communicated with the listing agent about the property. He informed me that he was going to temporarily take it off the market until he could get the septic tank inspected. Well, I informed him that my buyer knows of the septic problem and is willing to take the property "AS-IS" for this sales amount. I explained to the listing agent that this home will fall out of escrow each time after the inspection process. So, he said let me call the asset manager with your offer.

The buyer and I got on the phone to discuss the following offer. I explained the strategy to him twice before it sunk into him. The light bulb went off over the phone. He understood that strategy was to get the home under contract so he could do his own due diligence on the home. If he did not like the home, then he could get his earnest money back. The only out of pocket expense would be the cost of a home inspection and septic tank inspection. He said "LET'S DO THE DEAL."

LESSONS LEARNED FROM THIS SCENARIO

1. Communicate to the buyer the entire process in purchasing a home so they feel confident in their decision making process. My buyer finally understood the strategy after I further explained it in more detail.
2. Communicate with the listing agent. Their main goal is to sell the property in the quickest amount of time for the asset manager.
3. Do not forget to put your buyer in back up position with a written agreement between both parties. I would not trust verbal because the listing agent is too busy to remember one transaction.  

 I will keep everyone informed on this transaction over the next few weeks.