Real Estate Investing Facts

Foreclosure is the process in which once a property owner has failed to make payments as agreed and has been provided with a notice of default from the lender, the property is sold by public sale. Foreclosed properties can be good investment opportunities for you to purchase a home at much less than its market value. But before buying foreclosed homes, be sure that you know and understand that it can be complicated and far more risky than buying a property that does not have that financial baggage. For this reason make sure you perform your due diligence while researching the property. If at all possible and the seller is willing, have the home inspected by a professional.

Many home owners that go into foreclosure have been struggling financially for about a year before they give up the property, which means that the house may not have received any repairs or maintenance required.

However, not all foreclosed houses are previously owned properties, as some foreclosed homes are new. Sometimes, the builders themselves were overextended as they built spec homes and then experienced financial hardships. Foreclosures can happen to all sizes, shapes, and styles of homes; from simple homes to exquisite estates .

Buying foreclosures can be complex, so to reduce the risk, consider bank-owned properties since the appraisal has already been done. It is the safest deal for first time foreclosure buyers and there are no taxes or liens to be concerned with.

If you are attend a foreclosure auction and are prepared to bid on a home, do not bid too high because it can lower your profit potential when reselling the property, if you are planning to flip it.

You can find a professional real estate agent that has experience in purchasing foreclosures or one of the many online coaches that are available.

Let your agent check the neighbor homes to find out if the price for a foreclosed property is really a good deal.

When a government agency is involved, get ready for loads of paperwork when buying a foreclosure.

Foreclosure Investing

Rein Canada

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During the1780′s Fayetteville experienced what is sometimes called a “golden decade”. It played host, in 1789, to the convention that ratified the U.S. Constitution and to the General Assembly session that chartered the University of North Carolina at Chapel Hill, America’s oldest public university. The legislators paused for the state funeral of former Governor Richard Caswell, who fell ill after arriving in Fayetteville and died November 10, 1789. Fayetteville lost out to the future city of Raleigh in the bid to become the permanent state capital. Fayetteville was the capital of the state from 1789-1793.

The Fayetteville Independant Light Infantry formed in 1793 and is still active as a ceremonial unit It is the second-oldest militia unit in the country.

Henry Evans (circa 1760-1810) a free black preacher is locally known as the “Father of Methodism, ” for Methodists, in the area. Evans was a shoemaker by trade and a licensed Methodist preacher. When he began preaching to slaves in Fayetteville he met opposition from whites, but his preaching later attracted whites to his services. He is credited with building the first church in town, called the African Meeting House, in 1796. Evans Metropolitan AME Zion Church is named in his honor.

Fayetteville remained a village of only 3,500 residents in 1820, but Cumberland County’s population still ranked as the second-most urban in the state behind New Hanover County (Wilmington).

The “Great Fire” of 1831 was believed to be one of the worst in the nation’s history, even though, remarkably, no lives were lost. Hundreds of homes and businesses and most of its best-known public buildings were lost, including the old “State House.” The town was rebuilt quickly by FAyettville leaders to help the victims

In 1832 the Market hOuse was completed and , became the center of commerce and celebration. The structure was built on the ruins of the old State House. It was a town market until 1906. Before abolition slaves were sold there . It served as Fayetteville Town Hall until 1907. The City Council is considering turning the Market House into a local history museum.

In March 1865, Gen. William T. Sherman and his 60,000-man army moved into Fayetteville. The Confederate arsenal was totally disseminated. Sherman’s troops also destroyed foundries and cotton factories and the offices of The Fayetteville Observer. Not far from Fayetteville, Confederate and Union troops engaged in the last cavalry battle of the Civil War, the Battle of Monroe’s Crossroads.

Downtown Fayetteville was the site of a skirmish, as Confederate Lt. Gen. Wade Hampton and his men surprised a cavalry patrol, killing 11 Union soldiers and capturing a dozen on March 11, 1865.

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Foreclosure Investing

Rein Canada

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The Texas Revolution (1836) was not felt in the region as the area was never considered part of Texas until 1848. Given the blurry reclamations of the Texas Republic that wanted a clod of the Santa Fe trade, the Treaty of Guadalupe Hidalgo efficaciously made the settlements on the north bank of the river a formal American settlement, separate from Old El Paso del Norte on the Mexican side.   The present Texas-New Mexico boundary placing El Paso on the Texas side was drawn in the Compromise of 1850.

El Paso County was established in March 1850 , The first county seat was San Elizario. The United States Senate fixed a boundary between Texas and New Mexico at the thirty-second parallel, thus largely ignoring history and topography. A military post called The Post opposite El Paso (meaning opposite El Paso del Norte, across the Rio Grande) was established in 1854. Further west, a settlement on Coons’ Rancho called Franklin became the nucleus of the future El Paso, Texas. A year later pioneer Anson Mills completed his plan of the town, calling it El Paso. 

During the Civil War, the Confederate cause was met with great support from Franklin residents until 1862 when the city was captured by the Union California Column. It was then headquarters for the 5th Regiment California Volunteer Infantry until December 1864.

The Towns population began to grow after the war was concluded. In 1873 El Paso was incorporated and encompassed the small area communities that had developed along the river. With the arrival of the Southern Pacific, Texas and Pacific and the Topeka, Atchison and Santa Fe railroads in 1881, the population boomed to 10,000 by the 1890 census attracting newcomers ranging from businessmen and priests, to gunfighters and prostitutes. El Paso became a boomtown and because of it’s lawlessness it became a “Six Shooter Capital”. Prostitution and play flourished until World War I, when the Department of the Army pressured El Paso authorities to crack down on vice (thus benefiting vice in neighboring Ciudad Juárez).

Mining and other industries gradually developed in the area. The 1920s and 1930s saw the emergence of major business development in the city partially enabled by Prohibition era bootlegging. The Depression era hit the city hard and the population declined through the end of World War II. Following the war, military expansion in the area as well as oil discoveries in the Permian Basin (North America) helped to cause rapid economic expansion in the mid 1900s. Copper smelting, oil purification, and the proliferation of low wage industries (particularly garment making) led the city’s growth. The expansion slowed again in the 1960s but the city has continued to grow in large part because of the increased importance of trade with Mexico.

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Rein Canada

Foreclosure Investing

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Making your first property investment can be a very scary time for almost everybody concerned, including those people closest to you. Putting a large amount of cash on the line for something that you hope will pay off in the end can be a very risky venture, but with risk comes great rewards and fortunes have been made in property investment. Here are some ways you can make certain you set yourself up to win in the property investment game.

Step 1 : Begin your search in local areas before you start scouting into foreign nations.  While the markets outside of the united states may look excellent on paper, unless you have a robust illustration of the area itself, you may be buying blind. To get around this, and make sure that the property you buy can be resold, you’ll want to begin in areas you are totally familiar with.

Step two: ensure that you have sufficient financing lined up, and know how much you are able to spend. Making an investment in properties is all about the return on your cash, and augmenting the margins. Having your financing already lined up and set to go may prevent you from losing your chosen investment property.

Step 3: choose a home that’s near schools, and shopping centers. These types of establishments are continually growing and ever-changing, which means that you will have a far easier time selling your property, rather than waiting for the markets to turn in your favor. Shopping malls and colleges provide fantastic expansion opportunities, and even better potential investments.

Step 4: Look for signs that the area is presently growing. A lot of new cars, students walking about in new cloths, carrying cell telephones and other devices, as well as new commercial construction are all signs the area you’re in is presently experiencing growth. Selling your house in these markets will be significantly easier, as people are already spending their money.

Step five: avoid buying high end of homes. Even though it does look brilliant on paper, buying the most expensive home in the area with a small amount of cash to flip for a profit doesn’t happen that often. What you are going to actually want to do, is look for the houses that are on the lower end of the neighborhood scale and compare them to the higher end properties.

This will give you a base judgment of how worthwhile the area is.  If there’s a huge gap in price between the houses on the lower end to homes on the higher end of the market, you stand to earn a large amount of cash from a successful property investment flip.

Entering into property investment is a great idea and a lot more complex then what has been written in this post, as it can be very difficult and perplexing at times.

Rein Canada

Foreclosure Investing

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The rental agreement: The rental agreement specifies how long the tenant will rent the home and how much they will pay each month in rent to me. During the rental period they can purchase the home, unless otherwise specified. A rental agreement also comes in handy if ever taken to court, so that no matter what the tenant has put into the property, the judge will let me evict if necessary rather than foreclose.

The rental agreement gives the tenant the right to occupy the property during a specified time period. It is similar to the rental agreement you signed with the owner/seller, except obviously your rental agreement with the tenant will be very pro-landlord (pro-you).

The rental agreement needs to be separate only for selling on an option. If you are the buyer, you certainly can put them into one document, but when turning the option around, you’ll want to use the three different documents. The reason is that if the tenant doesn’t pay, or the deal goes south, you will want to be able to evict them as quickly as your state allows. If you have all three agreements in one contract, some judges will look at the lease option as a sale rather than a lease, and therefore make you go through a full foreclosure or forfeiture process versus an eviction. This will take much longer, be more expensive, and may require an attorney.

Anyone who will be residing on the property over the legal age must sign the rental agreement. This includes children of legal age (determined by the state).

A cosigner can be an important safeguard if you have a weak applicant and they have a strong parent or friend who is willing to sign with them on their rental agreement. It works well for giving liability to someone else who will come through with the payments. I have a situation where a mother cosigned for her daughter. It was just a rental but the daughter had terrible credit. The mother, however, had worked for General Motors for 25 to 30 years and made a good guarantee person for me. The daughter stuck me for nearly $5,000 in unpaid rent and damages, and now the mother is paying for itout of her GM checks. In another case, the mother was a local Realtor in Michigan, and she asked me to help her daughter get a house. Her daughter had been through a rough time, and the mother was willing to cosign. I probably didn’t even run the daughter’s credit because I knew the mother was a well-known Realtor and was good for whatever might happen. The mother paid the $5,000 option fee, and the rent was $1,300. Eventually, the daughter left, owing me $3,000 in unpaid rent, and the mom had to pay if off.

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I like to make all rent due on the first day of the month. If a tenant moves in on the seventh, I prorate the rent for the month. My rental agreements specify late fees of $25 for the first day late and $5 per day after wards, and the tenant, of course, must sign the agreement to this. I can’t reiterate enough how necessary it is to have everything in writing, spelled out in detail. That way your tenant can’t say, “I never agreed to that.” All you have to do is point to the contract and say, “Here it is in black and white, and there’s your signature underneath it.” I also like to add an incentive to encourage my tenants to pay on the first of the month. My contracts state that if they make their monthly payments on time, including any unpaid option fees, then I will credit them with $100 towards the purchase price of the house.

Your other fees on the property can include a pet deposit, security deposit, cleaning fees, and the like. In a lease option, I usually do not require a security deposit, because if they have an extra $1,500 for a security deposit, which is refundable, I’d rather have them apply that to the option fee, which is nonrefundable. There are some good reasons and areas of the country where even a small security deposit is recommended. It gives the tenant something they can get back if they don’t purchase. Some judges like a small amount showing as a security deposit. None of the option fees, however, show up on the rental agreement, as the option agreement is a separate document.

Your rental agreement should state the total cost to move in. For example, if there are fees, you will add them to the first month’s rent to get the total for the rental agreement, but that is not the total overall cost since you also need to add in any security deposit. The rental fees plus the security deposit make up the total move-in costs. The rental agreement must also show the total amount of anticipated rent for the contracted period, including prorated months.

You can also state in the agreement that if the rent is more than 10 days late, the agreement may revert to a month-to-month rental (nullifying the option) at the discretion of the landlord. I generally don’t do this unless I want to get rid of the tenant, because when this alternative plan is set in motion it allows the tenant to move out at any time. Be sure your rental agreement states that the keys are due back within 24 hours if the tenant does not exercise the option and/or moves out.

Payments should be postmarked by the post office rather than a Pitney Bowes machine, as these machines can have their dates changed. In my rental contracts I also specify that any bounced checks are subject to an additional fee. Although I start out trusting my tenants and allowing them to pay with personal checks, if one check bounces, all payments after must be paid in certified funds or bank checks only. I also tell them that if their rent is late twice within a 12-month period, their monthly rent will increase by $25 per month.

You should specify to the tenant how their payments will be applied, and in what order:
1. Outstanding dishonored check fees.
2. Outstanding late fees chargeable to tenant.
3. Outstanding legal fees, court costs or both.
4. Outstanding utility bills that are the tenant’s responsibility.
5. Any damage caused by the tenant.
6. Collection agency fees.
7. Costs for re-letting the property, if applicable.
8. Option fees owed.
9. Rent.

You should apply their payment toward rent last because it is easier to evict on unpaid rent than on unpaid utilities. So use their money to pay for unpaid utilities, and if the rest doesn’t cover the rent, you can begin eviction proceedings in most states. Again, check with your local investor group or a local real estate attorney on landlord eviction laws.

Stay tuned for Part 2 of “Points to Consider for the Rental Agreement.”

Wendy Patton is the nation’s leading author and trainer in ?lease options, rent-to-owns and subject-to deals. For more information on Wendy Patton visit her website at www.WendyPatton.com.

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