Refreshing! Home Values First Annual Increase In Nearly Five Years


“There was a surge in real estate this spring”, I answer to the question,”How is real estate?” I’ve been asked the question many times lately and that was my response. Really the response was just a gut feeling. Until I read the following article:

The housing market has finally turned a corner. In Q2, we saw continued momentum in the housing recovery, despite of some economic turmoil, like flagging job growth numbers and sovereign debt issues in Europe. Nationally we hit a bottom in the first quarter of the year, and the Zillow Home Value Forecast shows that 67 of the 156 markets it covers will experience an increase in home values over the next 12 months. Nationally, Zillow forecasts home values will rise 1.1 percent……………………………(Click to Continue Reading Article)

My final thought summed up in one word, “Refreshing”.

 

Published in: on July 26, 2012 at 8:05 am  Comments (2)  
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Negotiating a Get Rich Slow Scheme


by Dave Miller

The easiest way to get rich quick is to accumulate wealth slowly. Well then, how does one accumulate wealth slowly?

First you need a plan. A solid, well thought-out, practically applicable plan.

This requires a solid plan, to preserve your precious capital, as you do not want to go backward. The retaining of capital is a key element of moving toward your goal. If you lose your initial capital you must not only gain it back but also recoup the lost time.

It must be well thought-out; you do not want to be jumping on some quick get rich band wagon that is ready to go bust.

The plan must be feasible. Over the ages three areas have proven successful; real estate, gold, and businesses. Most wealthy people own one of these three.

Don’t put all your eggs in one basket, just like your Daddy told you. But nevertheless get some baskets and fill them with eggs. Many people use that line to delay saving and investing.

The real estate basket is the topic of discussion today.

Enter John Schaub and his book Building Wealth One House at a Time.

Building Wealth One House at a Time – John Schaub

This book focuses on strategies for creating wealth through real estate by starting small – and making the right moves. Nationally known real estate expert and speaker, John Schaub, learned his craft in the best way possible–on the job, and through every kind of market. He published a great book titled Building your Wealth one House at a Time. In it he shows you how to buy homes with little money down using private or owner financing. By doing this he eliminates the whims of the banking world. The lender he says, is more concerned about getting his money back than earning high interest. In Chapter 6 he tells you to do what it takes to make the lender happy, over secure if you must.

Click this link to read an article I also wrote on keeping the your lender happy.

He recommends only single family dwellings, no fancy shmancy highfalutin projects. Just solid homes the typical family desires and can afford to live in.

The part that hit home for me was that he says buy one home a year. No more. He warns of the dangers of diving headfirst. By waiting a year to purchase your second investment property you will learn innumerable lessons before plunging in.

John uses two people to accumulate wealth; his renters and his lender or investor. His lenders allow him to buy the home and the renters pay for it. In the meantime he is accumulating wealth. Renting to long-term tenants, with financial incentives to pay on time.

By using leverage, i.e. owner financing, investors or the bank, he can purchase a home that otherwise he would have needed to walk away from. This then allows him to have a renter paying down on the mortgage. But remember, leverage is a two-edged sword. It can help you accumulate faster and it can take you down even faster. You must carefully consider the amount of leverage you are comfortable with and what makes sense in your situation.

Building Your Wealth One House at a Time is very concise yet an easy to read book. It lays out a blueprint that is easy to follow using graphs and figures.

Unique is his approach to focusing on buying houses in good-quality neighborhoods while simultaneously creating positive cash flow properties. John uses the Goldilocks theory when choosing a neighborhood: not too expensive and not too cheap. Go with a neighborhood where prices are just right.

Buy his book today. Read it. Implement a plan. Take the first (I know this is the hardest one but do it anyway) step. You will not get rich quickly but you will most definitely be headed in the right direction.

Now for the good news! John Schaub is coming to town. Well, rather to a town in New Jersey. Iselin.

John is presenting a one day class called “negotiating secrets of a Professional Buyer”. Saturday June 23 2012 from 9:00 to 4:00pm. You can register here: http://www.eventbrite.com/event/3199047437 I plan on being there so I hope see a few of you there. If anyone is interested in carpooling from Lancaster County just call me. Cell number 717-656-0749. Currently four of us are heading there. Join us.

A quote from John’s site:

John has survived, prospered, and helped his students to make money in every market since 1975. Come learn how to recognize which opportunities are right for you today and for the next five years at this most interesting time in our history. Get ready for an exciting and profitable future!

You can subscribe to my blog on the right side bar for farther updates. If you do so, you will receive a copy of my blog as soon as I post it thus saving you time by not needing to check back.

Owner Financing is Legal Again – PA Allows Owner-Occupied Residential Mortgages


by Dave Miller

What was illegal has been reverted; you can once again borrow money from your rich uncle to buy your house. In Pennsylvania, you can participate in private financing deals again.

Our government in its normal state of exaggeration and misappropriation deemed it necessary to make a law regarding mortgages. This was after Wall Street, Fannie and Freddie all really screwed up in the mortgage world. True to form our government went into complete overkill and enacted the S.A.F.E. Mortgage Licensing Act of 2008. This Act states that an individual who takes a mortgage application and negotiates a residential loan is breaking the law.

This meant that if you asked your rich uncle to loan you $200,000 to buy your house, you were a law-breaker. If you asked the seller to keep money in the house you were buying, that was breaking the law. Residential mortgages were a strict no-no. This was only being regulated for about a year but was creating quite the uproar.

Our government had enacted this law saying they were protecting the people. What they missed was that the people weren’t asking for protection. Besides this law actually did the opposite. When the people wanted money they went to the banks, and the banks were not in the lending mood so they didn’t lend. In times past the people would ask friends, family or the seller for assistance. This kept the bankers in check until their statesmen cronies helped then out by making it illegal.

I’ll try to break this down:

Secure and Fair Enforcement for Mortgage Licensing Act 2008. I’m most certain it’s not fair and secure but they picked the title, not me.

The key here is “loan originator”. They define it as anyone that takes, offers, or negotiates a residential mortgage.

This applies to “residential mortgage loans”. Owner occupied or as they state “personal, family, or household use” is prohibited.

As far as I can tell, commercial mortgages and private loans or any other non-owner-occuppied residential mortgages are legal.

Owner occupied real estate with a mortgage is what is at stake here.

Now the good news.

This month the Pennsylvania Department of Banking has released a letter to clarify what a “mortgage originator” is. Here are the highlighted areas of the letter with my comments:

As a general matter, the Department will begin interpreting the provisions of the existing MLA regarding the definition of “mortgage originator” to the extent possible in a manner consistent with the HUD Regulation.

Comment: the department is interpreting the definition of “mortgage originator”

the Department will not take exception to an individual making or brokering three (3) or less mortgage loans in a calendar year without being licensed as a mortgage originator,

Comment: the department does not view someone as a “mortgage originator” if he is involved in less than 3 residential owner-occupied mortgages.

sellers of dwellings or residential real estate by means of an installment sales contract who engage in such business in a commercial context and habitually and repeatedly are required to be licensed as mortgage lenders and have their employees appropriately licensed as mortgage originators under the MLA.

Comment: installment sales are mortgages.

You can read the entire letter: Click here

 Now I’m not a lawyer or anything close to it so don’t take my word for it. Ask an attorney that can bill you $225 an hour. I spent around 5 hours researching this subject, it’s too bad I can’t bill at that rate.

So here is my take:

You can once again be involved in owner-occupied residential mortgages as long you do not exceed 3 per year. So go ahead and borrow from your rich uncle to buy your home.

Related Blogs:

Choose What You Want To Learn in Real Estate


We, at Shepherd Real Estate LLC, are offering a few FREE classes this fall.

Our class-room style lectures are structured around real estate investing. The Shepherd Team consists of professionals in Lancaster, PA with experience in real estate. We are investors ourselves and want to help you succeed in your endeavors. The Shepherd Team has a wealth of knowledge to share. In house we have an attorney, a CPA and Realtors all ready to help you.

 We need your help in deciding which classes to offer. Our goal is to give you what is of most value to you. We are conducting a survey to choose to the topics.

Please click through to the survey to make your choice.

Click here to take the survey.

Your response will help us pick the best topics.

Here is a breakdown of the options:

  • Investment Analysis

Crunching the numbers

  • Building your Power Team

Realtor, attorney, insurance agent, consultant, property manager

  • Assets Protection

Entities, insurance

  • Improving Cashflow

Proper management for better cashflow

  • Taxation of Real Property

Structuring your investments to avoid excess taxes

Click here to take the survey.

Thank you for taking the time to complete the survey.

Email me if you want to be notified when we schedule these FREE classes. They will be held at a location to be announced in the Lancaster PA area.

realstreet@frontiernet.net

We Need More Christian Billionaires


by Dave Miller

  “We need more Christian billionaires, let’s be Christian billionaires.” my friend said. At first I brushed the comment off without any farther thought. But a day later the comment was still ringing in my head. Was there more to that line than I was giving it credit for? Was there a deeper truth I was ignoring?

  I started asking additional questions. How would society benefit by having more Christian billionaires? How many exist?

  The more I looked at it I realized once again it was not the money that made the man. The wisdom and experience would outweigh the money. In order for a person to gain that amount of financial savvy he must immerse himself in knowledge and good judgments. 

  What are deeper ways to benefit society?

  • Philanthropic efforts – This is first thing that most people think of. Even though I think it’s deeper than that, this is still a way to impact people. As always it is risky, because finding avenues that contribute to society in a healthy way is tough. So often money or food is given to poor people and it encourages that society to expect a handout. Nevertheless with a little research good missions can be found.
  • Political clout – People with money have influence. In 1776 this was the case and our foundation was built. Just as the left does damage with its money to expand its agenda, so can a Christian.
  • Betterment to society with experience – We are better off if we can learn from experience, our own or others. Who better to learn from than a Christian? A person with the fortitude to make a billion dollars could contribute to society in incalculable ways.
  • Jobs that have a healthy atmosphere – The work place has a huge impact on people’s lives. If that area can have a Christian vibe to it then it will filter into their personal lives.
  • Wealth building through job creation through efficiency – Better work ethics, which I think Christians (especially of Protestant descent, create better efficiency which equals more competitive prices. This means more business coming your way, and then you hire more employees creating more jobs, thus equaling more wealth. Wealth building is more than having a job, its learning to do a good job.
  • R&D – Research on solar, wind, gas, ethanol or other energy, should not be subsidized by the government. When a private enterprise does the R&D it is usually viable. And if it’s viable, well, then it’s worth doing. If the government gets involved they attempt to create a market in areas that are not viable. They subsidize it and this puts supply and demand out of balance. A mess is created. Again, ethanol is a prime example. Let the private enterprises do the R&D.
  • Educational advancement – When people have money, they like to put it to use in a way that satisfies their worldview. Education is an example on this. A lot of money has been spent on education in the last 150 years. The worldview of these advancements has devastated our educational system. By having money and a good worldview this decline could be reversed.

  Far greater than having a Christian with a billion dollars is the influence and contribution he can make to society. The means of getting there, the knowledge retained, and the intellectual value far outweigh the money in the end.

Real Mistakes by Real Investors, and How You Can Avoid Them (Part One)


by Dave Miller

In the real estate world investors tend to make the same mistakes over and over again. Then after a time they learn and either stop investing or stop making the mistakes. When they stop making the mistakes yet continue to invest, then the dividends start coming in.

Yet new investors emerge into the market place making the same mistakes their predecessors did.

You have a choice; to make the mistakes yourself or to learn from other people. I say, learn from other people’s experiences. It’s cheaper than way.

#1. Ignoring Risk Management

   Investments consist of two sides; risk vs. reward. Yet many tend to skip the risk element. Buying and hoping for the best. “Hoping for the best” is not risk management. You must carefully weigh the risk-to-reward ratio. All investments have risk, there is no such thing as a risk-free investment. Even if the risk is only your time or your money being tied up. You therefore risk your time or money on this project while it could be used on another possibly better deal, losing chance of a greater return.

  Loss of capital can come in various forms; capital loss (devaluation), loss of greater gains, loss of additional capital (lawsuits),i.e.

Here are few ways to reduce risks:

  • Purchase your property in a LLC
  • Discuss the purchase with a trusted attorney
  • Know the market
  • Get liability insurance

This list could be ten pages long, yet I will stop with this. Encircle yourself with trusted and experienced advisors. Ask questions. Weigh your options. Call or email with questions, call 717-951-0201 or realstreet@frontiernet.net , I will gladly give you a free 15 minute consultation. (Consider the risk first, losing 15 minutes vs. gaining 15 minutes of knowledge)

#2. Over Leveraging

Investors love the way leverage increases the return on the investment. Yet they forget it is a two-edged sword. Leverage magnifies both profits and losses. Investors tend to use too much leverage and use it too long in their careers.

Am I advocating no leverage? No.

Investors should use leverage early in their careers, making sure they can cover the payments with alternative means, and move towards more secure loan-to-value ratios later in their career, making the net worth they achieved more secure.

#3. Picking the Wrong Strategy

Pick a strategy that matches your strengths. Not everyone is cut out to raise the rent on eighty-five year old ladies or evict 6’ 5’’ drug thugs. If you don’t know how to fix a roof and are scared of heights then stay off the roof.

Aligning your strengths with your strategy requires honesty. Rather than focusing on how someone else did it, look at yourself and your potential. If you are not a sales person but rather Mr. Fixer-upper then outsource the sales aspect and focus on fixing.

#4. Overstating Returns

Hunters and fishermen tend to exaggerate, telling tales that captivate their wide-eyed audience. Real estate investors tell even wilder tales. Telling friends they made $5,000 on a wholesale deal yet forgetting to mention they spent $12,000 on some guru telling them how.

Whether working with partners that hold an equity position or private money investors, you need to gain their trust. For this deal and for the next. If you overstate the returns and then fall short of your promises you risk losing a partner. But if you honestly and accurately state your expected returns and then supersede them, you win.

#5.Overimproving Properties

There is no profit in fixing something. The profit is in the added value of the improvement. If it costs you $5,000 to build a garage that increases the property value by $5,000, you have not added value. Make sure the improvement adds value beyond the cost.

The profit is in the purchase price. Not in the improvements. Improvements cost money, paying less does not.

Many investors pay too much for fixer-uppers. Don’t be one of them. Make your money on the buy.

Avoid trying to squeeze every penny out of the deal when you can close the deal with a decent profit. A certain dollar today is better than an unsure dollar tomorrow. Here is an example of a property I could have made more money on but chose not to (Click Here). Get the fast buck not the last buck.

#6. Waiting Till April 15th to Check If You Turned a Profit

April 15th is when you report your profits to the IRS, not when you see if you had a profit. In real estate numbers are everything. If you lost money on a deal you need to know that NOW! Not after three more deals like it. Run the numbers. Have your accountant involved in your planning.

Quotable Quote:

There’s blind luck, dumb luck and then there’s get up every morning at 5:30 and sweat the details luck. Few people actually stumble into wealth. It takes persistence, tenacity and a tireless work ethic. In the end, luck has little to do with success. It takes experience and hard work. Pure and simple. –  Smith Barney

Get Rich Slow Scheme


by Dave Miller

The easiest way to get rich quick is to accumulate wealth slowly. Well then, how does one accumulate wealth slowly?

First you need a plan. A solid, well thought-out, practically applicable plan.

This plan must be solid, to preserve your precious capital, as you do not want to go backward. The retaining of capital is a key element of moving toward your goal. If you lose your initial capital you must not only gain it back but also recoup the lost time.

It must be well thought-out; you do not want to be jumping on some quick get rich band wagon that is ready to go bust.

The plan must be feasible. Over the ages three areas have proven successful; real estate, gold, and businesses. Most wealthy people own one of these three.

Don’t put all your eggs in one basket, just like your Daddy told you. But nevertheless get some baskets and fill them with eggs. Many people use that line to delay saving and investing. Procrastination kills.

The real estate basket is the topic of discussion today.

Enter John Schaub and his book Building Wealth One House at a Time.

John Schaub

Building Wealth One House at a Time - John Schaub

This book focuses on strategies for creating wealth through real estate by starting small – and making the right moves. Nationally known real estate expert and speaker, John Schaub, learned his craft in the best way possible–on the job, and through every kind of market. He published a great book titled Building your Wealth one House at a Time. In it he shows you how to buy homes with little money down using private or owner financing. By doing this he eliminates the whims of the banking world. The lender he says, is more concerned about getting his money back than earning high interest. In Chapter 6 he tells you to do what it takes to make the lender happy, over secure if you must.

Click this link to read an article I also wrote on keeping the your lender happy.

He recommends only single family dwellings, no fancy shmancy highfalutin projects. Just solid homes the typical family desires and can afford to live in.

The part that hit home for me was that he says buy one home a year. No more. He warns of the dangers of diving headfirst. By waiting a year to purchase your second investment property you will learn innumerable lessons before plunging in.

John uses two people to accumulate wealth; his renters and his lender or investor. His lenders allow him to purchase the home and the renters pay for it. In the meantime he is accumulating wealth. Renting to long-term tenants, with financial incentives to pay on time.

By using leverage, i.e. owner financing, investors or the bank, he can purchase a home that otherwise he would have needed to walk away from. This then allows him to have a renter paying down on the mortgage. But remember, leverage is a two-edged sword. It can help you accumulate faster and it can take you down even faster. You must carefully consider the amount of leverage you are comfortable with and what makes sense in your situation.

Building Your Wealth One House at a Time is very concise yet an easy to read book. It lays out a blueprint that is easy to follow using graphs and figures.

Unique is his approach to focusing on buying houses in good-quality neighborhoods while simultaneously creating positive cash flow properties. John uses the Goldilocks theory when choosing a neighborhood: not too expensive and not too cheap. Go with a neighborhood where prices are just right.

Buy his book today. Read it. Implement a plan. Take the first (I know this is the hardest one but do it anyway) step. You will not get rich quickly but you will most definitely be headed in the right direction.

Quotable Quote: It is hard to fail, but it is worse never to have tried to succeed. – Theodore Roosevelt

Give Him What You’ve Got


By Dave Miller

Your banker holds the keys to many things.  If you are found in his good graces a nod can grant you freedom. But he can wave you off just as easily if you are weighed in the balance and found wanting.

If you are attempting an expansion in your business, you may need a larger line of credit or a term loan. Or maybe you need capital to buy a piece of equipment for that big job you quoted. Maybe your goal is to own your own home or real estate as an investment. Whatever your dream or need is, you probably need capital.

You may have the cash to buy it outright, if so, I commend you. You have done well. 

If you are in need of capital, you are at someone else’s mercy.

The three most popular methods are owner financing, private money or the bank. Of these three the conventional route is to call the bank.

Whoever you rely on, your relationship is crucial. The bank being the most commonly used method of financing; we will focus on this relationship. Nevertheless, these tips can be used for financers other than your banker.

Bankers love paper, or so it seems when I want money. First they ask for a copy of my tax returns for the past couple of years. It is preferred they pick them up with a pickup truck as my return is 83 pages long and my wife’s weighs in at 45 pages. Then they walk in with a towering stack of papers for me to sign. I see visions of dead trees. O Death; once lush vegetation laying down its life for me and my loan.

If it’s paper they want, then paper I give.

When I approach a banker for a loan on an investment property I provide him with a report. Excel is an excellent way to create these reports. I have a template ready and all that’s needed to do is fill in the blanks. This spreadsheet does all my calculating. In five minutes I can have a presentable four page report. This is the same way I evaluate properties before I look at them. Provided in this report are an income statement, cash flow statement, repair costs page and cost analysis. With a few more clicks I can add an amortization schedule.

I have used some version of this report while asking for financing in four deals over the past two years. Each time the banker has made positive remarks about the report. My goal is to keep the banker happy. If it helps to give him a presentable report that takes five minutes to make, then five minutes it is.

An annual ritual I have happens after my taxes are done. Bankers love tax returns. They view them as the Holy Grail. The sooner they have their paws on them the happier they are. I send them my returns even if I’m not asking for money at the time. A local banker, Bill O’Brien, once told a group of businessmen the way to impress a banker is to send him your tax return on April 16th .

I always ask my accountant for a PDF of my returns. I then send them via email to my banker. By having this on file you can have it to someone in two minutes via email. It is a fast and easy, and no tree died in the process.

A list of additional information I send in my packet:

–      Updated Personal Financial Statement

–      Personal Federal Tax Return (previous year)

–      Previous year LLC Federal Tax Return for investment properties

–      Income Statement and Balance Sheet for business

–      Income Statement and Balance Sheet for my investment properties

–       Year to date Income Statement and Balance Sheet for business and investment properties

So the number one way to impress your banker is to make a packet of the above mentioned items and send them his way. Oh, it also helps if the numbers on the paperwork are respectable. Either way, at the least, send your banker your previous year’s tax returns.

Quotable Quote:

A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.  – Mark Twain

Published in: on June 4, 2010 at 8:55 pm  Comments (2)  
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