HUD Announces Suspension of FHA 90 Day Anti-Flipping Rule

Recently, we investors have had some good news, as it relates to FHA financing (many of our buyers now are first-time home buyers, using FHA insured loans for their 3.5% down program, and less strict credit requirements). As of now, they require that any property they lend on, be held by the same buyer for at least 90 days prior to the closing. Now, they're suspending that. Check out below:

HUD just announced that, effective February 1, 2010, they are suspending the FHA 90 Day Anti-Flipping Rule.

With certain exceptions, such as HUD-owned and bank-owned properties, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. However, beginning Feb. 1, buyers may use FHA-insured financing to purchase properties resold through private developers and investors, providing access to a broader array of recently foreclosed properties.

Under the temporary waiver, all transactions must be arm's-length. In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.

For more information about these changes please visit the HUD website.

See? Who says the government isn't looking out for us investors? In truth, they are finally realizing that WE are the key to turning around the housing market. With so many foreclosures and properties that are deemed "unfinanceable", only investors will be able to make home ownership possible again. Couple that, with a more responsible economy (we all hope), and we can start the upswing again... but not before another huge WAVE of foreclosures comes out to the market.

Again, I say, what an incredible time to be a real estate investor!

And now, for a shameless plug for anyone in the Boston area

I'd love to see you at our Big WHOLESALING Event, in Billerica MA on Feb 6. The whole day will be focused on:

• Getting people out there,
• Making OFFERS,
• And getting their deals sold

Check out this link for the details: Wholesale Workshop

As always, Happy Investing!

Nick

Find and Analyze the Deals Next Monday in Nashua!

For those of you who missed Nick’s seminar on Dec 1st at BAREIA...

Don’t you worry!

He’ll be doing a recap at the Real Estate Investors of Nashua Group.

Just what will you learn?

• 3 ways to find motivated sellers
• Easy ways to train your birddogs
• How to work with asset managers and REO departments
• How to get accurate comps
• Using an income filter: "How much will that property ACTUALLY cash flow?"

You'll also get Nick's Rebab Cheat Sheet!

...and you might win some M&Ms...

Event Details:

6:30 pm

Monday January 11th

163 Amherst St, Nashua, NH 03064

(Second Floor)

For more information and directions, visit REINGUSA.com.

Bring lots of business cards... we hope to see you there!

Julia

How You Can Stay Motivated this Year

Ah, New Years.

Another year. In this case, the start of a new decade--2010!

My Resolutions

Every year, I sit down with my goals that I wrote out the year prior, and find out what I missed and the reasons why:

• Were these realistic goals?
• Did my business plan change, and I forgot to update my goals?
• Did I hold myself accountable enough?

Many people set very high goals, with no intention of ever executing on the plan, or even designing the plan, to meet them. These people are called the "talkers".

The question is, what will this new year--new decade--bring YOU?

If You're a New Investor:

This is from a great blog I sometimes read called ZenHabits. This question really helps address what new real estate investors should set out to accomplish:

"How do you stay motivated in business when you have never done something before & the results won’t show up until down the road? (via @darinpersinger)

Learn to love the process, and don’t let your happiness be so dependent on the outcome. Be passionate about the actual things you do, do them because you love it, and you’ll stick with it. The great things that result will be a natural by-product."

Essentially, if your only goal is to set out and make a lot of money, you MIGHT succeed - but you also might hate all the work it takes to get there. And trust me... when you hate what you do, NOTHING seems worth it, in the end.

If your end goal is to learn how to help

create win-win situations with homeowners and real estate agents, banks, and other investors, and to change people's lives while doing it (while learning from mistakes), you've just created a new lifestyle for yourself. And the best part is, while you're building your business and touching more lives, and learning in everything you're doing, you will be reaping better financial rewards than if you just set out to "make more money in 2010."

Dr. Robert Kiyosaki, in discussing the fundamentals of business practices, talks about how the very basic and cornerstone of all business is to have a meaningful and effective direction - known as your MISSION STATEMENT.

What is your mission statement?

Maybe that's a good place to start in 2010. After spending a while drafting this, then finally set your goals - financial, personal, & spiritual - and then create & execute the plan to get there.

But most importantly, enjoy the ride. Money will follow, if you continue growing & learning, and never staying in a comfort zone. Make this decade the one to turn it all around, especially if you're having challenges now with your life, finances, career, or relationship. BELIEVE you can do it.

You can bet I'll be raising a glass to all my colleagues, students, investors & friends I've made over the past 5 years... so, this one's for you!

Happy 2010 everyone!

~ Nick

Ask Nick: How does the rehab cost add up?

Hey Nick,

I'm immersing myself in real estate knowledge and thank God for the internet and you tube, there's a whole wealth of information out there that can be good for newbies like me.

Lately, I've been focusing my attention on rehabs. I figured that if one understood rehabs, one would understand real estate investing a whole lot better and even wholesaling.

My question is: How does the rehab cost add up?

When investors quote a rehab cost or estimate cost, say, $40,000, does this include materials plus the contractor's fee and labor, or is the labor priced differently?

As always, looking forward to your response…

Thanks and Happy Holidays!

Hi There,

You asked a very involved question... contractors will quote whatever work you tell them to. And if you're not clear, you'll never get accurate bids on anything.

Some will quote you labor only, some both materials & labor, some will underbid you only to give you what's called a "change order" later on, upping the real price, some do good work, others don't.

When I walk through a job, you have to be as detailed as you can, when drawing up your OWN scope of work. I go as detailed as labeling what SKU numbers from Home Depot or Lowes I want, with doors, chandeliers, counters, etc.

That way, when you provide YOUR scope to one or three contractors, you get ACCURATE bids.

Make sure they realize it includes both materials & labor. My coaching students walk through jobs and do this on a daily basis, as it does take practice.

Hope this helps!

~ Nick

Ask Nick - "When does a homeowner legally lose their foreclosed home?"

Hi Nick,

While wholesaling, I constantly encounter homes vacated by the Home Owners. I keep coming across notices from a company called American Field Services reading, "The property has been secured/winterized"… "Do not turn on utilities”...”heating tank has been drained"....

I understand the homeowner still has time before a foreclosure date is actually set, however, at what point does the homeowner legally loose the right to his/her house? Is it when he/she decides to walk out of the home and the lender sends in these American Field Services type of companies to secure the property?

OR Do homeowners lose their home when the legal process of foreclosure is ventually done?

These issues / questions have been weighing heavy on my mind...

Looking forward to hear your response,

Thanks!

Hi there,

Thanks for the question! The homeowner loses all rights to the property once the auction date has come, and the auction is completed. That's when it officially goes either to an investor, or more commonly, back to the bank (they are also present at the auction to protect their interests).

The name on the door you are seeing is the asset manager, the company hired by the bank to maintain it while it is on their books.

Hope this helps...

Nick

“Ask Nick”—How do I Find Houses?

There was a great response to the new “Ask Nick” segment in the AARE newsletter. Thanks for the questions! Here’s a good one…

Hi Nick,

I'm new in the REI Field and my dilemma is this:

I'm currently focusing on pre-foreclosures and have lined up an array of buyers, but I'm struggling to get houses despite the foreclosure crisis going on. By the time I arrive at a property in Pre-Foreclosure, I'm finding that the owners just "walked away" from the property.

Right now, my strategy is looking up the Notices/Complaints from the court records. I look up these notices online from our local newspaper. I do a bit of research on the property from initial purchase price, Refi's and do some basic comps of the neighborhood. From that point on I proceed to look at the property and take notes. This is where I'm finding most homes vacant and homeowners having just walked out and abandoned the property.

I am stuck at this point as to what to do/ how to proceed from here-I have buyers but no houses...Thank You"

Hi there,

Good stuff! Thanks for the question! You've got a good system going right now. Very good job getting your buyers list up and running - that's usually the hard part.

My first thought is that there is probably a way to systemize this process, so you're not tied down chasing property owners to where they move to. You make a huge impression by showing up in person, but as you're finding, many homeowners have already moved on, and you're chasing down ghosts.

Make the deals to come to YOU – don’t chase the deals!

It's great you get the list directly from the newspaper to save your time and money; however, it's not quite as timely as looking the records up directly at the courthouse or buying from a list broker, as other investors are doing.

My suggestion is to gather the essential data you already get from the newspaper (name, address, any dates of sheriff sales, etc) to immediately incorporate a direct mail campaign to these addresses.

Now, you have to assume that these people are getting bombarded with mail from other investors, so you have to make yours unique so they read it. In my coaching program, I show my students how to incorporate standard letters & postcards, what to say in the letters, etc to get the best response rate.

5 Tips to make your mail unique:

- Handwrite the name & address in blue pen

- Use a stamp with personality

- Hand-sign each one of these, and mail it out

- Ensure you have at least 5 (ideally seven) mailings to each person

- Write the words, "Forwarding Address Requested" on each envelope. This will forward your mail to the address where the owner moved to if they left this address for the USPS.

**Note - YOU don't have to be the one doing all the writing, stamping & stuffing.

ONLY do your research & due diligence on a property, if you get a return call. This will save you a bunch of time, so you don't have to analyze every property, and allow you to continue to build your list. Perhaps, if you know an area well and think it may have a better profit potential, you can spend some time heading over to the property and see if they are there.
Either way, keep your marketing going (direct mail, bandit signs, newspaper ads) to bring calls coming into you, and as long as you keep the flow going, you will always have deals to sell to your buyers.

And... once you get more deals than your buyers can handle, it's time to beef up your buyers list again!

Hope this helps. Let me know if you decide to implement this, and how it works for you.

Happy Investing!

Nick

Building Wealth in a Down Market

Someone posed this very question to me last week, and since this seems to be the "buzz" topic recently, I thought I'd share my humble thoughts on the subject.

What a Financial Planner Would Tell You


It's intriguing to me, as if you would have asked me this question back before I was introduced to real estate, in my banking days, I'd have told you what every other financial planner would have told you: save money, pay off debt, build your retirement savings through maximizing your IRA contributions & take full advantage of 401K match incentives, provided by your employer. "Re-adjust your portfolio allocation" (most people would look at me with three heads when I would say this to them), or "put your credit card in a block of ice in the freezer". (Hah - I forgot about that one..)

These ideas are still excellent ones. The only problem I have with these ideas, is they keep middle class people, well, middle class. They were growing their retirement, so they'd be just OK when they turned 65, but in the meantime they were still slaving away at their JOB and are unable to explode their wealth so that could enjoy everything life had to offer, before their retirement. I mean, let's face it... retirement is such a wonderful dream. But life is short - why wait to fill your dreams?

Building Wealth Through Real Estate Investing

According to this article, the "Top 7 Ways to Get Rich," Alen Korber makes the case for why investing is one of the smartest ways to grow your wealth. Being that he is a reseller of a stock market analysis strategy, he discredits real estate, claiming real estate tends to grow only at 10% per year, and requires a large down payment, so it's "hard to get rich quick that way." I would argue that anyone who invests in real estate to "get rich quick", HOPING it goes up in value the average 10% per year, and who puts down a lot of cash to do it, does not quite understand the real methods at all. It is possible to explode your wealth through real estate, but anyone in this business can tell you it certainly is NOT a get rich quick plan you'll see on those infomercials. I might call it a "get rich sooner" plan. And I still am uncomfortable throwing my money in the stock market, or anywhere else I cannot control what happens to it, or where it can sink to zero.

Want To Know How It's Done?

There are a few different strategies, but they usually end the same way - invest for CASHFLOW, NOT market appreciation. Don't even look at this factor, when you begin your investing business. You can choose to be an active or a passive investor (passive allows you to enjoy the gains from real estate, but someone else does all the work). When I begin a coaching session for one of my students, or when I meet with one of my investors, we go over their short term and long term financial goals, just like a financial planner would. Then, it's worth choosing different real estate investing strategies to help them invest for their immediate needs, and then set up IRAs and this plan around their longer term goals.

One strategy that seems fairly common, is to invest in shorter term investments (flips, high-yielding notes) to build some cash, and then shelter this cash in a longer term investment (either a small rental building, or as part owner of a large residential complex). If you already have some cash resources, I will suggest that as my colleague & fellow apartment owner David Lindahl says, "Go bigger, faster." The faster you can get involved in a larger complex, you start to take advantage of economies of scale, excellent management, and larger cashflow numbers ("dividend yields," for those stock people out there).

For those that do not yet qualify or think they're ready yet for larger complexes, a perfectly good strategy (and exactly what the residential branch of AARE is doing right now in this marketplace) is to invest in homes below replacement cost, for rental income in depressed areas. Will these homes go nuts once the market rebounds? Most likely not... but as a true wealth investor, you are going for cashflow, and never look at appreciation.

Money Magazine recently got wind of what we are doing, and published an article on give-away priced homes in their most recent issue. Set a return you want to get for yourself. My minimum return is 12% in rental income per year (I shoot for 20% in these depressed areas), and this is after ALL expenses.



Example:

$6,900 purchase price for a 3-bedroom house
+ $12,000 rehab costs
is $18,900 "cash in" the deal. Usually these homes are not financeable, so you would either have to put in all your own cash, or go in with a couple others. But here's the return:

Rent goes for around $600 / month in this area. Estimating all expenses (including management, vacancy, maintenance, taxes, insurance, marketing costs) at around 50% of your income, you'll still be raking in $3600 / year, which comes out to be 19.05% in your annual return.

If you play your cards right, when you purchased the home, you MIGHT take into account FORCED appreciation (sweat equity)... perhaps the house in fixed up condition would actually sell for $30,000. Though we never look at this number when we invest for the long term, it's nice to know that you may have an extra bonus coming to you when you sell down the line, in 5 or ten years. Or, keep them forever, and continue to collect your 19%... which only takes a little over 5 years to get all your money back. AND... this doesn't include tax benefits, and a whole slew of other potential income benefits you can reap... GOD I love this business.

You can probably see, it doesn't take many of these to help your cashflow situation - and perhaps the day you decide to retire, you now can realize your equity in these little ATM machines, by selling or pulling it out in a refinance. Take your dream vacation in 5 years, or when you retire - all tax free, unlike traditional IRA withdrawals.

As I mentioned before, some investors prefer to be hands on, while others don't want to have anything to do with the real estate side of it. For these individuals, there are plenty of active investors out there - contact me if you'd like to get hooked in with one of them. IRA money CAN invest in real estate, despite what your current advisor tells you. We are happy to help guide you through the process, or answer your questions on this if you prefer...

The moral of the story

It IS possible to invest smart in a down market, an up market, a sideways market, whatever - just make sure you keep the right thing in mind as you invest in whatever you choose: INCOME. Investing for anything else is considered speculation, and just as risky as the Guessing Game--I mean, Stock Market.

Until next time,

Happy Investing!

Nick