Determining the Listing Price of Your Home by William Bronchick

When it comes to buying a home, most potential buyers will use the listing price to as the number one factor to determine the homes that they look at. Even though you and a realtor may determine the asking price, the buyer will determine the selling price. If the price is too high, most buyers won’t give it a second thought - which is why you want to determine the listing price carefully.

If you set the correct price, you’ll notice a much faster sale. Setting the right listing price will also attract more potential buyers to your property as well. You’ll also notice an increase in response from realtors, and receive more calls about the property. The listing price is very important - and it can ultimately determine whether or not you sale your property.

A home can be overpriced due to several reasons. Overpricing is something you want to avoid, as buyers tend to steer clear of homes that have been overpriced. Normally, this happens when a buyer asks a lot more than the home is worth or valued at. Some buyers ask a lot more than the value of the home due to location. Although the location is very important, most potential buyers won’t give the home a second look if they think the price is too high - and more importantly out of their price range.

When you put your home up for sale, most activity will happen within the first couple of weeks. If you put the right price on your home, you’ll notice immediate interest. There are always buyers looking for homes in their price range, waiting for new homes to be listed or homes to be reduced in price. Buyers who are waiting to purchase may miss seeing your home completely if the price is too high.

To determine the listing price of your home, you might consider having it appraised before you put it on the market. This way, you’ll know the full value of your home. You can sell it for market value or go a little under, although you should never attempt to go way over the value. In doing so, you’ll miss out on a lot of potential buyers. The home market is very competitive these days, which is why you want your home to draw as much interest as possible.

Keep in mind that realtors really have no control at all over the real estate market, only the plan behind marketing. Realtors don’t determine the asking price - the seller does. You can ask a realtor for advice, although you are the decider of your listing price. If you do things right and take each thing step by step, you’ll set the listing price in the right area and have no problems selling your property.

Real Estate Investing - It's Foundation - By William Bronchick

Real Estate Investing – It’s Foundation

Before you even consider entering the real estate industry, you should know of its foundation. Real estate investing has no room for investors with very little knowledge of the different processes involved in the business. Many have failed and if you don’t want your fate to be the same as theirs, you should start learning all the things that you need to know. How can you survive the competitive market if you hardly know anything about real estate investing? There are lots of information sources online but look no further because some of the most important facts are already revealed in this article.

The first is ‘Criteria’. This refers to the checklist that you will utilize in order to identify the real estate property that you plan to buy. You can purchase the property at the buyers market. Since the market offers a lot of opportunities to real estate investors, you should set a certain criteria. Establish the things that you’re looking for and you also need to take advantage of existing market conditions. What kind of properties are you planning to buy?

Are you going to get single families or condos? Can you resell the property or perhaps have them rented? With so many opportunities to choose from, you might find it difficult to purchase the property that you want. You can focus in short sales or foreclosures; the choice is yours. These things will all present themselves in different situations. You can include them in the criteria you’ve set to determine the least risk and greatest opportunities.

The second important foundation is the Terms. The subprime backlash wave made ‘Terms’ even extremely important. Interest rates have remained fairly low in the recent years and the overall prices are declining or stagnant. The buyers market is filled with different emotions and you should try to establish adequate parameters. By doing so, you can easily tell when you should walk away from a certain deal or when it’s the right time to make a go for it.

Another important foundation is ‘Network’. The market is a very large one and if you’re alone, you may not be able to survive the extreme competition. Having a network of good relationships with fellow real estate investors is very important. If you have good relationships with other investors, they can help in providing you with opportunities. Your fellow investors should know about your predetermined criteria. You should also have your own real estate attorney just in case you encounter legal proceedings.

If you know the foundations of real estate investing, you will know what properties to buy, how you will purchase them, and who can help you.

Try to master these areas to ensure a solid place in the market and to enjoy continuing success. Criteria, terms, and network are the basic foundations of real estate investing. The many successful investors that utilized these areas are still enjoying continuous success. If you want to enjoy the same triumphs, you should study the foundations of real estate investing. Be prepared at all times because there are also risks involved.

Having adequate knowledge about real estate investing can serve as your key to success. With knowledge comes power; educate yourself before you finally enter the industry. It is definitely a competitive one and very few newbies are able to overcome the many difficulties.

Creative Real Estate Investing

Creative real estate investing is defined as the usage of non-traditional ideas and methods of selling and buying properties. Here, the buyer will initially secure his finance taken from a lending organization and pay the full amount together with borrowed funds which will serve as his down payment.

One of the effective ways in purchasing a house is through cash payment. Unfortunately, the typical family is not really in its proper financial situation to get into an agreement like this. Majority of the families are can modestly afford a down payment, thus, they are forced to secure what was left of the price of their purchase through mortgage from a lending institution. However, buyers should not exhaust their entire savings just to pay a huge down payment amount. This will lead to deprivation of reserves if in case any fall back happens or income will go down in the future.

What are options?

An option in real estate investment is termed as a person’s right to purchase a property for a specified amount on a certain period. The owner may choose to sell his or her option to someone. The option buyer then hopes that the value of the investment property will either down or up. The seller will receive a premium known as option consideration. The buyer also has the right to purchase the property or selling it to another person which he or she can exercise. This is usually done to gain control over the property without investing a lot of cash. Premiums in option are generally non-refundable. Options represent equitable interest and are recorded by the county recorder.

What is a lease option?

A lease option is comprised of two main parts namely an option and a lease (rental agreement). This is written in either one or two contracts. A rental agreement occurring between the potential lessee or tenant and the owner is implied as a lease. Leases hold the lessee responsible for paying the maintenance, upkeep, insurance and taxes of the property. Lease payments are typically five to fifteen percent higher than the rent of the property. For the lessee to have tax benefits, this lease type is structured as if the lessee is the owner himself.

What is sandwich lease option?

This is not, at any way, an option. This is just created by tenants who wish to exit his or her unit as the tenant not having exit options written by the landlord in their lease. In order to provide mitigation option (a way of reducing costs and risks), a person can find a tenant to replace the unit. The tenant found for replacement becomes the tenant of the existing tenant and not the tenant of the landlord. The legal tenant will now have the right to create whatever rent, policy and deposit systems that he or she wishes to imply on the new tenant.

To further understand the process in sandwich lease option, a branch of creative real estate investing, further explanations are provided. The moment the new tenant notices any need for maintenance or has encountered problems with the unit, he or she will contact the landlord who will then contact the real, legal landlord in for repairs and maintenances to happen.

The new tenant is required to achieve payments to the temporary landlord who will then make the rent payment to the original landlord, thus, making things legal and paid.

Joining a Real Estate Investor Association by William Bronchick

Of recently, real estate investing has again become one of the most popular trends in making money. This is a fact. Some of the richest persons in the world who proudly maintained a real estate investing status have acquired more and is still growing. Give it a moment. If you think that real estate investing is your thing and you don’t have the slightest idea on how it works, then it’s time to spend some time in trenches.

Below are some of the tips on how to effectively join an investing group. This would be moderately challenging but if followed effectively, one will get through.

Step 1 – Be knowledgeable

Do a quick research on the investment groups concerned with real estate within your area. You can do this through an online search. Finding your right guy will be faster if done on the net although, there are investment groups not found on the Internet. A one-click search engine will reveal a lot of appropriate groups within the city. It is much appropriate to find a group within your area before looking into the bigger picture. This will help you ease out your options.

Step 2 – Attend meetings

It is always a plus when you attend meetings of groups. This will help you determine the group’s status and what you can get out of them. You have to realize if that group provides more advantage than disadvantage. A lot of investment groups allow those vying for membership to attend their functions without charge or for a minimum fee which won’t hurt the budget, and will not require commitment. Investors know that there is nothing appropriate which would fit the majority. It is up to the person to decide if the opportunity is the right thing for them.

Step 3 - Ask related questions

Whatever it is that pops out of your mind, ask it. Don’t hesitate to bring about questions that will be beneficial on your part. Make sure that when you ask, the member whom you brought up the question with is knowledgeable, approachable and have made quite an experience with regards to the investment field. You must remind yourself of you purpose in joining the team and it is to network and gain knowledge.

Step 4 – Join in

Simply said than done. It is quite simple to join but you have to keep in mind that before joining, you have weighed the pros and cons of the group. Because every real estate investment group produces sets of rules and standards to follow, you have to make sure that it has met the criteria you have set on yourself. Don’t agree with the terms if you don’t feel comfortable with the group. The moment you have decided to join in, commit. Invest your energy and time working with your group. In every group, there are certain fees to provide so make sure that you are aware on the price. Still, if you are hesitant to commit, visit other groups and analyze them well.

A piece of advice though, in real estate investing, joining clubs or organizations concerned with investment must meet all your expectations otherwise the partnership will not work. There are several type of real estate investment clubs that offers a lot.

Joining a club will give you a better view of where you’re heading.

And, if you're in Colorado, be sure to join the Colorado Association of Real Estate Investors (www.carei.com).

Why Real Estate Investing?

At present, the number of real estate investors continues to rise  continually because many individuals today realized the high earning potential of real estate investing. Real estate properties have very attractive qualities that ensure viable income opportunities. If you want to enjoy the many benefits of real estate investing, start choosing your investments now.

If you have established long term goals, then you should invest on a certain scale over the long term. For instance, you purchase a real estate property. You need to hold it for a few years so that the home equity is built until it becomes a good or excellent deal.  Homeowners benefit a lot from equity because when equity is high, the net worth is also high. Many real estate investors prefer to invest over the long term for this reason.

By purchasing a real estate property, you will also enjoy the tax advantages that come along with it since you now own your investment property. Tax advantages vary depending on the property you purchase. Before engaging in any transaction, you should look into the possible advantages that you can get. Compare various properties and choose the ones that have the highest tax advantages.

Some investors tend to purchase properties and then resell them for a higher price. This type of investment promises high returns. You should consider the time of the purchase and the market condition. Check for the profit margin once you decide to sell the property. There are several factors that you need to consider before you purchase a certain property such as current property sales, upkeep, and renovations.

Can you hold the property for a short period? You should always be prepared because there are times when you can’t easily sold the property you’ve bought. After looking into these factors, you can now determine if a certain property is profitable or not. If the property can be sold quickly, then you will enjoy the benefits that come along with it.

There are real estate investors that become landlords. Some investors purchase properties but they don’t resell them; instead, they lease the property. If the property comes with a mortgage, the investor will need to pay for it but he or she will also receive additional incomes from the rents.

So you see, there are a lot of benefits if you decide to enter the real estate business. To summarize, the benefits are – build equity on the property, tax advantages, high return from reselling properties, and earn additional income by leasing properties.

It doesn’t really matter if you have short term or long term goals. The earning opportunities in real estate investing are really attractive. It’s no wonder why many people are now into the real estate business. If you want to enjoy the same benefits, try to determine if this is the right thing for you. You need to be interested in the purchase of real estate and you need to have adequate capital. To generate capital, you can take advantage of grants provided by governments or you can get capital in other ways.

Real Estate Investing - a Good Choice for Parents

Here’s good new to all parents out there who are supporting their kids to finish college. According to statistics, a great percentage of individuals are not able to finish college because of financial constraints. Some students are able to support themselves in college but parents should still back them up. You can help your kids in finishing a college degree and you don’t need to depend on your salary alone. You now have an option and that is real estate investing.

Parents like you should develop a solid plan so that you can support your kids all the way through college. Your decision is very important because you can only benefit from real estate investing over the long term. You can’t expect immediate success in the real estate business. You need to be dedicated, knowledgeable, patient, and hardworking. You need to devise a solid investment plan to ensure that your money will not go to waste. Students often rely on scholarships, student loans, part time jobs, and savings to pursue their studies. Now, there is another option and that is real estate investing. Even the students can take part in the decisions related to real estate investments.

It would take several years before you can see the fruits of your labor. While you’re child is young, you should already consider real estate investing. Learn from the experts and try to contact a mortgage broker. Also, don’t forget to choose a real estate attorney to help you with all the legal matters. Savings is very important and you should already have one named after your child. Your child will surely be able to pursue any college degree if you prepared for his or her future at an early date.

Parents should consider building an investment portfolio for their kids to support the college years. If you already have a savings account, you can earn interest on the real estate investments. Most parents are hesitant to be in the real estate business especially if their children are still young. But this should not be the case; set long term goals and start real estate investing now. When you’re child is already older, you will still need to establish short term goals. By starting early, you can already learn so much from the market conditions.

Even if you encounter downturns, you have enough time to recover and earn more money. In the early years, you may experience a lot of difficulties because you have a lot of expenses and cash flow is limited. After several years, you can now enjoy high income because you have very few expenses; just in time for the college years of your child.

When you’re child is already in college, you need to be less aggressive with your investments because of the risks involved. The present value of your investments should be protected so that when your child needs money in college, it will be easily accessible.

So what are you waiting for? Parents who have small children should start investing in real estate. Real estate investing may sound very difficult but if you’re equipped with the right knowledge and tools, you can be successful too. Study about real estate investing now and prepare the needed capital.

Mortgage Elimination Scams

You’ve seen the emails:

“Legally eliminate your mortgage!!”

Can this possibly be true? Well, I’ve read the claims and researched the law and here’s what I came up with.

The Claim

The claim is that you can legally eliminate your mortgage based on an accounting loophole that goes something like this…

“If the lender who funded your loan used borrowed money to fund your loan, then the loan is not valid. And, since the loan is not valid, the security (mortgage or deed of trust) is not valid either. All you do is simply march into court and ask a judge to void your mortgage lien, and you don’t have to pay it back.”

Now, without going into the legal issues, a common sense approach would tell you that the entire premise of this argument is patently absurd. Think about it… most lenders use borrowed money to fund loans, that’s the nature of the business.

So, if these “mortgage elimination” promoters are correct, then millions of mortgages would be void. 

The entire economy would collapse. This sounds vaguely familiar to the “tax protestor” scam where people claimed that they didn’t owe income tax because the government did not have the constitutional authority to tax them. More on that later…

The Law

The mortgage elimination promoters cite various court cases in support of their position. At first blush, it would seem there are dozens of court cases in which the judge actually did what they claimed, that is, declare a mortgage void because the lender used borrowed funds for the loan. But, since most laymen are not trained in the law, they take this stuff, hook, line and sinker.

I’ve read the decisions and they all have a common theme: they don’t support the mortgage elimination theory. In fact, most of the cases are only vaguely on point.

The “tax protestor” promoters did the same thing… take a quote from a judge’s decision out of context and cite the case as support for their position. In the end, the tax protestors all lost in court, paid large fines and went away with their tails between their legs. The government went after the promoters of the scam.

Similarly, the government is going after the promoters of the mortgage elimination scam. The Federal Reserve recently issued a warning, a copy of which can be found at the end of this article. The Office of the Comptroller of the Currency issued a similar warning last year.

The FBI recently raided the office of the Dorean Group, a big promoter of the mortgage elimination scheme. 

The Cult of Stupidity

As I write this, undoubtedly a few “followers” of the theory will email me and argue that I don’t understand or that I’m part of the “establishment mentality” that keeps the little guy down. Of course, these are likely the same people who are collecting referral fees from the scammers that are charging thousands of dollars to consumers in exchange for a false promise to eliminate their mortgages.

On a philosophical level, I appreciate discussions about how the dollar really isn’t backed by gold, the government doesn’t have the right to tax Americans and the the like. But I wouldn’t tell a client to actually rely on any of these theories in a court of law. Nor would I charge someone thousands of dollars in exchange for a promise or guarantee that their mortgage could be eliminated without paying it off.

How to Really Eliminate Your Mortgage

There are some legal ways to eliminate your mortgage:

1. Pay it off in full
2. File for chapter 7 bankruptcy (in which case you will not be liable for the mortgage note, but you will also lose the house)
3. Find a REAL legal challenge that a judge is willing to accept as a valid reason to declare the debt void, such as usury, gross violation of lending laws, fraud, incompetency or the like

How to Challenge that Bad Appraisal

In the volatile real-estate market of the past several years, prospective homebuyers and refinancers have encountered the same frustrating obstacle: a low appraisal.

Appraisal complaints have risen in recent years, particularly since home values began plummeting in 2007 and the Home Valuation Code of Conduct took effect in May 2009. But the experts say this isn't the first real-estate cycle in which contract prices don't often match an appraised value. 

More --->>> http://realestate.msn.com/how-to-challenge-that-low-appraisal

Watch Out When Buying Rental Property

Be careful when buying rental property. We stayed at a hotel for a week one winter when we were having our kitchen redone. The bill showed twice what it should have, but since I already paid the correct amount in cash, I thought nothing of it. When we noticed that the lobby and swimming pool were unheated, we thought it was frugality. Only a year later, when I read a news story about a new owner struggling to make the motel work, did I realize what was going on.

The owner had been planning to sell. To prepare, she was using the two most basic ways to inflate the appraised value: decrease expenses and increase reported income. By stopping repairs and quietly adding $100 in income every day, she may have shown $45,000 more net income for the year. At a .08 capitalization rate, that means the appraisal would come in $562,000 higher than it should have. Oops! The poor guy who overpaid!

Do you want to avoid a mistake like that when buying rental property? You need to watch for tricks like these. You also have to understand the basics of appraising income property.

It starts with the capitalization rate, or "cap rate." If investors in an area expect a return of 8% on assets, the cap rate is .08. Net income before debt service is divided by this to arrive at the value of a property. I explain this further in another article, but the primary point here is to remember that every dollar of extra income shown will increase the appraised value by $12.50 with a cap rate of .08, or by $10, if the cap rate is .10.

Sellers Dirty Tricks

If sellers of rental properties increase the net by honest means, then the property should sell for more. Unfortunately, there are many dishonest ways, both legal and fraudulent, that are sometimes used. Unlike sellers of houses, who may cover foundation cracks with plaster, the tricks used by sellers of income properties aren't about appearance. They are about income and expenses.

Income can be inflated by showing you the "pro forma," or projected income, instead of the actual rents collected. Ask for the actual figures, and check to see that none of the apartments listed as occupied are actually vacant. Also, be sure that none of the income is from one time events, like the sale of something.

Income from vending machines is a gray area. Smart investors subtract this from the net income before applying the cap rate, then add back the value of the machines themselves. If laundry machines make $6,000, for example, that would add $75,000 to the appraised value (.08 cap rate), if included. Since they are easily replaceable, adding the $10,000 replacement cost instead makes more sense.

Hiding expenses is the most common of seller's tricks. Paying for repairs off the books, or just avoiding necessary repairs for a year, can dramatically increase the net income. Demand an accounting of all expenditures. If a number in an expense category is suspicious, replace it with your own best guess.

Analyse each of the following, verifying the figures as much as possible, and substituting your own guesses if they are too suspect: vacancy rates, advertising, cleaning, maintenance, repairs, management fees, supplies, taxes, insurance, utilities, commissions, legal fees and any other expenses. This is how you make buying rental property safe.

Real estate investing is like weight loss

It amazes me how many people get started in real estate investing, only to fail when the going gets tough. As soon as someone discovers they can’t get rich in a week or two, they are on to the next “hidden guru” secret. It’s the same as weight loss - everyone talks about it, many try it, but few succeed. There are thousands of “get rich quick” and “get slim quick” gimmicks. No wonder both the real estate investing information and weight loss products industries make BILLIONS!

Weight loss isn’t easy... ask anyone who has tried it. However, the concept of weight loss is very basic - burn more calories than you ingest and your body will react accordingly. Unless you have a medical disorder, this formula works for just about anyone. Simple as it may be, the formula is HARD, meaning it takes a lot of DISCIPLINE AND HARD WORK. So, the weight loss industry has offered us thousands of ways to make it easier. Many of these solutions do work, but they only work if you put forth effort.

Now, let’s start with the premise you don’t need any of these “solutions” to make real estate OR weight loss work for you. You can eat less calories, go walking or jogging every day and you will lose weight. But, having knowledge of the caloric content of different foods is relevant. Also, for many people, knowing the carbohydrate content is relevant. Having the advice of a physician, dietician and personal trainer will help you prevent injuries and maximum your effort.

Same principle applies to real estate - you can go out and make hundreds of offers to motivated sellers and find a good deal. However, having information about how to solve the seller’s needs and construct an offer will help. Having an attorney, real estate agent or “guru” to assist you with constructing the offer and the paperwork will make it easier. Having advice from other people who have already done hundreds of deals will also make it easier for you to learn from other people’s success (and failures). However, whether it’s weight loss or real estate, the bottom line is not just knowing, but DOING. You can’t blame the diet if you don’t stick to it. Many people have successfully lost weight using the ZONE, WEIGHT WATCHERS, ATKINS and other similar plans. Many people have succeeded with the famous “guru” plans, but many have failed, likely because they didn’t give the required effort, NOT because the plan isn’t effective.

Both real estate investing business and weight loss are simple, but neither is easy. It takes a lot of work. Having a proven “system” or plan helps, but only if you stick to it. If the diet plan says, “exercise 3x times per week”, you can’t be sloppy about it and expect results. It’s like the people reading a book on the treadmill at the gym - if you can read a book, you’re not working HARD ENOUGH. Likewise, people call newspaper ads and say “hey, you wouldn’t want to sell me your house cheap, would you?” This is not DOING it is TRYING. You have to give 100% to a particular plan or formula before you say, “this stuff doesn’t work.”

Many people who are interested in weight loss join a gym or hire a personal trainer. From personal experience, I can say that both are great for weight loss. But, the weeks I didn’t show up, it was a BIG WASTE OF MONEY! The same thing goes for a real estate training system or mentor program - if you don’t put forth any effort, it won’t work! And, of course, you’ll likely get bitter about all the money you spent and blame the guru. After all, it can’t be YOUR fault!

That brings us to another topic - the “scam” side of the real estate and weight loss business. Sure, the “magic pills” that melt off fat are probably a scam. These snake oil salesman are offering the lazy and desperate people a solution - no work and results. Hah! If you bought into this scam you deserve to be parted from your money. Likewise, any real estate guru who promises riches with no work is also a scam. My favorite promise is “no selling involved” - that’s the biggest lie ever told. No business can be successful without a certain amount of selling of their product or service to customers - period! So, while there is a dark side to the weight loss and real estate investing information businesses, I assert that most people fail at both because of their own lack of action, not the fault of the “systems.” If you aren’t willing to work, another weight loss program or real estate seminar won’t get you any more results than you are currently getting - save your money and take MORE CONSISTENT ACTION with what you are currently doing.

However, if you are willing to work hard and take a lot of consistent action, a guru or program will likely give you more results. If you bought a book, course or program and already have results, another program, course or book will likely give you tools to get MORE RESULTS. I often hear about successes people have with my real estate programs, but a lot of them are not FIRST TIME successes. They are most often people who have already been successful, and, using my tools, became MORE successful. If someone asks me whether my program will make them successful, I ask, “what other programs have you bought?” If they have already spend thousands on other programs and have done NOTHING, I discourage them from buying mine. These people are looking for the elusive “holy grail” that all the other programs left out. More than likely, the missing element is lack of action on their part.

If you aren’t willing to take action on a massive scale, you won’t get more results by buying more products. If you have the discipline to work hard and take consistent action, then products and services will help you get there faster. Whether you are looking to get rich or lose weight, the bottom line is YOU!

7 Ways to Flip a Property

Flipping” is the buzzword of the year in real estate - flipping books, flipping articles in the newspaper, and even flipping shows on TV! What is flipping, how does it work and how you can profit?

Flipping simply means buying a property and reselling it quickly, as opposed to holding on to a property long term as a rental. Flipping comes in several varieties, most of which are legal and profitable, some of which are not.

Flip Strategy #1: Buy, Fix and Flip

Let’s start with the most common form - the good, old “fix ‘n flip”. This process involves buying a property that needs work, fixing it up, then selling on the “retail” market, that is, to a person who will live in the property. This method is tried and true, and works very well. You can easily make $15 - $50k on one deal, depending on your market and how good you are at finding bargains.

The danger in fix and flips is either paying too much or underestimating repairs. Be very conservative in your fix-up costs and length of time it may take to resell. Also, make sure you include in your analysis the cost of paying a real estate agent to sell the property.

Flip Strategy #2: Buy, Refi & Lease/Option

Rather than sell the fixed up property for all cash, sell for terms. Once you have completed the rehab, refinance the property at its new appraised value. If you did the math correctly, you should have little or no money in the deal. Sell the property on a lease with option to buy. The rent payment from your tenant/buyer should cover your mortgage payment (if not, consider an interest-only or adjustable rate loan that is fixed for 3 years). When your tenant exercises his option to purchase, you reap a larger profit, since you don’t have to pay a broker’s fee. If the tenant exercises his option after 12 months, you benefit from a lower capital gains tax rate.

Flip Strategy #3: Buy & Flip “As Is”

Don’t like to do fix-up work? Consider selling the property “as is” as a light fixer upper. If the local real estate market is hot, you should be able to sell the property in poor condition just a little below market. This is especially the case with houses in “transitioning” neighborhoods. Make sure, of course, that you acquire the property sufficiently cheap enough that you can sell it below market quickly and still profit.

Flip Strategy #4: Wholesale

Strategy #1, the fix and flip, is very popular, which means there are a lot of investors looking for rehabs. You can buy the property cheap and sell it for just a few thousand dollars more to another investor without doing any work. You won’t make nearly as much as the rehabber, but you will realize your profit quickly.

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“Flipping Properties”

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Flip Strategy #5: Pre-Construction

In very hot real estate markets, prices are appreciating as much as 2% per month. If you time things right, you can put a contract on a pre-construction house or condominium, then flip it to someone else when the development is complete. If it takes 12 months for the development to be complete, and the condo price is $500,000, you could make $100,000 or more in one year! Of course, the opposite is also true - you could end up losing money if the local economy tanks and you end up with a worthless condo that you can’t sell for more than you paid. Use this approach very carefully...

Flip Strategy #6: Scouting

The Scout is an information gatherer, so not technically a property flipper. He is the “bird dog” who finds potential deals and sells the information to other investors. Many people get started as a Scout for other investors because it does not take any cash or prior knowledge to look for distressed properties. The Scout finds a property for sale, gathers the necessary information, and then provides this information to investors for a fee. The fee will vary depending on the price of the property and the profit potential. The Scout can expect to make five hundred to one thousand dollars each time he provides information that leads to a purchase by another investor.

Flip Strategy #7: Illegal Flipping

OK, I am not advocating this approach, because it is illegal. Illegal property-flipping schemes work as follows: unscrupulous investors buy cheap, run-down properties in mostly low-income neighborhoods. They do shoddy renovations to the properties and sell them to unsophisticated buyers at inflated prices. In most cases, the investor, appraiser and mortgage broker conspire by submitting fraudulent loan documents and a bogus appraisal. The end result is a buyer that paid too much for a house and cannot afford the loan. Since many of these loans are federally insured, the government authorities have investigated this practice and arrested many of the parties involved. As a result, the public perceives is flipping to be illegal.

The fact is, “flipping” - as I described in the beginning of this article - is NOT illegal. Loan fraud in the process of flipping is what is illegal, so don’t confuse the two. The other six ways to flip are very legal, very ethical and very profitable!

The Basics of Foreclosure Short Sales

You will likely come across dozens of properties in foreclosure with little or no equity, that is, the seller owes at close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a “short pay” or “short sale.”

Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department”. More than likely, each lender you deal with will have a separate name for this department, so be patient when calling. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins.

From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process - attorney fee’s, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Your job as the investor is to convince the lender that it will fare better by accepting less money now.

The lender will want some information about the property, the borrower and the deal he has made with you. Specifically, the lender wants to know what the property is worth. The lender will generally hire a local real estate broker or appraiser to evaluate the property (called a broker’s price opinion or “BPO”). You can also submit your own appraisal or comparable sales information. In addition you will want to offer as much specific negative information about the property as possible. Also, include some relevant information about the neighborhood and the local economy if things are bad (copies of newspaper articles with “bad news” may help). A contract’s bid for repair estimates should also be submitted, which, of course, should be the highest bid you can obtain!

The lender will also ask for financial information about the borrower. Sort of a backwards loan application, the borrower must prove that he is broke and unable to afford the payments. The borrower must show that he has no other source of income or assets to repay the loan. This process may involve as much, if not more paperwork than an original mortgage application! The borrower should submit a “hardship letter”, which is basically a sob story about how much financial trouble the borrower is in. This may require a little literary creativity, and some help on your part. Don’t lie, just paint a picture that doesn’t look good.

Finally, the lender generally wants to see a written contract between you and the seller. The lender wants to make sure the seller isn’t walking away with any cash from the deal. Generally, the contract must be written so that the buyer pays all costs associated with the transaction, so that the “net cash” to the seller is the exact amount of the short pay to the lender. A preliminary HUD-1 settlement statement is often requested, which can be difficult, since many title and escrow companies simple won’t prepare one in advance of closing. You can prepare your own HUD-1, and simply write “preliminary” on the top.

Don’t be surprised if your first short sale bid is rejected. Lenders aren’t emotionally attached to their properties, so they aren’t as likely to give you steal. Many short sales fall through if the BPO comes in too high, which is often the case. You can’t pull the wool over a lender’s eyes – if the property isn’t is need of serious repair, it is unlikely you can convince the lender the property is worth a whole lot less than the appraised value.

The process of the short sale is not that complicated, but the success or failure of the deal depends upon how you present it to the lender. Many novice investors and realtors give up at short sales quickly because their first deal is rejected. Like any business, short sales takes practice to get good. Generally speaking, loss mitigators are pretty good at spotting an amateur investor. If you know what you are doing, the loss mitigators are more likely to make a deal with you.

Want to become an expert at short sale deals? Register for William Bronchick's upcoming Foreclosure Investing Boot Camp.