Real estate investment face worse consequences as US drowns in debt

September 9, 2010 By

As the US technology stocks, real estate derivatives bubble up the financial market, markets, investments and households face worse consequences as the US drowns in a sea of debt. More and more people are taking out mortgage loans without asking the most important questions to themselves ‘ how much house can I afford’. This is leading most people to lose their houses to foreclosure and making the real estate investment market more and more sluggish.

The amount of federal government debt in the US is on the rise and has already reached an alarming level of 100% of the GDP (Gross Domestic Product) and has shown no moves of dropping. The household debt is more than 90% of the gross domestic product and there is commercial, state and personal debt too, to add on to the amount of total debt load in the US. These debts are estimated to amount to 350% of the GDP but are compounded by unfunded liabilities and off-budget items.

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The asset prices in most US states are declining largely and this is slowly reducing their debt loads but the Federal Reserve and the President are thinking of adding more stimulus and money into this particular real estate market. The households and businesses do not want any more debt load and the US government can’t afford any more debts. Both deflation and a dragging down of the debt amount are very necessary for households, investors as well as the government. Only this could clean up the balance sheets of the businesses and citizens.

Deflation can wash out the total real estate market in a year or two but the Bernanke strategy has raised another specter, the possibility of another hyper-inflation. This is different from normal inflation and this can prove to be more harmful to the US economy as it can destroy the currency. The constant issue of Treasury bonds and notes to fund the bailouts of the banks and Washington deficits is gradually weakening the confidence of the dollar. More than half of the US government debt is held overseas. Selling more paper into the real estate market will boost the chances of a surfeit.

A deficit in the value of the dollar due to the increasingly sluggish real estate investment market could soon panic the world financial market. These negative statistics calls for mortgage companies to adopt stricter lending norms. Not only the lenders, the borrowers must also check ‘How much house can I afford’ before applying for a mortgage loan to buy his dream house.

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Finding the Money to Invest in Real Estate

May 3, 2010 By Leave a Comment

Getting involved in the real estate investing game can be difficult at first especially if you don’t have the money. The truth is that it isn’t really so much the money as the lack of confidence associated with not having capital and not having knowledge. You could drop about any successful real estate investor off in a new city with no money and in a short time they would have built a profitable enterprise.

So the question is what are some good ways to find the cash you need to get started?

Private money and hard money lenders

These are not just for sophisticated investors but you should make sure that you know what you are getting into when you deal with a hard money lender. You can get money to close fast and they will not be as likely to look into your financials. Using hard money lenders to buy property will cost you significantly more in interest, typically 10 – 12 % but if you can get into a property for 65% of market value this increased interest may be worth it. Private lenders are also much more likely to be willing to structure creative deals than banks. Ask for interest only loans on all or part of the balance. This is a great way to generate a sizable monthly income fairly quickly.

Pay for it Later – Deferred Down Payments

This one can take some bird dogging, finding the right motivated seller is essential here. The principle is simple, you find a preforming mortgage that is about to go bad and take over the loan. Small print is important and a good real estate lawyer can be very helpful here. But the idea is to make a deal with the seller that you will pay them a lump sum when you sell the property. Finding these sellers can mean putting adds in the paper or pursing people in problem situations.

Substitute Collateral

Don’t ever forget about the possibility of putting other things on the line. You can use existing real estate, cars, boats, or anything that you have of value as collateral for a down payment or even as a down payment. This can be an easy way to find interesting deals and make them happen with little or no money down.

Use an Equity Line of Credit

Borrowing against your personal residence or any other real estate that you own is also an option. You can also borrow against an IRA or simply open a personal line of credit with your bank. These will typically be smaller loans but could easily be enough to get you started in inexpensive starter homes.

There really are a number of different ways to generate cash for real estate closings or simply buy for nothing down. Even during tough economic times there are still deals being made and people getting wealthy off of real estate investing.

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Different Types of Real Estate Investing

February 23, 2010 By Leave a Comment

One nice thing about real estate investing is that anyone can do it.  Whether or not you have good credit, a steady job, or money in the bank, there is a form of real estate investing available to you.

Granted, the more money you have, the more possibilities you have.  Cash is and always will be king.  That being said, cash is not necessary.

Here are a few different ways to invest in real estate starting with the most expensive and ending with the options that don’t take money or credit.

Investing in Apartment Complexes

Investing in multi-family real estate takes the most money of the options I am about to present, but it can be extremely profitable and is more passive than the others.  You generally need at least $100,000 to either buy an apartment complex on your own or join with other people to buy a bigger one.

The main advantage is efficiencies of scale.  Because all the units are in the same place, you can reduce the number of maintenance managers, leasing agents, etc that have to cover  your properties.

Investing in Real Estate Secured Notes

Loaning money to credible investors to purchase real estate can be very profitable and very passive.  Basically, you loan 70% of the after-repair value to an investor who buys the property to rent or flip.  In return, you get anywhere from 6% – 12% on your money.  The worst case scenario is that he doesn’t pay and you foreclose.  Then, you take over a property with equity!

Hard Money Rental Real Estate

If you don’t have as much money, but have decent credit; you can begin investing in real estate by using hard money.  Hard money lenders lend based on the investor value of the house and allow you to buy it with very little out of pocket if the deal is priced right.

Wholesaling

If you have no money and no credit, you can still be in the game!  Simply find deals that are good enough that you can assign the contracts to an investor with credit and money for a fee.  If you find a $100k house for $50k, you could sell the contract to someone for $55.  You would have made $5k without doing a whole lot!

Conclusion

In conclusion, everyone can invest in real estate if they know how.  Just learn the ropes and jump in!

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