Many people are dreaming about making money in real estate

Many people are dreaming about making money in real estate. For most people this will forever stay a dream, but some individuals are able to make their dreams come true. Fact is – even the less experienced individual can make money in real estate if following some basic rules. One way to make good money in real estate is to “flip houses”. What is house flipping? Can you actually learn to flip houses?

We all have read stories about of someone that made millions in real estate. But how have they done it? Here is a quick guide how to make good money real estate. It is easy to follow and you can verify each step if you spend additional time to research it and to verify it for accuracy. Let’s assume you live in an apartment or your own house and your income allows carrying an additional mortgage payment for a few months. Keep in mind – you do not plan on keeping the objects you deal with forever. 5-year mortgage terms or ARM’s with 1-3 year terms will work for our advantage.

A good way to start is to buy so-called HUD houses. These houses are sold or auctioned off by a mortgage lender. The HUD houses usually require some fix up work, but the sales price is way below normal market values for comparable houses that are in excellent shape. HUD houses can often be bought with no or just a little money down – of course depending on your personal credit history. Once the HUD object has been purchased you start fixing the problems on the house and to bring it into a condition where it looks well maintained.

If you are good in doing stuff yourself – perfect. If not you need to look for the low-cost repair people in your area. Choose the sole proprietors that often advertise with flyers or low cost classified ads. Work out a deal with them and promise them more business if they work with you. The next step is important. Depending on market conditions you will sell the house yourself and that way save money that you usually would have to spend on the real estate agent. If you act carefully enough you should be able to produce a 20%-40% profit from the overall transaction of buying and selling the HUD object.

Important: Make sure to put some of that profit into a savings account to cover your income tax liability.

With the remaining profit you turn around and do the same thing again. Find the right HUD house and buy it. Fix it up following the same procedure as shown above and sell it. Again – put money aside to cover your income tax liabilities.

Depending on your skills and the market conditions you should be able to go through this process at least twice in your first year. With a little luck you will be able to purchase the 3rd object with cash alone or only need a small mortgage. By now you probably have streamlined certain steps and eventually build up a network of suppliers that help you to cut down the turnaround time from the moment you buy the house and sell it again.

Important: When selecting HUD houses to fix up, concentrate on those that need mainly cosmetic work. New inside and outside paint, new carpets and things like that. Stay away from houses that need structural work. Even with no experience you can do work like painting the inside walls. This is really easy to do as no furniture is blocking your way and if you are going to replace the carpet anyway.

Keep in mind that friends and family might try to talk you out of the idea of house flipping. They are afraid of the risk and of course they have never done this before. Most people avoid risk in life at all cost. Don’t listen if you feel confident enough you can do it. Sometimes you have to ignore advice to find your own luck. Keep in mind – you are buying real estate. It is not a risky stock that loses 50% value in one day. Yes, you might hit the market at a slow point, but time is on your side. As long as you can carry the additional mortgage payment for 6-12 months (worst-case scenario) you should be fine.

House flipping is a simple way to make a fortune in real estate. Plan each step appropriately. Work with a mortgage broker and explain that you only plan on keeping the house for a short time. Ask for loan programs that allow to buy with no or only small money down.

Important: When fixing up the house let psychology drive you. It’s not you who has to like the house. The potential buyer has to like it. Find out what current trends for new houses and their interior is. Choose the right colors for paint and carpet. Model homes can give you a good hint and many ideas.

There is almost no other business that allows you to make money with almost no money down in such a short time. In fact, more millionaires made their fortunes in real estate than in any other business according to statistics on the Internet. So, why should you not be the next millionaire who did it with real estate?

Should You Buy That Second Home?

A summer place in the North Carolina mountains, a winter place in sunny Sarasota, Florida. Wouldn't you like a fabulous retreat in the mountains or near the beach? More and more people are buying second homes for vacation and future retirements.

I sell real estate in the resort town of Sarasota, Florida. Many of my clients are second home buyers. Many of them purchased condos on the beach, on a golf course or just a nice single family home in town. So I deal with second home buyers often. Obviously, I make money from these people so I am in favor of people buying a 2nd home but it is not for everyone.

Desireable second homes are expensive. Make sure it fits into your budget. In Sarasota, there are no desireable properties that pay for themselves if you obtain a mortgage to purchase the property. The rental rates do not cover all of the expensive. You must know going in that it will be an expense. Decide if the expense is manageable.

A property that does not pay for itself is pretty typical in Florida. Do the research on where ever you plan to buy to find out what a property will rent for in relation to the cost of the property. I doubt you will find too many places that cover all of the expenses.

Make sure you will have time to use a second home. With the time constraints of life, you might not use it as much as you hope. I have a friend who works all of the time and has very little free time. He wanted to buy a mountain house in North Carolina. I asked him when did he plan to use it. It dawned on him that he would maybe use it once a year. So he purchase a weekend waterfront retreat within 45 minutes of his home. This way he can use the house when he has free weekends. He has been up there every weekend for the last 3 months.

Compare the cost of renting versus the cost of buying. Let's say you are retired and plan to use a winter getaway for 3 months. Here in Sarasota you can rent a nice place for $3,000 - $5,000 a month. That is $9,000 to $15,000 for a 3 month vacation. Now compare this with the cost of owning. When you own property you have to pay for property taxes, home owners insurance if you have a mortgage, principle and interest payments on the mortgage if you obtain one, maintenance and repairs. All of these costs will vary according to the price of the property you purchase but they will be more than just renting.

Second home owners make money when real estate prices go up, renters lose out. Recently, real estate prices have gone through the roof in many parts of the country. Sarasota real estate prices have had many years of price increases over 30%. Can you imagine if you purchased a second home during this recent real estate price boom? Many of my clients have made hundreds of thousands of dollars in appreciation. That pays for many years of negative cash flows. As a renter you will miss out on any property appreciation.

Even if prices are rising by a modest 5-10% a year that is still a pretty good return on something you can actually enjoy. You can't really enjoy the use of a stock or bond but you can with a second home.

In a nutshell ask yourself 3 simple questions:

Can I really afford it?
Will I use a 2nd home often enough?
If I decide to only rent am I ok with missing out on real estate appreciation?

12 Great Things About Successful Real Estate Note Holders

1. They make sure that the insurance policy on the property is issued for an amount that represents at least the full value of the note still owed to them.

2. They also make sure that the note is recorded and they are listed as mortgagee, trustee, or the first contract holder on the policy. This guarantees that they will be entitled to any proceeds from any claim ahead of the borrower.

3. They make sure that they get a notice of cancellation if the borrower fails to keep a current policy on the property.

4. They make sure that real estate taxes are paid on time by the borrower, and if necessary the note holder will pay the taxes themselves.

5. They make it a habit to drive by the property on a regular basis or have someone drive by to make sure that their investment is still intact.

6. They keep all pertinent information on the buyer in a safe place in case of fire, flood, earthquake, hurricane, tornado or any other type of catastrophe.

7. They make sure that they have received an amortization schedule from their attorney or title company so that they can keep up with all payments that are made to them.

8. They notify the borrower well in advance (at least 3–6 months) before a balloon payment is due. This gives the borrower more than enough time to find favorable financing; this reduces the threat of default.

9. They don’t allow the borrower to get comfortable making late payments. They install a late payment clause in the contract and enforce it.

10. They are serious about their money and initiate foreclosure proceedings at the first sign of trouble. They are not childish in this area. They obtain the services of an experienced foreclosure attorney to handle the problem instead of trying to save a few bucks and “do it yourself”.

11. They realize that a note is a depreciating asset. They understand that each month and each year the value of their note becomes less and less due to inflation.

12. They understand the time value of money and are able to answer these questions:

. How much is my note really worth in today’s market?

. If I decide to sell today for all cash, how much would I get?

. Can I sell a partial of my note?

. How fast can I get the money?

. Who will buy it?

. What is my risk factor in the long run?

. What if things don’t work out as planned?

. What is my exit strategy?

. Should I continue to receive monthly payments for the duration of my note?

These are considered some of the best reasons why some people are successful note holders and some are not. There are more, but these will make the greatest impact on you if you can emulate them. If circumstances in your life indicate that now is the time to convert your note into cash, please give us a call and let us help you.

Also, if you need to only raise a specific amount of capital, we can structure a partial so that you receive exactly the amount you need without having to cash out your entire note.

Home Sellers – Smart Fix Ups to Sell For Top Dollar

1)Curb Appeal – Dress up the landscape add mulch at all planting areas shape into curved borders, use to cover around all trees spread wide and cover bare areas. The mulch will help define the landscape, add flowers and shrubs, cut and edge lawn. Keep trim and turn mulch for fresh appearance.

2)Exterior Problems – Roof is way past its life span (the buyers home inspector or Bank appraiser will require it to be replaced, so why not do it before at a cost you can negotiate) replace roof use Architectural grade shingles costs more in material but the labor is the same. Replace any damaged or rotted wood including decks and porches. Repaint exterior siding, trim, windows and shutters.

3)Doors and Windows – Make sure every one is operating properly it is well worth the cost to have a contractor come in and make everything work. New window balances, locks, replace broken and fogged glass, adjust all doors, thresholds, and locksets. Patio sliders always are misaligned replace rollers for better operation, install new screen.

4)Appliances and Mechanical Systems – If your appliances are more than 10 years old replace them they don’t work efficiently and are way out of style. No need to buy high end but they must be high style. Match all kitchen appliances pick a contemporary look. No doubt the mechanical systems are big ticket items a 30 year old a/c unit must go, air handler unit compare cost of refurbish versus replacement. Water heater should have been replaced 10 years earlier if not replace.

5)Kitchens and Baths – Your counter tops are beat up replace or refinish. Wood cabinets can be repainted or refinished, change out hardware new door handles and drawer pulls. Replace faucets with new contemporary look. Check light fixtures there are great low cost designer fixtures at the big box stores.

6)Flooring – Ceramic tile if in good condition consider cleaning and staining the grout for a new fresh look. Replace carpet and padding use good quality not high end. Vinyl flooring if not newer replace. Hardwood floors scratched dull no shine refinish.

7)Walls and Ceilings - Repaint every room paint walls and trim in complementary neutral 2-color. Paint ceilings white. Paint all doors both sides same as trim. Make house as fresh and new as possible.

Every item on this list will affect your listing agent their market analysis and suggested list price of your home. They each will affect the buyer and the buyer’s agent in what the offer price will be. Even if they over look some items when the home inspector comes in they will nail every one of these repairs with an estimated cost of two to three times the actual cost you can negotiate. This home in 30 year old condition will sell at 20% below the market with these fix ups as a top condition home with warranties you can get 10% to 15% above the market. A 35% difference and a great part of that stays in your pocket.

What is a Tax Lien Certificate?

Let’s begin with the basics.

How would you like to walk into your local county office and write them a check, and in exchange, earn 14%, 24%, and even 50% on that money, guaranteed by the government?

Property owners nationwide, pay property taxes. You pay them, I pay them, but have you ever wondered what happens when someone doesn’t pay them? The county doesn’t get the money, but they still have bills. They have to raise this money somehow because unlike the federal government they are not permitted to carry a deficit. Like anyone they want their money now. To avoid chasing the property owners, they turn to us for help.

Counties nationwide have said for years, “if you’ll pay these property taxes on behalf of these lazy property owners, we’ll give you a Tax Lien Certificate”; which gives you a first lien on the property.

“Now if the taxpayer doesn’t pay you your money back plus interest (8-50% per year), then we’ll give you that piece of property. But that’s not all! We’ll also extinguish all other liens on that property, even the mortgage!”

The first position lien holder gets priority over everyone else. As the primary lien holder you dictate what happens with that property, simply put the first lien holder is God.

TLC’s have proven to be the most efficient method by which the county can collect delinquent taxes. Everyone wins! The taxpayer gets to keep his home and gets more time to pay. The county gets paid. You the investor, earn ultra high returns on your money. Best of all, if done correctly there’s no risk on your behalf. You pay the taxes and wait out the redemption period until you win. If the taxes do get paid you earn the interest penalty of 8-50%. If the taxpayer does not pay you the back taxes plus the penalty interest - you get the property. The mortgage and all other liens are wiped clean off of the property. Can you say “JACKPOT!” That’s right, people like you and I are getting free and clear properties across the U.S. for pennies on the dollar. Go ahead say it - “JACKPOT”.

Law & Technology

The legal battle over the sex.com case may be over, but it seems that there is no end to the hanky-panky when it comes to online domain names.

In Kremen v. Cohen, the 9th U.S. Circuit Court of Appeals recently rejected the latest appeal by pornography king Stephen Michael Cohen of a $65 million award to sex.com’s original registrant, Gary Kremen. Kremen alleged that Cohen misappropriated that domain name.

Kremen has settled his conversion claim — alleging that the domain name was improperly transferred to Cohen — with the one immediately available deep pocket, Network Solutions Inc.

Herndon, Va.-based NSI was the registrar of the sex.com domain. It allegedly allowed the domain name to be transferred to Cohen without Kremen’s consent. The confidential settlement reportedly was for somewhere around $15 million.

In the course of this decade long legal adventure, Kremen helped blazed new trails in the field of registrar liability and domain name law.

The sex.com case began in 1994, before the explosion of the Internet as a medium for selling goods, services and pornography. When Kremen first registered sex.com, only one company, NSI, was registering names, and it was giving them away for free.

Kremen and the courts have been forced to grapple with the thorny question of whether a domain name is capable of being converted — a legal theory normally requiring that some tangible property be misappropriated to another person without consent. The legal confusion was compounded by the fact that there was no enforceable contract between Kremen and NSI since Kremen had paid no consideration for the domain.

But the method by which control of the domain was wrested away from Kremen was quite old-fashioned. It was accomplished by simple forgery and fraud.

Cohen sent a letter to NSI purporting to have come from Kremen’s company, disclaiming any interest in sex.com — which Kremen had let sit idle — and asking Cohen to so inform NSI. The letter purportedly was signed by Kremen’s then-housemate, though the court subsequently noted her signature was misspelled.

NSI did nothing to verify the authenticity of the letter and, accepting the letter at face value, transferred the registration of sex.com to Cohen. He then built a multimillion-dollar porn empire around the domain, much to the chagrin of Kremen, who by then recognized the tremendous value of a generic, second-level domain name such as “sex” in the dot-com world.

Millions of dollars and several court battles later, Kremen succeeded in procuring the return of the sex.com domain registration. To boot, he obtained a $40 million compensatory and a $25 million punitive damages award from the U.S. District Court in San Francisco against Cohen, who apparently took all his assets and fled the United States to an undisclosed location where even bounty hunters hired by Kremen cannot find him.

Important issues remain

Whether Kremen ever collects this judgment, and whether the case is finally over, important legal issues remain.

In 2003, in Kremen v. Cohen, the 9th Circuit reversed the trial court and held that an Internet domain name is property subject to being improperly taken or converted by another. The ruling allowed tort claims to be brought when a domain name is wrongfully transferred even though no enforceable contract exists or when contract remedies may be too limited. Still, the issue remains open.

The 9th Circuit based its ruling on its self-described “grudging reading” of California law as to whether a domain name fell within an exception allowing intangible property not merged into some document — like a stock certificate — to be the subject of a conversion claim. The question of whether something is property subject to conversion is not a federal legal question, but one of state law.

The federal appellate court in this case had offered the opportunity to clarify California law, by means of certified question, to the California Supreme Court. But that high court demurred. When forced to make the determination of California law itself, the 9th Circuit interpreted California case law from the late 1800s to permit such a claim despite the argument that the domain name was no more than a routing protocol and thus not tangible property.

The 9th Circuit held that the domain name system was in fact a document or collection of documents stored in electronic form. The court found that the domain name is similar to a stock certificate, which is associated with the intangible property, and that the intangible value of a domain name is associated with the domain name system records. Such records associate word-based domain names with particular computers networked on the Internet.

But the 9th Circuit went further. It noted that if it were necessary for it to do so, it would hold all property, tangible or intangible, as being capable of conversion — and would reject the approach set forth in “Restatement (Second) of the Law of Torts” permitting conversion only where there is a merger of intangible property in some document.

However, because this decision is based on a federal court’s interpretation of one state’s law, it does not set strong precedent for other courts applying the property laws of different states. In fact, other federal decisions, most notably from the Eastern District of Virginia where NSI was based, hold to the contrary. It remains to be seen where the other circuits or states will come down on this debate.

Dilemma remains

The Kremen victory and the eventual settlement by NSI have not deterred continued shenanigans or carelessness with domain names, as was recently experienced by one of New York’s oldest commercial Internet service providers, Panix.com.

In mid-January of this year, ownership of the Panix.com domain name was moved to Australia, the company’s domain name server records were moved to the United Kingdom, and the company’s e-mail was redirected to a company in Canada, all without Panix.com’s knowledge or consent.

The fiasco resulted in Panix.com’s customers, many of whom are in New York City, Long Island and New Jersey, being deprived of Internet and e-mail access for a few days, and in the potential compromise of customers’ private e-mail and passwords.

Two well-known domain registrars were involved in the Panix.com incident, but proper verification of the transfer request was not obtained. The receiving registrar in Australia, responsible for obtaining the validation, had delegated the responsibility to its reseller, which failed to obtain the validation.

In its investigation of the Panix.com incident, the Internet Corporation for Assigned Names and Numbers (ICANN, a private, nonprofit corporation that currently governs the domain name system), expressed concern that the recipient registrar had delegated the verification to a third-party reseller. But a proposed rule that would have required the recipient registrar to have sole responsibility for verification of the transfer request was rejected when ICANN recently adopted new procedures to regulate transfers of domain names from one registrar to another.

Panix.com was able to regain its domain name rather quickly. It took a determined Kremen a number of years and a lot of legal fees to do so. Others may not fare as well. Owners of domain names must exercise vigilance and diligence. The courts will have to continue to address the inevitable claims and disputes.

We will see where other courts wind up in determining whether a domain name is property and how they will deal with the continuing, thorny legal issues in this area.