Archive for March, 2011
Critical Lease Option Terms
Posted by Peter Vekselman in Uncategorized Tuesday, 29 March 2011 06:01 No Comments
No doubt, lease options are great tools for facilitating real estate deals today when future property prices are uncertain and many buyers lack the ability to make a large down payment or obtain conventional financing.
With that said, there are pitfalls the savvy investor needs to plan for when drawing up lease option documents. Notice there are multiple documents because one of the most critical terms of a lease option is having the lease and the option written as two separate documents.
One of the biggest benefits of a lease option contract is the flexibility it allows both the lessee and the lessor. Nonetheless, here are common contract terms to be aware of.
1. The reason to write the lease agreement separate from the option agreement comes about in the event the lessor needs to evict the tenant. If the lease agreement and option agreement are combined as a single document, the tenant may claim an equitable position in the property. In that event, a judge may convert the lease into a land purchase agreement that overrides the lease clause. At the very least, the title becomes clouded.
2. Make sure the option agreement contains a well written clause stating a threshold up to which the tenant is responsible for repairs. This is based on the assumption that he will become the future owner of the property. Set the threshold high enough ($3,000 to $5,000) for it to be meaningful and to prevent the tenant from trying to have you finance property improvements prior to the final sale of the property.
Commercial Sectors Update
Posted by Peter Vekselman in Uncategorized Friday, 25 March 2011 03:30 1 Comment
As our economic recovery continues, commercial real estate will outperform residential for a few years to come. However, not all commercial sectors will perform equally. It’s a good business practice to occasionally take time to scan the market in our never-ending quest to learn real estate.
Good news on the commercial front is that a mid-February NREI survey shows 74% of lenders expect commercial credit to become more available over the next twelve months.
Now, what are the best commercial sectors for investment??
Apartment buildings are already in growth mode. Nationally, occupancy rates are well up into the 90% range. Hot markets like New York City and Washington D.C. have filled vacancies and limited new construction is beginning. The urban apartment market has fully recovered and will lead commercial real estate revenues for years to come.
The market has multiple drivers beginning with displaced homeowners. Or should I say, foreclosed on homeowners. These people and families need somewhere to live. Current mortgage rules prevent them from qualifying for a new mortgage for about five years. It’s apartment living until then.
When Your Short Sale Offer is Rejected
Posted by Peter Vekselman in Uncategorized Monday, 21 March 2011 17:45 No Comments
Today’s blog contains critical information if you are here to learn real estate.
There is no question that short sales will be around for a long time to come. We’re talking years not months. If you haven’t gotten into short sale investing yet, there is still time for you to do so. If you want to learn real estate, it means keeping up with current events. Today, that means short sales continue being driven by many reasons including: an excess of properties for sale on the market, excess Bank REO inventory, bank shadow inventory, distressed homeowners remaining underwater in their mortgages, new construction coming to market, sellers on the sidelines, etc.
Further evidence that lenders are under pressure to approve short sales is this recent Treasury Department statement: “While HAFA has been widely credited with streamlining the short sale process by setting clear timelines, documentation requirements and procedures, feedback from various stakeholders including servicers, housing counselors, realtors and others supported that additional enhancements could be made to further streamline short sale transactions, to the benefit of homeowners.”
Following that was a report from the Congressional Oversight Panel that oversees TARP saying the Treasury has spent just $4.3 million on HAFA for 661 short sales. Based on those low numbers, Treasury made rule changes:
- HAFA no longer requires that servicers verify the borrowers’ finances.
- HAFA no longer requires servicers to determine if the borrowers’ monthly payment is higher than a 31 percent debt-to-income ratio.
- HAFA no longer requires second-lien holders to agree to accept 6 percent of the unpaid principal balance owed them, up to $6,000. Servicers now decide who gets paid how much, with a cap still at $6000.
- HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.
Short Sales – The New Investment Frontier
Posted by Peter Vekselman in Uncategorized Saturday, 19 March 2011 06:15 No Comments
There is good reason that your real estate training never ends. Delinquent mortgage payments continue having a major affect on today’s residential real estate market. Approximately 5 million borrowers are at least two months behind in their payments. What are the lenders going to do? This is uncharted territory for everyone involved – lenders, borrowers, and investors.
Staying current with events is paramount to your real estate training during times such as these. The combination of industry knowledge and common logic says the number of short sales has to rise in the near future. Estimates are 23.1% or 11.1 million mortgages were underwater at the end of 2010. Additionally, the numbers say that only 30% of bank owned property has even made it onto the market. The last key statistic to the equation is that loan modifications are down because the majority that can qualify already have.
So how do we apply this information to our real estate training? If banks can’t sell all of the houses they already own and millions upon millions of owners are behind in payments and even more millions owe more than the house is worth, the only reasonable alternative is for banks to accept more short sales. That means I will continue bringing you important insights as the short sale phenomenon unfolds.
One current reality is there are now many reluctant first time landlords in the rental market. That’s because homeowners had to move on although they couldn’t sell for less than the mortgage. Many of these same houses rent for less than the mortgage payment. It follows that these reluctant landlords have become sick of taking a financial beating month after month. Even if they tried before, they are ready to take another shot at a short sale – but now there are tenants in the house.
A Real Estate Investors’ Beginner Guide to Facebook
Posted by Peter Vekselman in Uncategorized Monday, 14 March 2011 17:04 1 Comment
As a real estate investor, it’s important that I realize my own limitations. I’m a real estate expert not a social media expert. However, as a real estate mentor I do stay on the cutting edge of real estate marketing developments. As such, I am very much in touch with the networking and marketing power that this new frontier brings to real estate investors.
There can be little doubt that Facebook is the clear social media leader. You may ask why I believe Facebook to be so important? These facts are very convincing:
- There are more than 500 million active users.
- People spend over 700 billion minutes per month on Facebook.
- 50% of active users log on to Facebook every day.
- The average user has 130 friends.
- The average user connects to 80 community pages, groups, and events.
- More than 2.5 million websites have integrated with Facebook.
- Over 80 of the U.S. Top 100 websites and over half of the Global Top 100 websites are linked to Facebook.
- There are more than 200 million active users currently accessing Facebook through their mobile devices.
- People using Facebook on their mobile devices are twice as active on Facebook than non-mobile users.
Those numbers cannot be ignored. You won’t find that many participants in any other media – anywhere. In comparison, there are 115.9 million TV households in the US. As we all know, TV marketing is very expensive. Facebook and other social media marketing are free. It’s a no brainer.
There are many strategies for social media marketing. Four of the most effective are:
- Viral marketing with a catchy video delivering a subtle marketing message.
- Contests and discounts that excite your audience and convince them to pass your message to friends and family.
- Offering new apps that appeal to your target audience.
- Offering insightful information based on your business expertise.