Minnesota Real Estate Investors Association, Inc.

Tag: sub2 (6 articles found) - Clear Search

Is Real Estate Changing?


Obviously it is, but how is it changing and what direction are we headed is the question most people are asking themselves these days. Some of the old school investors/realtors will relate to this article, but for most of you, this will seem like a radical new approach to real estate. You see, the changes I am going to be talking about or nothing more that real estate cycles coming back around full swing.

Over the last ten years or so, all you needed was a pulse and a few months to build appreciation in order to make money in real estate. That has changed drastically, today not only do you need a pulse, you also need a creative thinking brain. However, just having a pulse will not get you a mortgage anymore. In fact, I think the only way to get a mortgage today is to prove that you absolutely don’t need it, and then you have at least a fighting chance to get past underwriting.

Over the past two years, the real estate market has been going through a market correction, because of the over inflation of housing prices. Most of these properties have been either short sales or foreclosed upon by the banks and put back on the market at reduced prices. In many areas, prices have begun to stabilize and the new market values have been established. The first time home buyers tax credit helped boast these sales and stabilize prices. However, access to financing is getting harder and interest rates are expected to increase over the next few years. This will help to bring down prices of the surrounding properties over the next few years.  Read More...

What’s Working for You?


I do a live weekly webinar training for real estate investors from all over the country. The weekly training is designed to help you either get started or get back on track. We have a vast verity of investors on the weekly training call from beginners to seasoned investors and one thing that I have been trying to emphasis on the training calls is that there is no one magical technique for success.

There are common traits and behaviors of successful investors, but they all have their own (sometimes unique) business models and they stick to it. However, in today’s rapidly changing market and economy, even those seasoned investors have been forced to change their strategies recently, myself included. That is why we have been seeing so many seasoned investors looking for answers.

I have been working with everyone to help them understand that one key fundamental to long term success in real estate, or any other business for that matter is the ability to change with the market. The market has changed and so must we.

So I am reaching out to all my fellow investors, new and old to find out what is working for you in your market? In the comments section below, tell us what is working for you, or what you have been doing lately. Then join us on the weekly training calls to continue this discussion on a weekly basis. Read More...

Flipping is Legal Again...



Ok, ok, I know, flipping has never been illegal, but with recent changes in the mortgage industry, the lenders are coming back around and asking for our help again. Wells Fargo was actually the first major lender to change its stance on seasoning, but because FHA is a government program, this is huge. First, let me give you a little back ground so you understand what the hoopla is all about over FHA temporarily suspending its 90 day title seasoning rule.

Several years ago, when all was right with the world, some investors were taking advantage of a unique situation in the mortgage industry. The federal government wanted everyone to be able to take advantage of the America dream. So they lowered interest rates and loosened up the required mortgage qualification guidelines for Fannie Mae and Freddie Mac backed mortgages, including down payments. This actually made it cheaper and easier for people who normally would never have been able to qualify for a mortgage, get one with little or no money down.

These changes actually made it cheaper for a tenant to get a mortgage than it was to rent a property, because they could finance the entire purchase price, including their closing costs. If they were to rent a property, they would at least need the first month’s rent and a security deposit. But if they bought a house, they didn’t need any of their own money up front and their first payment wasn’t due until after they had lived in the property for one month. Plus, with a mortgage, the lender only pulled their credit report, and since most of these tenants never established credit, they didn’t have bad credit. Note that a credit report doesn’t show eviction notices or criminal history, which is where many of these tenants had records. Read More...

Subject-To’s are Coming Back


Since real estate values have plummeted, Subject-To deals have been harder to do because most of the time, the mortgage balance from the seller is higher than the property values creating a situation that if we took over the sellers property and started making payments on their existing mortgages, then we would end up with a property that we could not make cash flow or even resell without having to pay down the mortgages ourselves.

While some lenders were accepting short sales, most lenders were waiting for their bail out from the government. Since that never happened, some lenders have been more susceptible to short sales. While short sales have been our only way to deal with over leveraged properties, we were forced to resell the properties to pay off the short sale. Which meant that sub2 deals were not taking place which is why according to the National Association of Realtors®, about 50% of all transactions in the 4th Quarter of 2008 were either Foreclosures or Short Sale.

According to BloombergCitigroup Inc.’s agreement to back legislation that lets bankruptcy judges cut mortgage rates for at-risk borrowers drew criticism from bank industry lobbyists who said the compromise with Senate Democrats was flawed. Citigroup endorsed the bill after Senate Banking Committee Chairman Christopher Dodd, and Senators Charles Schumer of New York and Richard Durbin of Illinois, said they will limit the legislation to existing mortgages, rather than future loans. Durbin, the Senate’s second-ranking Democrat, brokered the deal with Citigroup and sought similar agreements with other lenders.” Read More...

What is 'Subject To'?


This seems to be the toughest subject for investors to understand, especially new investors.

What is 'Subject To'? Here is a section from the Purchase Agreement I use that talks about encumbrances and marketable title:

DEED / MARKETABLE TITLE: Upon performance by Buyer, Seller shall deliver a Warranty Deed joined in by spouse, if any, conveying marketable title, subject to: (A) the existing mortgages. (B) Building and zoning laws, ordinances, state and federal regulations; (C) Restrictions relating to use or improvement of the property without effective forfeiture provisions; (D) Reservations of any mineral rights by the state of Minnesota; (E) Utility and drainage easements which do not interfere with existing improvements; (F) Exceptions to title which constitute encumbrances, restrictions, or easements, which have been disclosed to Buyer and accepted by Buyer in this Purchase Agreement; (Must be specified in writing) _______________________________________________________ (G) Others (Must be specified in writing) ____________________________

When you buy a property and take over the existing mortgages and start making the payments directly to the bank, you have bought the house 'Subject To' the existing mortgage.

Example:

Ready to Join me for a GREAT 2009?


It’s that time of year again, when we sit down and reflect on the previous year and look forward to the year ahead of us. This past year has been filled with extreme swings in the economy and our emotions. For some people 2008 was a great year and for others it was a nightmare. I have been caught right in the middle of both, so I guess for me, everything evened out and it was a year that makes me look back and ask, what the heck happened. I had some winners and some losers. The losers of course came in the last quarter of the year and I did pretty well during the first 3 quarters of the year. Some might look back with discouragement and frustration. I however am looking ahead with a clear determination to make 2009 the best year ever.

With the shake up in the credit markets and the stock markets, I see huge potential for 2009 in real estate. I believe we have hit the bottom, for the most part. A new president and administration will take office on January 20, 2009 and they have made it clear that they are focused on stimulating the economy. Again, for some this will be good and for others it will be bad. For real estate investors, this will be very good. Just like when the real estate market was hot, the economy seemed unstoppable and real estate prices climbed to artificially high prices, the collapse of the credit and financial markets has artificially lowered real estate prices below the point of where they normally would have settled at. Read More...