Shoestring to Millions

Short Sales are not easy. This runs through Mark’s head as tries (yet again) to call Sam’s lender.  Eureka! At long last, the lender has received Sam’s short sale package!

Mark is giddy with joy!—But his giddiness is short lived. He is advised that the short sale process can only begin once a short sale negotiator has been assigned to the file. Mark requests an approximate date from the customer service representative and he is advised that it may take 14 to 20 business days for a negotiator to be assigned, due the large volume of short sales files the bank is already processing.

Mark is once again put into the waiting zone for the short sale process. Mark ,like a prudent investor, decides that during the wait period he will get the property listed with Jay (the Realtor) and start marketing the property to help locate an end buyer.

TIP: When investors have a property “ locked up” they should market it immediately to in order to locate multiple end buyers. Marketing take various mediums in the world of real estate marketing: it can range from simply placing the property on the Multiple Listing System (MLS) with a realtor to putting together a direct mail marketing plan to holding a open house.

Mark decides to utilize the “gunshot marketing plan approach” for selling the property.  Mark not only has the property listed with his Realtor to place it onto MLS, but he also places the property into online classified advertisements and in print in the local newspaper.  Mark puts his marketing plan into place and starts to show the property to potential end buyers.

TIP: The greater the exposure you can get on the property the better your chances are for selling. Along with exposure in today’s market, it is important to work on creating specific seller held or creative financing programs if possible to allow for a greater percentage of buyers in the market to be able to buy your property.

Over the course of a few weeks of showing the property, Mark realizes the difficulty he has in deciding a sale price for the property without completed his short-sale negotiation. His strategy is to price the property at 7% below current market value and explain to all buyers that this is a short sale and so the final price acceptance depends on the bank (legal point- please make sure you make that disclosure to the buyers to ensure that you as the investor do not walk into legality issues).

TIP: When selling a property in a declining market or a buyers market. It is very important to under price the property by 5 to 10% under the market value and your competitors in order to ensure that your property gets the proper buyer traffic that will help you sell the property.

As weeks go by, Mark finally receives a call from the lender informing him that a negotiator has been assigned on the file. Mark starts to talk with the negotiator, outlining the current situation of the homeowner. Mark explains that the homeowner needs to sell because he can longer afford his mortgage The negotiator asks why the homeowner doesn’t try a loan modification on the property.

Explanation: Loan Modification is a modification made to an existing loan made by a lender in response to a borrower’s long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

TIP: The rule of thumb for loan modifications: the bank will ideally want the new mortgage payment (Principal Interest Taxes and Insurance) to be 33-35% of the total household income (Gross or Net but that depends on the lender guidelines). If the lender can obtain a good return on the modified mortgage payment then they will usually approve it because they have an incentive from the federal government to do so. It is to be noted that the lender is under no obligation to accept a loan modification request from the borrower.

Mark explains to the negotiator that the homeowner has too many other obligations and does not wish to attempt a loan modification and rather opts to sell the property to reduce his liabilities. Based on this, the negotiator rejects the loan modification puts in a request for a BPO as the next step in Short Sale review process.

Definition: The BPO, or Broker Price Opinion, is a tool used by lenders and mortgage companies to value properties in situations where they believe the expense and delay of an appraisal is not necessary. Real estate brokers are given an order conduct a BPO by the lender, mortgage company or loss mitigation company. The broker does either a Drive By BPO or an Internal BPO in most cases.

Mark is now on wait again until the BPO agent schedules his appointment. What will the BPO reveal? Can Mark as an investor influence the BPO agent in any way? How can Mark beef up his marketing efforts to sell the property or can he get more creative?

Check out next week’s blog.

MARKS NET WORTH as of August 17th, 2009:  $72,500

Equity in home: $55,000

Savings: $4,000

401K: $13,500

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

Short-selling isn’t easy. It takes patience, determination and organization. Lets take a look at how Mark does at his first go-around with the short sale process…

Mark is now starting to feel the pressure of running a business and working a full time job. As he finishes his day at work, he runs at home to retrieve his papers and heads to the local coffee shop. Over his cup of latte, Mark begins to look through all the paperwork he gathered from Sam. Mark reads through the piles of legal letters, notices and threats sent to Sam. As he shifts through Sam’s paperwork, he starts to compile a list of items he needs to execute a short sale package.

Mark first puts together his Authorization to Release. This  document allows a third-party (Mark) to speak on behalf of the borrower (Sam) with the lender. A hardship letter is the next item–in it Mark explains why Sam fell behind on his mortgage payments and why this home most be sold as short.  Additional documents needed: 2 years of tax returns, 2 months of pay stubs and 2 months of bank statements. Mark also pieces together a financial worksheet for Sam based on his bills, receipts and other expenses.

Once complete, Mark heads home and faxes his Authorization to Release (ATR) and to the 1800 fax number as listed on Sam’s mortgage statement.  Mark has read from his numerous books that it takes up to 72 hours before the ATR is received and uploaded into the lenders system. Mark sits by and waits patiently for three days to pass and upon the fourth day morning before heading out to work Mark makes his first call to the bank’s 800 number. As he sits on the bus, cell phone in one hand and the mortgage statement and authorization in the other; Mark is placed on hold and is indoctrinated into the short sale world of hell:

Bank: “Thank you for calling.”

Mark: “I sent in the ATR about 3 days ago now. I wanted to see if it has been received?”

Bank: “Sir, Can I have the  Account Number and the Borrower Name”

Mark: “Acct Number: 22465178 Smith”

Bank: “I do not see anything in the file sir. Can you let me know when you faxed it in?”

Mark: “I sent it  3 days ago. I have a confirmation”

Bank: “Sir unfortunately you will need to resend the document as we have not received anything”

Mark is beyond frustrated with the bank’s customer service. How is he supposed to help Sam if the bank is going to misplace his faxes? So, Mark re-faxes the ATR…and patiently waits ANOTHER 72 hours. Upon the passing of the 3rd day, Mark calls back into the bank .

Bank: “Thank you for calling..”

Mark: “I sent in the ATR about 3 days ago now. I wanted to see if it has been received?”

Bank: “Sir, Can I have the  Account Number and the Borrower Name”

Mark: “Acct Number: 22465178 Smith”

Bank: “I see that the Authorization was sent in”

Mark: “Great I wanted to find out about the status of this file. When is the expected sheriff sale date for this property”

Bank: “There is no foreclosure date scheduled as I see in the system”

Mark (feeling happy that he getting somewhere with the file): “I wanted to negotiate a short sale”

Bank: “You will need to send in a short sale package

Mark elated having his ATR accepted quickly puts his entire short sale package through the fax machine. Mark sends in the package and wishes to try to negotiate the short debt pay off with the lender

Bank: “Thank you for calling. All our reps are unavailable right now.”

Mark: “I sent in the short sale package. I wanted to see if it has been received?”

Bank: “Sir, Can I have the  Account Number and the Borrower Name”

Mark: “Acct Number: 22465178 Smith”

Bank: “I do not see anything in the file sir.”

Mark: “I sent it and I have a confirmation”

Bank: “Sir unfortunately you will need to resend the document as we have not received anything”

Mark frustrated goes back and resubmits the package again.  The next day he calls again.

Bank: “Thank you for calling. .”

Mark: “I sent in the short sale package twice. I wanted to see if it has been received?”

Bank: “Sir, Can I have the Account Number and the Borrower Name”

Mark: “Acct Number: 22465178 Smith”

Bank: “I do not see anything in the file sir. Can you let me know when you faxed it in?”

Mark: “I sent I have a confirmation”

Bank: “Sir unfortunately you will need to resend the document as we have not received anything”

Mark faxes the package in again and tries the next day and gets the same response that nothing has been received. This happens 5 more times, and by 6th fax attempt Mark overnight the package.

TIP: This has happened on actual shot sale negotiation files with WAMU and Bank of America.

Mark calls into the bank to see if they received his overnight delivery. Surprise Surprise no package had been received by the bank. Mark  feels dejected and infuriated that after weeks of trying the bank still has not even received his short sale package.

Will the bank ever receive Mark’s package? Will he get to negotiate his first short sale or order his first BPO before the property goes to sheriff sale? The clock is now ticking

MARKS NET WORTH as of August 9th, 2009:  $71,500

Equity in home: $55,000

Savings: $4,000

401K: $12,500

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

Mark made his offer to Sam and is nervous and excited. Mark sits in his office chair, on Thursday morning, running the events of the previous night through his mind as he stares at his computer screen.  He thinks back to the conversation he had with Sam about the fishing trip, and was concerned for being “too corny” while trying to connect with him.

It is lunch time and he constantly stares at his cell phone waiting for the call from Sam… but alas still no call.  Thursday turns into Friday, which blends into Monday with no phone call from Sam. Mark starts to fell discouraged, is concerned that Sam will walk away from the deal. So, Mark decides to bury the file and move onto the next deal cultivation by sending out more mailers.

TIP: It is balancing act when it comes to deciding when to let a deal go and when to keep working on it. If you work on it too much, then you will spin your wheels and not accomplish much and forgo the needed attention to grow and develop your business

One afternoon, a couple weeks later, while reading a real estate article on the art of following-up, Mark decides to give Sam a call just to check in and see if he had reached a decision.  Sam reveals that, “ahh, ya know what Mark? I have honestly avoiding thinking about my problem. I’m just not sure what to do”

Mark then goes reiterates the benefits of his offer:

  1. no upfront fees
  2. Mark will work the short sale and make sure that homeowner is not responsible for any deficiency judgment
  3. no moving costs to Sam
  4. Mark will find him an acceptable rental apartment

Definition: a judgment for an amount not covered by the value of security, is delegated as a loan or installment payments.  In most states, the borrower will only get a deficiency judgment if he/she chooses to file a suit for judicial foreclosure instead of just foreclosing on real property.

TIP: Offers are strengthened based on the benefits you as an investor can offer the homeowners.  Please remember that deals are made during the follow up and not the initial meeting.

Sam voices his concern about the issue of being responsible for any difference between the negotiated amount and the principal amount he owed on his mortgage. Mark advises him that as long as the property is Sam’s primary principal residence, the deficiency judgment is not applicable for the first mortgage (if the bank accepts the Short Sale payoff). In addition, Mark assured Sam that the short payoff letter will state that the lender will not go after Sam for deficiency judgment amount.  (CONCERNS THAT TYPICALLY ARISES WITH SHORT SALE SELLERS)

Sam, based on Mark’s confidence, decides to go forward with Mark and allow him to work the short sale and sell the property. Mark is super excited and he schedules a follow up date to meet up with Sam and finish locking up the paperwork for the short sale. Mark also called his realtor to get the requisite listing documents.

TIP: To process a short sale, most lenders want to see the property listed and marketed before they start accepting lower payoffs for the property.

Mark works on his MaxOffer (MO) to see what he should try to negotiate the bank down to in order to allow him to sell the property for a profit. This is the formula utilized by Mark is as follows:

MO

Numerical Numbers

Max Equity Exposure (70% of ARV)

$381,500

Less: Rehabilitation Costs

$10,000

Less: Closing Costs

$7,000

Less: Hardmoney Points and Fees (5 points which is 5 points of the loan amount of $364,500)

$18,225

Less: Negotiation Buffer

$5,000

Offer Range

$348,275-$381,500

Based on the above-indicated formulation, Mark decided to start his offer price to the lender at $348,275 for principal loan amounts totaling $800,000 (in first and second mortgages). Is Mark crazy? Will he get the bank to accept the short at the price he is offering? Tune in week and find out!!

MARKS NET WORTH as of July 27th, 2009:  $72,500

Equity in home: $57,000

Savings: $3,500

401K: $12,000

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

Mark comes to his first homeowners excited but nervous. Excited to the fact that he is taking steps to achieving his dream of becoming a real estate investors but nervous on the fact that he is scared of messing up.

WORDS OF WISDOM: When you are involved in preforeclosure residential real estate transaction you are truly a transaction engineer as you have the trust and the housing future of your clients in your hands. Proceed with caution and setup reasonable expectations.

Mark walks into the house with all his paper work in a file (comparative market analysis, his notes from the telephone conversation, a print out of the assessment value), which he brings into the house with him. Sam is immediately thinks internally that “what are all the documents that Mark has in his hands? Is he trying to buy my house  from me? I am not going to give it to this guy; the audacity of him thinking he can steal my house which me and my wife put our 5 years from underneath me.”

TIP: Do not walk into a house with any paperwork in hand as the seller psychology immediately becomes to the defensive that the investor is trying to steal my house away from me. Rather you need to built rapport in the first hour of meeting a homeowner. So leave all the paperwork in your car and just come into the person’s house with nothing in your hands for the first meeting.

Mark unaware of the thought patterns of Sam, he walks into the house and tries to rush to the deal table but remembers from his readings that he needs to build rapport. So Mark kindly asks Sam to give him a tour of the residence and as he walks through the property Mark makes mental notes of the property and the hobbies of Sam. While walking through the property, Mark notices that Sam was into fishing and joy oh joy Mark had just gone fishing with his best friend last summer. After Mark finishes going through the property, he sits down with Sam and they start to talk about fishing. This lasts about 20 minutes and during this time, Sam begins to soften up thinking “hey this guy is great, he has not even asked once if I want to sell my property and he likes fishing!!”

TIP: Always build rapport based on the hobbies of your prospective seller or buyer as that is an easy way to get someone to like and trust you.

When time came, Mark started talking to speak to Sam about the property and what happened to bring him to his current financial distress. Sam explained that he has cancer and that caused him to fall behind on bills due to the mounting financial pressure. Mark feels award about discussing a person’s illness with him but he tries to relate and empathize with what happened. Then Mark  asks to the most critically important question about the conversation: “How can I help you with your current situation?”

TIP: You are always in the mode of trying to help the homeowner and that is how you should approach the options you present to the homeowner.

Sam advises him that he needs to get $20,000 to pay down his other costs. Mark gets a little confused as he knows that this deal is a short sale as the debt on this property is more than the market value. So he asks the question, what do you need the $20,000 for? Sam explains that it is for the medical debts and moving expenses after he sells this property.

LAW FACT: Sellers are not allowed to get anything in terms of monetary compensation at the closing table when the property is being closed as a short sale.

Mark now tries to start negotiating with Sam, explaining to him that the value of the property is only  $490,000 and that Sam owes atleast $800,000. Mark will need to have his attorney short sale the property so that Mark can buy it below current market value.  He tells Sam that he is an investor and can only help him out if he can buy the property at a discount from the bank. Mark then explains to Sam the entire short sale process:

1.      Gathering the necessary paperwork i.e. mortgage statements, 2 years of tax returns, 2 months of banks statements, hardship letter, paystubs

2.      Authorization to Release must be signed and send in to the letter

3.      Submission of complete package to the lender

4.      Request order of BPO

5.      Negotiate with Lender

6.      Close the short sale with the buyer

TIP: As an investor always negotiate off the quick sale price of the house and not the true market value when speaking with a seller. Always negotiate of the highest comparative property when negotiating with a buyer.

As the process is explained, Mark reassures Sam that he is here to handle all the problems and not have any burdens on Sam. Mark also explains to Sam that he would assist Mark with Moving Costs to a new apartment when he buys the property from Sam and in addition, he told Sam that he would refer him to a great bankruptcy attorney to help discharge his medical collection debt.  Sam told him that he needed to think about it  and that he will get back to him.

Will Sam take Mark’s proposed deal? Was Mark offer a good offer? How should Mark work on Sam to close the deal? Tune into next week’s blog to find out more.

MARKS NET WORTH as of July 20th , 2009:  $72,100

Equity in home: $57,000

Savings: $3,100

401K: $12,000

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

Mark has started his marketing campaign and has landed his first seller appointment for a property in Garfield, NJ (2 family property located in a blue collar neighborhood of the city). Before, heading to his appointment to meet with the seller to see how he can be of help, Mark is in the process of compiling his due diligence on the property. Mark as a part of setting up his appointment went through the list of preforeclosure interview questions  (as discussed in the last blog) to gander vital information on the property. Mark’s Notes on the Garfield Property read as follows:

  1. How long have you owned this property?-> The seller owned the property for 4 years as he bought the property in 2005.
  2. When did you buy this property? -> in 2005
  3. Is there a second mortgage on the property? Yes, he owes a $200,000 for his second mortgage
  4. How much do you owe the bank for each mortgage? Sam (owner of the Garfield Property) said he owed $600,000 on his first mortgage principal amount.
  5. How far behind are you on each mortgage? He said he is 6 months behind and he has received the Notice of Intention of Foreclosure. Not Sure, what that means, should ask my attorney.
  6. What is your monthly payment for the first mortgage and for the second mortgage? First Mortgage: $4,500 includes the taxes and Second Mortgage: $850
  7. What do you think your house is worth in today’s market once it is all fixed up? He could not give me a straight answer but he thinks it is worth $750,000 in today’s market.


Based on the information above it seems like Sam owes more than the value of this property.

TIP: Short Sale is defined as a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. Simplified it means that the debts and the mortgages owed on the property are more than the current market value of the property.

  1. How much money in repairs do you think the property needs? No repairs as when he bought the house it was a new construction.

Based off his notes indicated above, Mark has ascertained the following important pieces of information regarding the Garfield property:

Requested Information

Information Received

Mortgage 1st Mortgage: $600,000

2nd Mortgage: $200,000

Total Payments per month: $5,350

Delinquency Months Behind: 6 months

Notice of Intent to Foreclosure: Filed

Sheriff Sale:

Value Owner Value: $750,000

Realtor CMA: $545,000

Quick Sale: $490,000

Mark had also meet up with a Realtor named Jay from a local real estate company in the area who he promised the listing to for resale if Mark was able to structure a method of buying the property from the seller. Jay was able to pull together a comparative market analysis for the area for 2 families in the neighborhood and was able to ascertain that similar comparative homes within the last 6 months sold in the range of $525,000 to $580,000

TIP: When looking at a Comparative Market Analysis (referred in the business as a CMA) make certain that the comps are within 1 mile of the subject property and are similar in terms of lot size, bedroom, and bathroom counts. In addition, the comps must have sold within 3 to 6 months from the date of the comparative market analysis.

Mark is now armed with knowledge that he needs to have a fundamental understanding on the true financial situation of the property located in Garfield, NJ.  Mark wonders if he should find out how much the taxes are on the Garfield property, but he forgot to ask his realtor Jay for that information.  Mark sets out to meet the homeowner Sam tonight.

INSIDE TIP: Here is a free website that you can use in NJ for free tax record search. http://imac.taxrecords.com/login/signup.html?url=www.taxrecords.com

From the above mentioned website, Mark was able to locate the pertinent tax information on the property as it provided him the following pieces of information:

Yearly Tax $8,000
Land Assessment Value $150,000
Building Assessment Value $400,000

The tax assessment value showed Mark that the City of Garfield viewed the value of the property to be at least $550,000

TIP: Tax Assessment values are updated accordingly to the town tax assessment update schedule and hence can be lagging in terms of the true of the property. So utilize the cities assessment value with a grain of salt as they maybe higher (in a declining market) or lower (in a up trending market) from the true market value of the property.

Mark has now completed all the due diligence he needed to complete before heading into the meeting with the homeowner for the property. See how Mark should approach the homeowner and what solutions can he as a real estate investor offer to the homeowner given the due diligence he has collected. Do not forget to catch next week’s blog.

MARKS NET WORTH as of July 19th , 2009:  $74,100

Equity in home: $60,000

Savings: $2,100

401K: $12,000

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

Mark has finally started his marketing campaign geared towards preforeclosure homeowners. It is the first week that his marketing campaign has taken effect and he has mailed out about 500 letters to his mailing list. Based off his first week efforts, Mark got one call on his cell phone from a angry seller. The seller yelled at Mark exclaiming that he was not in foreclosure and this was a mistake. Mark feels frustrated about the lack of response.

TIP: Marketing is a continuous effort and the typical response rate on a mailing is 1-2% on the number of mailings sent out.

Mark however continues his mailing to the list 500 pieces at a time. While his mailing campaign continues, Mark continues his job from 9 to 5 everyday in his as an IT analyst. By the 4th week of the mailing campaign, Mark’s cell phone starts to ring with calls from distressed sellers at all hours of the day. Herein Mark’s begins to realize a fundamental truth in the Real Estate Business that an investor needs to be available on his phone at the moment a seller reaches out to him or her. The likelihood for capturing the deal at the moment the calls comes in is much higher than if he or she tries to return a phone call by the evening hours.  Mark is continuing his corporate job but is trying to find his balance with his new business (yes that’s right Mark is trying to run a real estate business which involves marketing, deal sourcing and prospecting, accounting and management). As soon as Mark finishes his corporate job, he calls back his leads and work on putting together mailing pieces for the upcoming week’s mail out.

Mark has finally locked in a homeowner for an appointment for a property located in Garfield, NJ. Mark setups the appointment to go speak with the seller about his situation and what Mark can do to help workout a solution for the seller’s situation.

TIP: In the residential preforeclosure business, a real estate investor is more like a counselor as it is his or her job to facilitate a solution for the seller problem and satisfying the bank. For this role, the real estate investor gets handsomely rewarded.

As Mark speaks with the homeowner over the phone, he gathers a few pieces of information so that he is better prepared. He asks the list of following questions: (Keep it as a guide)

1.    How long have you owned this property?

2.   When did you buy this property?

3.   Is there a second mortgage on the property?

4.   How much do you owe the bank for each mortgage?

5.   How far behind are you on each mortgage?

6.   What is your monthly payment for the first mortgage and for the second mortgage?

7.   What do you think your house is worth in today’s market once it is all fixed up?

8.   How much repairs do you think the property needs?

By asking these questions, Mark or any investor will be ascertain to whether this preforeclosure deal falls into one of these categories: short sale, loan modification, equity deal, redemption deal, or second short pay deal. Mark goes ahead and starts contacting a few Realtor who work in Garfield to help him run a comparative market analysis on the property to get an idea of the after repaired market value of the property. Why woul a realtor give this information to Mark because Mark tells them that he is a Investor and will give them the listing at the time of resale if they help provide him an accurate comparative market analysis.

TIP: Realtors are willing to work with Investors and want to develop a relationship with them but make sure you give them the incentive of the listing if you are going to acquire their help and make sure you keep up your word as real estate is a small community and word gets around quickly.

TIP: Try to work with Realtors who are located in the area where the subject property is located. This will ensure that the analysis they give you the actually have some knowledge of the market area.

To learn about Mark’s first seller meeting, and how he can structure the deal to make it a win-win for everyone in the deal. Tune in next week to find out more.

MARKS NET WORTH as of July 8th , 2009:  $74,500

Equity in home: $60,000

Savings: $2,500

401K: $12,000

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ

Mark continues his job as an IT specialist. His hours at work have increased from 9am to 7pm due to the layoffs of fellow colleagues in his firm, as the economy is getting worse with housing under contract activity (this means that less contracts are being signed up by prospective buyers which translates into higher inventory and this has a depressing effect on real estate prices—This is a Good Indicator to Watch for an Investor).  After taking the assessment, Mark realized that he was lacking in the areas of Analysis, Negotiation and Structuring and has decided that before he embarked on the purchasing or investment into a project; he decided to improve his skills in property analysis.

TIP: Concepts that are important for Analysis:

a.     Cash on Cash Return: this is basically how much money you will make if you were to buy the property for all cash.

Formula: (Net Profit /Cash Investment)

b.     Loan to Value: this basically the amount of debt you take on to the present or future value of the property.

Formula:  Amount of Debt/ Value of the Property

c. Debt Service Ratio: this is the ratio where a lot of lenders look to see how much of their debt is being satisfied with the net income being produced by the property.

Formula: (Net Operating Income/ Annual Total Debt Service Payments)

**Typically aim to have the ratio at 1.20 and higher this means that for every $1.00 dollar of debt there is $1.20 of income. **

d. Debt to Income: this is the concept that comes into play where in the individual’s debts (including new housing mortgage payments and all other payments as seen on their credit report) divided by gross monthly income. Here in the lender is looking for a ratio of no more than 40-45% but with an Federal Housing Administration insured loan you can have the ratio as high as 50%.

e. Gross Rent Multiplier: this is the concept that the value of an income producing property is the gross rental income of a property multiplied by a multiplier (this multiplier is determined by old closed comps).

f. CMA: Comparative Market Analysis. This is the analysis put together by a Realtor wherein they compare the condition, size, lot size and type of property against other sold properties to help ascertain a market value for the property you as an investor will be buying.

http://www.realdata.com/calculator/index.htm (free calculator that you can use to easily input your figures and get the results for the various concepts)

Mark has finally started to put together his knowledge base for Analysis aspect of the Real Estate Process. He now knows and is better equipped to handle the deals that will be coming at him during the course of real estate investing career.

TIP: It is really important to have a sound foundation base of knowledge, as it is much easier and cheaper to learn in the privacy of your own self rather than messing up on a deal where in $10,000 or $100,000 of dollars on the line.

Mark while learning up on his analysis has decided to start putting together a marketing strategy and plan on how to get deals coming to him as he has learned from the Introduction Chapter of his Carleton Sheets Course. As a part of the marketing strategy, Mark has decided to enter the world of the pre-foreclosure market (this is a where all the investors starts up). Mark is excited to embark on the world of the distressed asset properties naïve to the world of sellers and buyers and emotions he is about to face.

Concept: Pre-foreclosure this is term wherein a seller who has been behind on their mortgage payment for the last few months. The lender has now filed a Notice of Intent to Foreclosure through their attorney. Once this notice is field and is uncontested, the property is now in the pre-foreclosure stage. In the state of New Jersey, a lender has to go through the judicial process wherein seller has between 6 to 12 months before the lender can officially foreclosure on the property.

Mark has decided to use $2,500 out of cash reserves to market to the preforeclosure market. Mark first and foremost signs up for a lead providing source and he decides on Realtytrac.com (the author of this blog does not endorse the service of Relatytrac.com and only refers to this website for the simplicity of the blog entry) from where in he can get access to information of homeowners against whom the default notice has been filed as this is a public notice filed in the court house of the county where the homeowner lives.

After getting his first list, Mark set ups a marketing plan of 5 points of contact marketing pieces (utilizing yellow letter, postcard and door knocking).

TIP: Remember it always takes about 5 to 7 points of contact before a customer or seller will reach back out to your marketing pieces

How successful is Mark’s first effort and does he get into his first deal. Tune in next week to find out.

MARKS NET WORTH as of July 2nd, 2009:  $74,500

Equity in home: $60,000

Savings: $2,500

401K: $12,000

Written by Ankit Duggal

Investment Director: www.rernj.com

RER is a boutique real estate investment company based in Clifton, NJ


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  • 2: Great City Mortgage Literature Sources ... Our foreclosure listin [...]...
  • Dennis's mortgage market guide: Great tips and info. namely on tax assessments.
  • krishna: Hey thanks a lot for posing this topic. I was preparing a paper presentation about this topic and i got many points about a real estate investor.

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