Insurance for “Subject To” properties is a commonly misunderstood challenge.

A “Subject To” deal is when you agree to purchase a property subject to the existing mortgage along with all other liens attached. The existing homeowner deeds the property to you and you take over making the payments to the lending institution. You do not assume the loan through the bank. It’s a popular creative investment strategy for real estate investors.

When it comes to insurance for “subject to” deals, some rules of thumb usually apply:

1. If you (or your entity) own, or have a financial “stake” in the property, be the “first named insured”. The first named insured is the primary recipient of any potential claim benefit or liability protection only.
2. A “loss payee” will have its interests protected in the event the property itself is damaged (a mortgagee is inherently BOTH).
3. If you decide to keep the “homeowner’s” policy in place and be named as the additional insured, be advised: if it is discovered that the ex-owner, the first-named insured in this case, no longer owns the property, expect the insurer to deny the claim based on the fact the policyholder no longer owns the property. Even if you manage the claim to be paid, you are not the entity to receive the proceeds, as you are not the first-named insured. If you did not attempt to be added as a loss payee as well, chan ... Read More…

Try not to roll your eyes too much when I say this: I was scared shirtless of seller negotiation for YEARS. It’s absolutely true: I have a constellation of nature and nurture traits that make my choice of professions kind of hilarious.

I’m waaaay on the end of the introvert/extrovert bell curve. My Meyers-Briggs profile is INTP. My DISC test says that my “I” is a 25 out of 100. If you don’t know what any of that means, it means that I am naturally extremely introverted.

Add to that the fact that I have a tendency to get very anxious over uncertainty—I try to run every scenario and every outcome mentally before I do anything—and you don’t exactly get a recipe for someone who’s a “natural negotiator”.

In the beginning, before I really understood seller psychology, or how to deal with the objections they throw out to offers, or, for that matter, how to deal with rejection without feeling like I must have messed up somehow, I literally lost, I don’t know, hundreds of deals to the fact that I couldn’t get out of my own head long enough to actually tell sellers what I’d like to pay them for their houses.

Drew LOOOOVES to tell the (sadly, true) story of my negotiation strategy back then: I’d talk to a seller on the phone, make an appointment (often without really knowing what the seller’s bottom line was), go see the property, then tell the seller I’d have to get back ... Read More…

BreAnn Stephenson, National Real Estate Insurance Group

There are many key relationships involved in real estate investing but hiring a proficient Property Manager is critical. A good PM can help you achieve maximum cash-flow from a property or may pave your way to bankruptcy. Many property losses involve “absentee” Property Managers or their tenants, evidencing the need for careful consideration when hiring this service. Today we will discuss 5 crucial qualities a good PM demonstrates and a sample of corresponding questions to help reveal if they possess these 5 C’s.

Crucial “C” Quality #1 – Clear Communication

Communication is the cornerstone of any investor-PM relationship. One pattern we see much more than we’d care to is a decline in communication between the property owner and PM, directly followed by damage at the property. You will want regular reports from your PM about your property’s condition and confirmation the rent is still coming in. You will also want to know immediately if something goes wrong so that it can be fixed, and any further damage minimized. Asking the following questions can help uncover your potential PM’s communication skill level.

• What involvement do you expect of me as an owner? (Communication is a two-way street. Understanding how they like to work can help you have a more productive relationship. It also may tell you if you are a good match for one another. If t ... Read More…

Just like a house, you can’t build a financial fortune from the roof down. You need to build a foundation first. 

Have you ever noticed that some people seem to have wealth flowing to them? Yes, some professions tend to pay more than others, but in every field, those with the most wealth are the ones that have a legal foundation already in place.   

This foundation is set up using an understanding of the legal strategies associated with wealth accumulation. Unfortunately, many people are “taken to the cleaners” by less-than-competent lawyers who fail to educate their clients. 

The basic foundation of wealth consists of four legal tools. If you understand the tools and know how to use them, your chances for success are much better. If you and/or your parents don’t have the four tools already, it is time to get moving. It’s worth every effort you make and every dime you spend getting the foundation in place. Here’s a basic overview of the four tools: 

Testamentary Will 

Everyone needs a will. Even if you have a revocable trust, you need a will. The will name the personal representative (the executor or executrix). A family member, who is geographically near the bulk of your estate, has good business sense, and can be fair with your heirs, is the person you are looking for. It is basically malpractice for the attorney to name himself or herself as the personal representative. 

The w ... Read More…

Excluding banks and your own capital, there are two commonly used sources of funding for real estate investors: private money and hard money.

Knowing what each source of funding brings to the table as well as where each source may fall short will be important for you as a real estate investor looking to scale your business.

What is Private Money Lending?

Private money lending is typically done by individuals. Their capital may come from extra cash they have on hand, self-directed IRA/401(k), a line of credit, etc.

Pros of Private Money Lenders:

1. They usually lend their money locally, so they know the area well.
2. They may have lower terms than hard money lenders because they have less overhead.
3. They tend to be more flexible than hard money lenders when it comes to making a deal work.

Cons of Private Money Lenders:

1. They have a limited pool of capital, which means you’ll likely need to use many rather than one. This can make it difficult to manage relationships.
2. They typically have a less formal process than hard money lenders which can make doing deals more cumbersome.
3. They tend to market themselves via word of mouth or referral only, meaning you’ll likely have to search for them and vet them yourself.

What is Hard Money Lending?

Hard money lenders are typically businesses with capital that comes from private or institutional investors and business lines of credit. Hard money lenders get their n ... Read More…

Maybe you’re someone who's completely comfortable asking complete strangers questions like, “How much do you owe on your house” or saying things like, “That’s crazy, you’ll never get that price”.

But if so, you’re unusual—most real estate entrepreneurs have a tough time telling other people that their properties are not worth what they think they’re worth. Whether it’s that you don’t want to argue with a seller who seems certain that his price is right, or whether it’s your fear that YOU’RE the one who’s wrong, or whether you don’t want to disappoint or offend complete strangers who’ve come to you for help, the fact is that you might just have a hard time choking out the fact that you need to pay less for a property than what the seller wants.

I’m the same way. The difference, though, is that I have over 2 decades of trial-and-error-based experience in talking to property owners of all descriptions. And because I’ve spoken to, oh, 20,000 or more sellers, I’ve had the opportunity to try a lot of phrases that get my point across without sounding confrontational, insulting the seller or his ugly house or iffy neighborhood, or asking questions that the seller might find invasive if stated too directly.

So, I’m sharing those phrases with you. Study them, practice them, and use them when the situation arises. You’ll feel more comfortable, yo ... Read More…

Warning: This is the longest blog post I've ever written. At the same time, I think if you can read it all, you'll be glad you did.

Because there’s a dark secret that a lot of investors know, but that no one seems to talk about much. It’s a secret that every full-time investor eventually discovers for himself or pays the consequences.

So, I guess this “secret” isn’t, really a secret—in fact, it’s right in front of all of us, all the time. Look at any successful investor, and there it will be, staring you right in the face. Yet, you may have never noticed it on any conscious level.

Part of the reason you’ve never noticed it is that the real estate education industry tends to misdirect you, denying the truth of this phenomenon without coming right out and addressing it. Have you guessed it yet? No? then let me drag out “the reveal” a little longer with an example.

Let’s take 2 imaginary real estate entrepreneurs, Investor A and Investor B (well, OK, they’re not all that imaginary—they’re both based on people I know, and if you look around a little, you’ll see examples of both, too).

Both investors start from the same place. It doesn’t matter where—maybe they’re frustrated corporate employees who hate their jobs and despair of being able to retire while they’re still young enough to enjoy it. Maybe both have decent credit and $20,000 in savings. Maybe bo ... Read More…

Marco is a buyer of seller-financed notes and mortgages who is also a member of our amazing national community of real estate entrepreneurs. He’s co-teaching the all-day workshop on getting started in buying notes in late February and is the author of a weekly “Seller Finance” e-letter.

        Like many other members, I attended the excellent Saturday Workshop taught by Robert Mohon called, “The Ultimate Credibility Package.”

        One of the things I learned was all bankers are taught the four Cs of lending money: things they look at when considering whether to make a loan. These are:

1. Credit
2. Collateral
3. Capacity
4. Character

        This made me think about the differences between lending money and buying seller financed loans that someone else already made, which is what I do. I came up with these four Cs for Note Buyers:

1. Credit
2. Collateral
3. Capacity
4. Conditions

        These are all crucial for deciding WHETHER to buy, and how much to pay for, any note you might be offered. So let me break them down:

Credit

        Seller financed note buyers review each payor’s credit report. Beyond FICO score, it shows their history managing credit and making payments consistently. It also notes bankruptcies in the last 7 or 10 years, and foreclosures in ... Read More…

Note: laws and regulations regarding the advertising, registering, and formalization of private loans vary enormously state-to-state. Generally, these rules apply to the borrower rather than the lender, but even lenders should be aware of what the laws in your state say about these transactions. Of course, this article is not intended as legal, accounting, or other professional advice. Always consult with your legal, accounting, or other professional before making any investment.  Further, nothing in this article should be construed as an offering or solicitation of security.

Private lending is a strategy in which even moderate-income investors can easily get involved.

There are plenty of real estate entrepreneurs and rehabbers who want to borrow your money; if you let it be known you have as little as $20,000 to lend in most markets, someone will be right there ready to put that cash to work.

If all goes as it’s supposed to, it’s a truly hand-off investment; you just sit back and collect checks. And the return is oh-so-much-better than other fixed-rate investments; you can expect to average around 6-8% per year total (because higher rate loans are generally also shorter term; when you loan money to a rehabber at 12% but he only uses that money 9 months a year, that still works out to 8%).

But the big fallacy of private lending is that YOU, as the private lender, don’t need to know very much to assure that the deal goes well. After all, it&r ... Read More…

        I get this question a lot, especially, during or just after a presentation showing an apartment complex illustrating a ‘cash on cash’ return in excess of 20%.

        If you went to a Commercial Broker and told them you were looking for properties with a 20% COCR, they’d do one of two things; 1-They’d tell you they would buy the property themselves if they ever found one with a 20% COCR or 2-They’d hang up on you because they’d think your expectations are unrealistic.

        You probably won’t find an Apartment complex advertised with a 20% COCR. Just like the broker said, if it fell into their lap, they’d buy it. However, you can increase your chances of finding some great deals by doing a few things differently.

        First off, there’s no big secret in ‘finding’ Apartment complexes for sale. Start by using the same vehicles most investors use. For instance, you can search through Loopnet.com or go to any of the major or regional Commercial Brokerage web sites such as Marcus & Millichap (MarcusMillichap.com), CB Richard Ellis (CBRE.com) or Sperry Van Ness (SVN.com) just to name a few. There are many many more out there.

        You can also peruse local newspapers in the market you’re interested in. Remember that not all papers are created equal. Some newspapers will ... Read More…