As will any real estate investment, it is important to buy at a good price. That we did. Of all the searching we did, this was by far the best deal we came across.

Also, I have talked about cash flow many times and how important it is. This park puts out a very nice cash flow and this cash will allow us to improve the park over time and increase that cash flow in the future.

Lastly, financing a park in this market is critical. The wrong financing has put many parks back in the hands of banks and the previous owners. We were able to get seller financing for 10 years at an excellent fixed rate and private financing through a private lender’s equity line of credit. This makes the repayment of the park so much more manageable.

Get your properties at an excellent price with good cash flow and finance them properly and you can’t go wrong.

The problem that many earlier investors get into is that they fall prey to companies that offer financing…for a fee. What are the fees? Well that all depends.

Business Credit News has an excellent piece about the high costs that some of these companies charge. What would you pay for a $100,000 credit line? will give you an idea what the fees are. Also, note my comment while you are there and even reply to it on their site (or more beneficially for me:-), on this site).

Whenever you talk to prospective lenders about financing your projects, make sure you ask for and understand the fees involved. They could make or break your deals (or your bank).

Find out the value of the property – Many people use only on-line research for this purpose. This is a mistake because without physically inspecting a property you will neither be able to make a comparison with neighborhood properties nor will you be able to get a feel of the neighborhood and the property as well which is vital for assessing its real value. Prices of properties sold in the neighborhood serve as benchmarks for property value in the locality. Make a record of the prices of run down properties and improved ones as well all that are sold in the vicinity.  The local county office, tax assessor’s office, offices of real estate brokers and appraisers are some of the places you can visit to gather this information. After assimilating all information you can do a CMA or comparative market analysis of property values.

Prepare a cost estimate – After you have the necessary information on actual property values in the neighborhood, make an estimate of costs involved to see if you can make a profit from the deal. The costs involved will include acquisition costs i.e. the price paid to the owner, documentation and other costs involved in transfer of title, taxes, origination fees and all other related costs. Added to this would be the costs involved in repairing the property.

Repair costs include all expenses needed to improve the overall condition of the property. By physically inspecting the property you can collect ideas about what repairs need to be made. You can cross check the correctness of your own repair estimate by asking for quotes from contractors for the repairs. You will also need to take other costs into account like a title search, home inspection, survey, certificate of occupancy, etc. for preparing a realistic estimate. Finally, do not forget to consider the holding costs. Holding costs are those costs that you will have to pay while you are renovating the property, such as mortgage payments, utilities, taxes, insurance, etc.

Over time, by concentrating on a few neighborhoods, you will develop the ability to quickly estimate the property value and repair costs so that you can make quick determinations of feasibility, so that you do not waste too much time on unprofitable projects.

Check project feasibility – If you want your investment to be profitable you must ensure that it is feasible. To evaluate feasibility take the current value of the unimproved property and add all costs of improvement along with other incidental costs and the amount of estimated interest. This will give your the overall project cost. Now add your expected profits to this figure. If the cost of comparable improved homes in the neighborhood is lower than your total, the feasibility factor is negative and it is advisable that you simply forget about this particular project.

Fix the cut-off level in the purchase price – The price paid for acquiring the property is vital. To determine what the highest price payable take your expected sale price for the property and deduct the costs of repairs/renovations and all other expenditure involved in the project along with your profit margins from it. What you have as the remainder is the maximum purchase price you should pay for the property.

Negotiate intelligently- Profits from your real estate investments depend mainly on the cost of acquisition. That is to say, you make your money when you buy, not when you sell. When you make a fair estimation of other costs involved, it provides you with an understanding you need for negotiating a profitable purchase price.

While there are many situations where people did all the wrong things when it came to their real estate investments, here are some examples of  investors that simply invested their hard earned money, following all of the rules set before them at the time. These were not speculators or experienced corporations that where throwing their money around. They did full-doc loans with serious downpayments and invested in positive cash flow properties. They did what any RESPONSIBLE investor would have done.

So what happened?

The government screwed up the economy. – They let sub-prime mortgages and speculators take control.

The government changed the rules. – Fannie Mae changed their lending rules even for people already in the game.

The government put a band-aid on the problem that didn’t stick. – They said the bailout packages would solve the problem – it hasn’t.

The banks took advantage of the situation. – They rewarded their executives for bad decisions.

The banks refused to stop the hemorrhaging. – They took major losses instead of small ones by not working with homeowners and investors.

The investors in this story did everything right. They cannot be blamed for the situation they are in now. Especially when they asked for help before their problems started and offered less costly solutions to their lenders afterward.

We have lost a bunch of banks now, along with tons of jbos. Those banks and jobs might still be around if they had only been willing to work with homeowners.

As the name suggests, it is the owner who is directly selling the property. Therefore all dealings with respect to the sale have to be made directly with the property owner. An FSBO deal has a number of advantages.

One advantage of dealing directly with the owners is that you can get first hand information about the property’s specific strengths and weaknesses.  Vital information on the history of the property, nearby schools, recreational areas, malls and shopping centers, health care facilities etc.  This can let you assess the value and desirability of owning the property from a resident’s perspective which can make you much more comfortable about the investment you are about to make.

Another advantage is that property owners are not real estate professionals and you will find dealing with them much easier than dealing with hardened professionals who unnecessarily hike the price of the property greatly lowering the profit potential of the deal. In FSBO deals owners usually do not price their properties very high and during negotiations usually agree to come down rather quickly on their quoted price.  Additionally, in their effort to close a deal, home owners are known to also offer incentives like a decorating allowance or covering the fees of the buyer’s agent etc. All in all, FSBOs offer great deals.

However, on the down side many home owners unintentionally give inaccurate details of the real condition of the house and associated problems. They may be unaware of the fact that something they accept as being normal may in fact pose a problem to a new owner of the property. It is therefore advisable to have a home inspection done when dealing in FSBO property. This may also satisfy the property owner as to the true state/worth of the property and would help close the deal at a much faster pace.

FSBO transactions can be completed quite smoothly if the owner has some previous real estate experience. This helps him understand that the longer a house remains unsold the more its position will worsen as it will make potential buyers suspect the existence of possible deficiencies or defects associated with the house preventing its sale.

On the other hand when you buy agent listed property it saves you a lot of trouble to assess the price as usually the property is priced realistically in relation to its fair market value. Conversely, selling at a higher price is sure to enhance his commission in the deal. Therefore he does have a vested interest in the deal.

It is also easier to find agent listed properties as agents are able to list properties on many MLS sites and also advertise in classified ads and real estate magazines. Agent dealings can also cut down the time needed to close the deal and transfer the property as they work behind the scenes even when not working directly with you.

In the end, it can be said that an FSBO real estate deal with a knowledgeable property owner can offer a more profitable real estate investment opportunity as compared to buying an agent listed property.

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Below is an example of New York State Attorney General Andrew M. Cuomo HOME VALUATION CODE OF CONDUCT (HVCC) and what is may cost the US Consumer if HVCC is not stopped in the Senate.

Home Valuation Code of Conduct
The Federal Housing Finance Agency (FHFA) has announced the “final” Revised Version of the Home Valuation Code of Conduct (HVCC).

The Code is based on an agreement between the Enterprises, the New York State Attorney General Andrew Cuomo and FHFA to improve the reliability of home appraisals.

The “agreement” was originally between Fannie Mae, Freddie Mac, the Office of Federal Housing Enterprise Oversight and Cuomo. The New York Attorney General made a big splash is THIS ANNOUNCEMENT. The settlement was prompted by an investigation of mortgage and valuation fraud initiated by the New York Attorney General in response to allegations of shady dealings between an Appraisal Management Company, Washington Mutual and a group of appraisers doing contract work for the Appraisal Management Company.

“The integrity of our mortgage system depends on independent appraisers,” said Cuomo. “Washington Mutual compromised the fairness of this system by illegally pressuring appraisers to provide inflated values. Every company that buys loans from Washington Mutual must be sure that the loans they purchased are not corrupted by this systemic fraud.”

The lawsuit filed last week details a scheme in numerous e-mails showing First American and eAppraiseIT caved to pressure from Washington Mutual to use appraisers who provided inflated appraisals on homes.

E-mails also show that executives at First American and eAppraiseIT knew their behavior was illegal, but intentionally broke the law to secure future business with Washington Mutual. Between April 2006 and October 2007, eAppraiseIT provided over 250,000 appraisals for Washington Mutual.

Due to many problems with the original HVCC, the failure of WAMU, Fannie, Freddie and a myriad of other reasons, the agreement was revised after a comment period. However, it’s far from perfect and, if implemented, will have a significant effect on your brokerage business and the relationships you have built.

Per: http://www.ffiec.gov/hmcrpr/hm091108.htm 9/8/2008 Release $$$$$$$$$$$$$$$$$$$$ US CONSUMER COST INCREASE EXAMPLE with HVCC$$$$$$$$$$$$$$$$$$$$$$$$$

The Federal Financial Institutions Examination Council (FFIEC) today announced the availability of 2007 data on mortgage lending transactions throughout the nation at 8,610 financial institutions covered by the Home Mortgage Disclosure Act (HMDA). Covered institutions include, but are not limited to, banks, savings associations, credit unions, and independent mortgage companies. The HMDA data made available today cover lending activity – applications for loans, loan originations and denials, and purchases of loans – from 2007. The data include 21.4 million applications and originations and 4.8 million purchases, for a total of 26.2 million actions reported by all covered institutions in 2007.

Now let’s work the math 26.2 million consumer mortgage transactions in 2007. Now the loans will need to be locked for at least 45 days (maybe 60) being conservative vs. 30 days as the time frame to get an appraisal will be that much longer than before due to the complexities and process of the AMC’S (Appraisal Management Companies).

Let’s be conservative that the average loan amount is $118,000.00 x 26.2 million = $3,091,600,000,000 Total Mortgage Monies Lent out.

So now we take $3,091,600,000,000 x .25% (this is a conservative number for the cost of the extended rate lock vs. a 30 day lock)

= $772,900,000,000 cost more to the US Consumer now wait there is MORE $$$$$$

The average price conservatively of a new appraisal under the HVCC will increase by $125.00

26.2 million mortgage transactions x $125.00 more from the US Consumer = $3,275,000,000 MORE $$$$$$

Grand Total of the example to the US Consumer

$772,900,000,000 + $3,275,000,000 = GRAND TOTAL US CONSUMER MAY PAY MORE WITH HVCC $776,175,000,000

References:

Per: http://www.ffiec.gov/hmcrpr/hm091108.htm 9/8/2008 Release

http://www.oag.state.ny.us/about.html

http://www.cnbc.com/id/30521887

http://www.petitiononline.com/hvcc/petition.html

http://kgerealestate.com/blog/2009/04/home-valuation-code-of-conduct-must-be-stopped/

http://narblog1.realtors.org/mvtype/appraisalinsight/home_valuation_code_of_conduct/

http://www.realtor.org/wps/wcm/connect/b79bfd004dd40b4f8919ade06077afc4/Williams+Fannie+Mae+HVCC+Delay+04202009.pdf?MOD=AJPERES&CACHEID=b79bfd004dd40b4f8919ade06077afc4

http://www.realtor.org/wps/wcm/connect/239710804dd4088588d5ade06077afc4/Koskinen+Freddie+Mac+HVCC+Delay+04202009.pdf?MOD=AJPERES&CACHEID=239710804dd4088588d5ade06077afc4

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf

http://ezinearticles.com/?(HVCC)-Home-Valuation-Code-Of-Conduct-And-The-End-Of-The-Independent-Real-Estate-Appraiser&id=1142474

http://appraiseractive.blogspot.com/2009/01/home-valuation-code-of-conduct.html

I agree with Nadji’s view in the article, “…things will get worse before they get better. But he said it’s impossible to time the bottom and it makes sense to get in before interest rates rise and big institutional investors jump in and drive up prices.”

Don’t let this opportunity pass you by. If you have cash in hand, or you have access to cash, this is the time to invest for your future.

It just so happens that Dallas-Fort Worth came in at number 1 on the list. This is good news for my wife and I who are looking at the area for near term investments. Check out the list at http://tinyurl.com/ccxdff.

The old adage of “buy low, sell high” comes up a lot these days. Just remember that Cash Flow is King. Also, how do you know if you are buying low?

As Trump says in his interview, “The only problem with buying [now] is you just don’t know how low is low. The only positive I see, frankly, is that the stock market is going up — but I just don’t know why the stock market is going up.”

There are a few points of light these days, even among all the horrible news. Investors are apparently see these as positive signs. Just be careful.

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Home Valuation Code of Conduct must be stopped!!

Customers file goes to lender A for underwriting customer now pays at least $100.00 more than before for an appraisal. Lender A denies the loan or happens to pull back on pricing (loan was floating exp) and is not as competitive as Lender B. Lender A MAY agree to release the appraisal to Lender B how ever Lender B will not accept Lender A appraisal due to warranties is has with its investors. Consumer now may need to pay an additional $400.00 for a new appraisal. Customer snaps..

The above issue just came into play with a consumer. A perfectly clean loan file was submitted to

a Lender A for an approval. 30 Year Fixed Refi conforming loan. Customer paid $300.00 for an appraisal

Lender A denies the loan for the following reason(s):

Unacceptable Appraisal/Collateral: Insufficient collateral value- URAR does not support valuation.

Note: No explanation of the particulars or a counter offer on what Lender assumes the value to be.

Note: The appraisal is very detailed and has 9 comps to support the value.

Now Mr. Consumer as of 5/1/2009 and some Lenders as of 4-19-09 Will be subject to the ruling of HVCC or Home Valuation Code of Conduct

Note:

The Home Valuation Code of Conduct (the Code) is the result of a joint agreement between Freddie Mac, the Federal Housing Finance Agency (FHFA), and the New York State Attorney General to enhance the independence and accuracy of the appraisal process, and provide added protections for homebuyers, mortgage investors and the housing market.

Continuing story:

Now in the example as noted above. Realistically instead of Mr/Mrs Consumer paying exp $300.00 for an appraisal the fee may be $400.00 or $500.00 for a single family. Keep in mind now with the HVCC a middle man is involved known as a AMC Appraisal Management Company. Instead of a independent appraiser (small business owner) making exp $300.00 for the appraisal the AMC will keep a portion of the appraisal monies and pay the appraiser less than what he or she was making before. Another words the middle man AMC Appraisal Management Company keep the majority of the monies that the CUSTOMER who paid for the appraisal and the actual appraiser (small business owner) who is doing all the work will now be making substantially less money than before.

Now in following with the above scenario Mr/Mrs Consumer wants to pursue there mortgage application with another Lender. PROBLEM** With the HVCC as noted Lender A MAY transfer the original appraiser over to Lender B HOWEVER Lender B WILL NOT accept the original appraisal. Mr/Mrs Consumer will now need to pay an additional $400.00 or $500.00 for a new appraisal to start the process all over again.

So now the cost of doing mortgage application goes from 300.00 current model to $400.00/$500.00 with the HVCC Ruling. NO BUT WAIT.. In this example the Consumer would pay 2x $400.00/$500.00 to proceed with the mortgage application. Before HVCC consumer cost $300.00 After HVCC $800.00/$1,000.00 A NIGHTMARE WAITING TO HAPPEN!

Now a Large conglomerate AMC – Appraisal Management Company is in the picture and Mr/Mrs (small business owner) appraiser is making less $$ that they were making in the past.

Who are some of the appraisal management companies. Mr/Mrs consumer you need to see the following link from Diana Olick CNBC – http://www.cnbc.com/id/29619999

Mr/Mrs Consumer you must take action ASAP to defeate HVCC HOME VALUATION CODE OF CONDUCT.

Signed,

Dana Bain

Premiere Mortgage Services Inc.

http://www.BainMortgage.com