Jamie English, Author at Metrolina REIA - Page 2 of 9

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If I were to write about how to get rich quick, without effort or risk in real estate, the resulting effort would be buried in a mountain of other similarly titled works. You can get rich quickly in real estate, but only relatively so – and risk will only decrease with specialized knowledge and experience.

So for those of you with a surplus of money that you have been yearning to rid yourself of, I proudly share with you some of the top ways to lose it by investing in real estate.

*Lack of education and training. This is listed first for a reason, as anything else is simply a subset of this. Real estate investing is a full-contact sport. If you knew you’d be stepping into the ring with the world boxing champion for your weight class in 12 months, I bet you’d want some training first. Even if you felt you stood no chance of winning, you would at minimum want to know how to guard and defend, how to strengthen your neck muscles so that a properly landed punch would not give you whiplash, strengthen your abs so that the same instrument of destruction would not cause internal bleeding. Yes, a three-day training seminar from a top real estate trainer may cost you $5,000. When you attempt to purchase investment property without education or training, you are stepping into the ring with a world champion whose every landed blow can easily cost you more than $5,000, and a few such failures to defend will end in nothing other than the knockout blow of profit turning to red ink faster than a referee could perform a “standing eight count.” Whatever mistake you can make or problem you attempt to solve, someone has done so successfully before you, and can teach you to sidestep it. If you think education is expensive, try ignorance.

*Misjudging the neighborhood you buy in. You can make money in investing regardless of the neighborhood, but woe upon he or she who attempts a strategy based on a mistaken evaluation of the neighborhood.

*Underestimating repairs.

*Over- or under-improving the property based on your intended exit strategy.

*Poor tenant screening and incorrect methods of ongoing property management.

*Paying too much. This is the most common mistake. A low enough purchase price will give you the necessary cushion to fix most other errors.

Lou Gimbutis is director of education at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. He can be contacted at lou@MetrolinaREIA.org. For more information, visit www.MetrolinaREIA.org.

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Editor’s Note: This is the second of a two-part article. 

The difference between real estate and traded assets is that no one really needs Lehman Brothers shares to live. Food, water, clothing and shelter will always be in demand. Even if your property values have dropped, you still own something. The house is still there, and either you or your tenants are living under its roof. There is always the utility, and in the case of a rental property, rents may provide inflation-protected income.

The principles of real estate investment are simple and the values generally understandable; anyone who has ever rented or bought even one home can grasp the basic tenets. You can crawl around an attic tweaking timbers, or see with your own eyes whether or not a water heater is rusty. You know if a neighborhood is nice or not, and if you would want to live there. Are there people with jobs who want to rent houses? Property values can almost never go to zero.

Investing on Wall Street involves a level of education that most of us do not have. It involves trusting someone to do something you don’t completely understand. There are many recent examples of why this is not a good idea. The individual retail equity investor (you and me) is trading against a vast institutional investing and program trading machine or “black box.” This is like showing up to a gunfight with a knife.

Personal real estate investment is more manageable. A housing unit or “builder’s box” is more easily understood than Wall Street’s “black box.”

A curious investor looking at real estate as an alternative to stocks and bonds will get conflicting advice from stockbrokers and financial advisers, and even some real estate professionals. Financial advisers don’t generate fees from clients who buy real estate. Every dollar individual investors put into real estate is a dollar lost to Wall Street. They realize this and for obvious reasons do not favor real estate.

Some real estate professionals are not trained to serve investors and are uncomfortable with analytical investors who take the time to do their due diligence. Compared to buyers who purchase their own, based on a good showing and a little emotion, investors may seem indecisive and more work than they are worth.

Doug DeShields is secretary/treasurer and member of the Metrolina Real Estate Investors Association which provides education, mentoring, and networking for the real estate investors in the Charlotte region. www.MetrolinaReia.com.

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Editor’s Note: This is the first of a two-part article. 

The value of U.S. housing transactions in 2011 was $428.6 billion, with about 28 percent of them made by average Americans for the purposes of investment, according to “The Invaluable Investor 2012,” a study co-authored by REALTrends and Personal Real Estate Magazine, with polling assistance from Harris Interactive. Some 1.24 million residential unit sales were made to individual investors at a total value of $120 billion, averaging $96,580 sales price per investment property.

The Urban Lands Institute study “Emerging Trends in Real Estate 2013” correctly predicted modest gains in leasing, rents and pricing coast-to-coast in the United States, along with improving prospects for all property sectors, including the recovering housing segment. “In face, real estate assets will almost certainly continue to outperform fixed-income investments in the ultralow-interest-rate environment induced by the Federal Reserve, as well as offer a familiar refuge from ever-seesawing stock markets,” its executive summary states. ULI paints a profitable scenario for investors with the savvy and wherewithal to jump on deals in single-family-home markets where depressed prices are continuing to climb upward.

The most recent U.S. Census Bureau report (2010) counts nearly 75 million owner-occupied homes. This is a testament to the fact that real estate is a significant asset class in which the majority of American families participate.

How you can benefit

Wall Street points its finger at the current housing market and tells you that real estate has lousy returns. Yet, according to The New York Times, Wall Street lost an estimated $4 trillion in the collapse of or losses in former A-list companies Citigroup, AIG, Merrill Lynch, Lehman Brothers and Bear Stearns. These assets or value have been vaporized. Gone. Some shares are worth nothing; not even as recycled paper at $30 a ton.

Since Jan. 1, 2009, the Dow Jones Industrial Average has recovered some 50 percent or more of its value, but there is no consensus as to why this has happened.

Residential real estate is climbing out of the malaise it fell into in 2007 and 2008. The national trends, residential market by market, show increasing sales, growing prices. The reality is residential real estate has not been priced this low (on a relative basis) in a generation. For buyers or investors, many homes are available at prices that are lower than replacement cost.

Doug DeShields is secretary/treasurer and member of the Metrolina Real Estate Investors Association which provides education, mentoring, and networking for the real estate investing in the Charlotte region. www.MetrolinaReia.com.

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Congratulations! You have now successfully been through one-half of the year 2016. Upon reaching this point in time myself, I decided to look at some numbers relative to my businesses – my law practice and my real estate investing business.

One of the first things I wanted to look at was my profit and loss statement. A profit and loss statement (P&L) is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. These records provide information about a company’s ability – or lack thereof – to generate profit by increasing revenue, reducing costs, or both.

We all know that a business that consistently loses money cannot stay in business. The longest exception I’ve ever seen to that was in the airline industry. Although the airlines continued to lose money in the ‘90s, the value of their planes grew, and they were able to borrow more and more money against their aging aircraft. Ultimately, that did not end well for a number of airlines, and most major ones have been through bankruptcy at least once.

After looking at your P&L, the next step is to figure out where your profit is coming from. What are the things you are doing that actively make you money? My assistant helped me break down what percentage of my income is coming from which source. Hopefully you are using QuickBooks or something similar that can generate this information for you so you can see what is driving and affecting the numbers on your P&L.

Based on that information, you should be able to do two things:

*Do more of the things that make you money.

*Do less of the things that cost you money.

Your P&L is the first step to such knowledge.

Attorney Jeff Watson is council to the National Association of Real Estate Investors and an advisor to the Metrolina Real Estate Investors Association, www.metrolinareia.org, which provides education, networking, and mentoring to investors in the greater Charlotte area. You may contact Jeff at jswlawoffice@suite224.net.

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“One to buy; two to sell” is a saying in North Carolina real estate, referring to a marital interest.  It is commonly used, yet rarely understood.  The purpose of this article is to clarify the oft-expressed saying.

In North Carolina, when a couple marries and later buys a house, there is a presumption that the home is owned as tenancy by the entireties.  This is a form of ownership exclusive to married people and is akin to joint tenancy with a right of survivorship. Tenancy by the entireties avoids probate as the surviving spouse automatically inherits the deceased spouse’s share upon her death.  A last will and testament cannot supersede this; the surviving spouse automatically inherits.

A different scenario exists when a home is owned individually.  Let’s use a scenario whereby Mom, a divorcée, owns a house solely in her name.  Mom has two daughters.  Mom makes a will naming her two daughters as owners upon her passing, each in equal shares.  Mom later remarries Husband, never changing her will, and never putting Husband’s name on the deed.  Upon her death, who owns the house?

Mom and Husband did not own the house as tenancy by the entireties since they were not married at the time of purchase (recall, Mom was single when she bought the house).  The law favors the free transfer of property, so nothing precludes Mom from leaving the house to her two daughters.  Upon Mom’s death the two daughters own the house, as was dictated by the terms of Mom’s will.

So is Husband left out in the cold?  Not exactly. North Carolina law protects spouses from exclusion in a will. In this sense, Husband has a spousal interest in the home.  According to North Carolina law, Husband would be entitled to $30,000 for support for one year after the death of the deceased spouse.  Husband is entitled to this regardless of the terms of Mom’s will.  The “year’s allowance” is designed to protect surviving spouses from disinheritance.

The surviving spouse’s year’s allowance is to be satisfied from available funds in the deceased’s estate.  However, if the estate lacks the funds necessary to satisfy the year’s allowance, then Husband could obtain a lien on the home equal to that amount – $30,000.

So Mom bought the home (“one to buy”) but Husband needs to remove his spousal interest (“two to sell”).  The daughters own the home, in equal shares, and Husband is not an owner.  He simply has the ability to place a lien on the property.

Attorney Craig Morgan is a member of Metrolina Real Estate Investors Association, www.MetrolinaREIA.com, which provides education, networking, and mentoring to investors in the Greater Charlotte area. He can be reached at Craig@providencelawcarolina.com, (www.providencelawcarolina.com).

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“By the way, what have you done that’s so great? Do you create anything, or just criticize others’ work and belittle their motivations?”-Email from Steve Jobs in response to criticism from Walter Isaacson

I love reading biographies of great people not because they are perfect. In fact, the opposite is true. I enjoy reading about their great successes contrasted with their imperfections, character flaws, and major screw-ups.

Imperfection makes the stories real. Steve Jobs, like all of us, certainly had many of these imperfections.

But along with those imperfections, it’s fascinating to experience the can-do, creative spirit that drives people like Steve Jobs even in the face of constant and harsh criticism.

If it’s important, it will be criticized. I can count on it.

And despite all of the stoic serenity I can muster, for me criticism hurts, too. It especially stings when the criticism is about my most precious, important aspirations.

But it feels good knowing that like Steve Jobs, I’m a creator and not a critic.

When I’m on my deathbed, I won’t count how many people I criticized or tore down.  But I will take pride in being a creative person who did my little part to make the world a better place.

What about you? Are you creating or criticizing? Are you building people up or tearing them down? Are you on the arena floor staring down the lions or are you comfortably sitting in the stands saying how you could do it better?

I’ll leave you with part of my all-time favorite challenge to the critics from Theodore Roosevelt: “It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again … who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”

Chad is a member of Metrolina REIA (metrolinareia.org), which provides education, networking, and networking for real estate investing in the Charlotte region.  Chad also writes about real estate, money, and life at coachcarson.com.

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When I moved to Charlotte in early 2007, I effectively “bet the farm” on it being a solid prospect for sustained, long-term growth, and it has not disappointed.  According to CNN Money, Charlotte was the 10th-fastest growing city in the U.S. for the decade of 2000 to 2010, and recently weighed in at the second-fastest growing of the U.S.’s 25 largest cities from 2010-2013.  Nary a year goes by that we are not ranked toward the top of the list for population growth.  The farm, I am happy to report, is in good hands.

Curious about the effect of such a sustained influx of people into the area, I put the question to the individual most likely to have a solid answer based on years of in-depth knowledge of the Charlotte market as an extremely successful investor, landlord, and rehab lender: Tyler McCraken.  Tyler has long been my go-to person for questions about neighborhood growth trajectory, neighborhood gentrification or improvement, and other such questions that ultimately helped me determine what houses to buy or pass on, and what neighborhoods to either focus my marketing on or shy away from.

The major benefit Tyler has seen from our swelling population is that neighborhood income level has risen, causing a corresponding drop in crime rates across neighborhoods where once upon a time only fools would tread lightly.  “Safer” was a word that Tyler used several times in contrasting the Charlotte of the early 2000s with the Charlotte of today.  Even today’s worst neighborhoods, according to Tyler, are relatively safe compared with what he used to see.

The other interesting result of fast growth, according to Tyler, is the disparity between what most cities would consider a normal mixture of residential and commercial properties.  The massive demand for housing has caused neighborhoods in some cases to double or triple in value in a very short time.  Commercial property is bought, sold, and built based on residential demographics, and we are growing faster than they can keep pace with.  The result is that where in other cities across the country, a neighborhood of $300,000 houses would have a similar mix of stores and businesses nearby, in Charlotte the businesses nearby may still reflect those found in close proximity to $150,000-house neighborhoods.

Lou Gimbutis is director of education at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region.  He can be contacted at lou@MetrolinaREIA.org.  For more information, visit www.MetrolinaREIA.org.

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Millennials are beginning to drive the housing market.  Tired of spending money on rent with nothing to show for it, millennials are now beginning to drive the housing market.  This article explains how to overcome the most common roadblock millennials face when buying a house.

The primary issue preventing millennials from buying a home is a lack of money for the down payment. This hurdle is surmountable with some creativity.

The typical down payment for a home loan is 20 percent of the home’s purchase price. When the homebuyer is unable to provide 20 percent of the purchase price, the lender usually requires private mortgage insurance, or PMI. PMI protects the lender if you stop making payments. PMI results in a higher monthly payment but a lower initial down payment.  PMI can be affordable, since mortgage payments are low due to today’s low interest rates.

PMI can be avoided through special lending programs. Lenders often have programs available, such as “first-time homebuyer” programs alleviating the need for PMI even when paying less than 20 percent for a down payment.  Generally, these programs are lender-specific and require some investigation. Yet the savings can be tremendous if you qualify.

Buying a home does not have to be an independent endeavor. A unique idea is to consider purchasing a home with someone else. A home can be bought with a friend, domestic companion, business partner – or anyone!  The idea is simple; if you cannot afford a home in your individual capacity, then buy it with someone else. Pool your assets, and, through your combined efforts, raise the money for the down payment.

Use a “partnership agreement” when buying real estate with another party.  This is a contractoutlining the rights and responsibilities of the parties involved. The partnership agreement expresses the terms of ownership. A partnership agreement should contain details as to raising capital (i.e. the down payment), sharing of profit and loss, accounting, selling, renting, duties, managing, making mortgage payments, death or incapacity, and decision-making authority.

You should always use a partnership agreement when buying real estate with another person.  By using a partnership agreement, the details are agreed upon prior to the purchase, saving future frustration and headache.

Contributing the money necessary for a down payment is possible. Interest rates are low, special home buying programs exist, and partnership agreements can be used to buy a house with a partner. You can afford a house if you take a creative approach.

Attorney Craig Morgan is a member of Metrolina Real Estate Investors Association, www.MetrolinaREIA.com, which provides education, networking, and mentoring to investors in the Greater Charlotte area. He can be reached at Craig@providencelawcarolina.com, (www.providencelawcarolina.com).

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The year was 2006, and the Michigan real estate market was slowly circling the bottom of the toilet. Around the country, real estate was booming, and seller’s markets abounded – or so I’d heard.

There was no evidence of it in my backyard. With the state hemorrhaging manufacturing jobs (auto and furniture industry) and the service jobs that support them, demand for housing was plummeting and showed no signs of reversal. Housing was already losing value in many areas. What would the effect be when the national real estate “boom” ended, financing for buyers dried up, and we entered a recession, as we indeed did in 2008? I was not waiting around to find out.

So, my search for a new place in which my real estate business could prosper anew began. I limited it to the eastern portion of the country, so as not to be incredibly far away from family. Beyond that, a blank slate sat before me, upon which I began writing the criterion which would make for an optimal long-term growth market. You know already how the story ends, but it may be of interest to you to review the factors that my intensive research considered:

– Local economic strength: Michigan had demonstrated with brutal clarity the effect of having all of your economic “eggs in one basket.” Therefore, I sought an area that would not topple if the winds of change blew a contraction or collapse in one or two industries. Charlotte qualified strongly on that point.

– Growth potential: At the time I reviewed the numbers, Charlotte’s housing stock was considered undervalued compared to other major metropolitan areas across the country. In other words, if you wanted to move to or relocate your company to a big city, you could buy a lot more house for your money in Charlotte.

– Average days of sunshine: Statisticians track everything, don’t they? When trying to project future growth, I did not take lightly that most people prefer bright blue sunny skies to their gray, overcast brethren. Charlotte sat very high on the list.

– Proximity of various recreational activities: Charlotte is only hours from the beaches of the Atlantic Ocean, but moving in the other direction, mere hours from the Blue Ridge Mountains. This results in a staggering variety of scenery, as well as convenient proximity to both winter sports such as skiing and a long summer season of watersports.

There were of course many other factors, but the resultant decision, which I have yet to come to regret, is that Charlotte is the solid choice for sustained short- and long-term growth.

Lou Gimbutis is director of education at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. He can be contacted at lou@MetrolinaREIA.org. For more information, visit www.MetrolinaREIA.org.

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Here are two more terms instrumental to a sound grasp of the principles that will speed you along your journey to success in Real Estate Investing: Equity and first mortgage.

Most of us are aware of the general definition of equity: Value minus debt equals equity.

However, there is a phrase that is key to putting the importance of equity into its proper place: You can’t eat equity.

In other words, equity is a wonderful thing on paper, but real estate is a relatively non-liquid investment: If an emergency arises, you cannot readily and immediately turn your equity into cash to meet the needs of a crisis.

For beginning investors, creating cash and cash flow should always come before considerations of equity.  Equity will ultimately make you wealthy, but I have watched many an investor crash and burn because they were not in a position to ride out a financial setback and unable to harvest their crop of equity fast enough to avoid disaster.  It is entirely possible for an unbalanced portfolio to yield $1 million of equity on paper, yet leave the investor unable to pay the bills at the end of the month.

First mortgage, or first position mortgage, refers to the security position of a mortgage securing debt with real estate.  In North Carolina, the earliest recorded mortgage is given first, or senior, position.  This becomes important if the buyer defaults on payments and a foreclosure is instituted.  While the lender on a second or third mortgage – also known as a junior lienholder – can indeed institute a foreclosure if payments are not made as agreed, funds obtained from the foreclosure sale are allocated to pay off 100 percent of the first mortgage – not considering tax liens and other non-mortgage variables – and only after the first has been repaid in full do funds begin to go to the second mortgage, and so on.

Real estate investing has many facets, and some investors make mortgage loans secured by investment property.  This can be done safely only after determining an accurate analysis of the value of the real estate, what it is likely to bring at foreclosure auction, and the costs of this auction – both legal and in terms of opportunity cost while funds are tied up yet bringing no return.  A second position mortgage may be a safe investment, but only if the value is substantially greater than the amount of the first and second mortgage combined.  Other investors, myself included, specialize in investing in pre-foreclosure property.

Lou Gimbutis is director of education at the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region.  He can be contacted at lou@MetrolinaREIA.org.  For more information, visit www.MetrolinaREIA.org.

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