Real Estate Essentials: The Basics You Need to Know

Welcome! What we will learn today includes the concept of real estate as well as titles and their attributes; types of tenancy and types of properties; and definition by measurement using the township as the standard; possession of property; Deeds and their conveyance from giver to receiver; restrictions use imposed both privately and publicly; and mortgages; how they are transferred and how they affect the larger financial markets.

Traditional Definition

First, we will start with the concept of real estate. How can we define it? The elemental concept of real estate–the American tradition of property rights–is derived largely from the Anglo-Saxon tradition.

This concept of real estate begins with Nordic cosmology, early informal English tradition, Saxon common law, and the English Magna Carta.

Starting along a shoreline, we can visualize property by looking at a point on the horizon. To the right, we view the Sea; to the left, the Earth; above we view the Air; and by focusing downward beneath the surface, the Core.

Next, we face inland and draw a horizon line. Above the horizon we view the Sky that helps us to determine air rights, the height of buildings, etc. Then, we view the Ground as the surface of all the Earth, whereas, the Core below helps to define mineral rights.

As we face away from land out to Sea, we can mark a horizon line with the Sky above and the Sea below. Generally speaking, we can see about twelve to fifteen miles out to Sea on a clear day because the curvature of the earth. This application of line of sight helps to define the delineation between sovereign states and international waters.

Titles

Next, let’s talk about Titles and the various attributes of these documents. We start with the Title known as a “Fee Simple.” This Title is the most common one. Generally, ownership of residential property is by Fee Simple.

This Title reflects a bundle of rights, the right to: 1) dispose of the property, to use sell or give it away; 2) the use of the property; 3) possession of that property, which is what the Title’s about and; 4) the ability and right to exclude others from using the property.

The Differences between Real Estate and Real Property

Real Estate plus the Title equals what we call Real Property and Freehold Tenancy. This tenancy has an indefinite duration of time.

Freehold-Estate Tenancy can extend perpetually and can be passed from one party–one generation–to another. The Freehold may be Fee Simple.

Alternately, the tenancy could be a Life Estate for which someone has the right to remain on a property (in a house) until s/he passes away. Then, it is turned turned over to another party, by prearranged agreement. This party is referred to as the Remainder Man (a traditional term).

Title is equal to the Estate minus the tenancy. Therefore, we can define Real Estate as a Bundle of Rights that includes the rights of Disposition, Use, Possession, and Exclusion. We can abbreviate these rights with the acronym D. U. P. E.

A Non-Freehold extends for a limited duration of time, the length of time that a person may hold it. Therefore, it is Non-Freehold. Generally, this Estate is referred to as a Leasehold that requires a lease contract, which specifies a duration of time.

This lease is similar to the Title except there is one of the four property rights in Bundle of Rights which is excluded. This excluded right is the right to Dispose of the property, to sell or give it away. However, the rights to Use, Possess, and Exclude others from using it still apply under this lease.

Below, we have a comparison chart. The key feature is that a Freehold has an indefinite duration.

The Non-Freehold enjoys only a limited duration of time because the lease, the Leasehold, excludes the right of Disposition. In contrast, a Freehold Bundle of Rights includes all four: Disposition, Use, Possession, and Exclusion. Therefore, the Estate is equal to the Title is equal to this bundle of our rights to the property.

Let’s talk about the types of tenancy along with the types of properties. This tenancy in Severalty involves a number people. In common, it is often with the married couple and specified heirs for that tenancy. In Joint Estate, there is a Right of Survivors. Anyone with this tenancy who survives has the right to continue the tenancy and to have that Fee Simple with its four-fold Rights of Property. By Entireties, the Right of Survivors are the same.

Properties

The types of property include business property–service sector, industrial (generally manufacturing), commercial property (both wholesale and retail), residential property, and agricultural property.

Residential properties are defined as properties of four or less units or vacant land that is zoned for residential use. Also, it includes ten or less acres of agricultural land (commonly, acreage that small lacks the natural conditions to provide a sustainable working farm.

Definition by Measurement

For definition by measurement, we use the Township as our basic standard of measurement. The Township is six miles by six miles square (36 square-miles encompassing 23,040 acres).

To measure a Township, let’s use an example of an uncharted island of irregular form. We start by drawing a Baseline and Meridian line upon it, striving to center it as well as possible (for simplicity’s sake, whatever is practical).

Let’s use an island for our example. We use the full Township plan, carrying it over onto the water around this island. We measure the island down to measurement of quarter miles.

As we measure the entire island, we can determine how many square miles are contained on the island or irregular shape. We are not concerned with the water area at this time.

If we use square quarter miles in order to do the estimation of area and determine that the island is 368.75 square miles. For a symmetrical island, it may measure 23.5 miles long by 23.5 miles laterally.

Let’s continue to use the Township as our standard unit of measurement. We recall that it is which is 6 miles by 6 miles (36 square miles) and contains 23,040 acres. We are going to consider how we can further subdivide this Township. If we subdivide a township, we have 36 square-mile Sections.

Therefore, each Section is one-square mile and includes 640 acres. If we subdivide this square mile into quarter sections, each section must be a quarter of a square mile containing 160 acres. The boundaries of these quarter-sections are one-half mile by one-half mile.

If we subdivide further, we have acreage that is one-quarter mile by one-quarter mile. This is a sixteenth of a Section, a sixteenth of a square mile and 40 acres in size. Traditionally, this has been considered as the size of a workable family farm. These forty acres can be divided further as subdivisions for residential and business property.

Possession of Property

Let’s discuss Voluntary Alienation, the giving up of the right to possess land voluntarily through an instrument of conveyance (transfer) of these rights through a Deed or Will.

Involuntary Alienation occurs when a person dies without a Will. In this case, the property goes to probate and the court decides. Also, if a person dies without a Will and without heirs, this case is called Escheat. As a result, the property is deeded over to the state government.

Involuntary Alienation can include situations such as Eminent Domain and Condemnation by Eminent Domain, in which a government can take over a property if it pays a fair value for the property. The government may do this regardless of whether or not the present owner wants to keep the property. Usually, this action is taken for some larger public good, such as the construction of an expressway.

Adverse Possession may be hostile or simply can be Open Possession without permission. It may also include taxation. If taxes are not paid on the property, the municipality or the county can take over the property for the lack of back taxes being paid.

Clear Adverse Possession may occur if there is a legitimate claim on the Title. Flagrant Possession can occur by a party moving in and occupying the land. However, it could be that if there is property to which there is no apparent claim and a person resides on that property for seven years (common-law), then that person can claim ownership to what would otherwise be abandoned property.

Voluntary Alienation requires an Instrument of Conveyance, a transfer, usually a Deed, but often times a conveyance of a Title. On this chart here (and when it’s complete you may want to pause the video and take a look at it, what we have is the instruments which may be transferred from the giver to the receiver.

The giver (many different names for them, but they are all represent the origin and so their names end with an “OR”).

The receiver is the end-recipient. Therefore, that name ends with an “EE” (an easy way to remember this). The instrument of a Title or Deed is given by a grantor to a receiver known as the grantee.

Deeds and Their Conveyance

The Deed is an Instrument of Conveyance for transfer between two parties. One party is the giver, the other the receiver.

The giver (who is the Grantor [most likely the seller]), gives the Deed to the Grantee (who is the buyer). For example, the transaction may involve a Sale-by-Owner property. In such a case, that For-Sale-by-Owner gives the Deed or Title (or both) to the borrower who is the receiver.

In different states, there is application of one of two distinct theories as to who has the predominant right over the property–Lien Theory or Title Theory.

In a Lien Theory state, the Grantee (the mortgagor or buyer of the property) maintains legal control. In a Title Theory state, the mortgagee (the lender) maintains that control.

The Deed is a recorded Constructive Notice. As a result, a Constructive Notice is a written document that is filed as a public record.

An Actual Notice is more traditional. A person would stand in the middle the town, all the neighbors would gather about, and s/he would say “I now own this piece a property” and describe it to the town folk. This kind of notice is neither written nor filed. Therefore, an Actual Notice is an informal notice.

A number of different types of Deeds exist. The following are some that we consider and that we see most often:

1. Bargain and Sale Deed, or a Quit claim deed that clarifies what the nature of the property.

2. Special Warranty Deeds and General Warranty deeds, Free and Clear, or Free of All Encumbrance Deeds.

These instruments are what the names suggest. Deed requirements state that there must be a premise. In other words, there must be a Grantor and a Grantee and there must be some interchange between them.

In addition, there exists what we know as the Habendum Clause or Seisin Clause (which goes back to the Middle Ages). This clause means to have and to hold the property.

With this clause, there must be consideration given: money or other valuables, or something as simple as love and affection. (This concept goes back many centuries when wives were considered chattel property.)

In essence, a valid Deed is one that is signed by the Grantor along with two witnesses and must be offered voluntarily by the Grantor, and accepted voluntarily by the Grantee.

Encumbrance or Lack Thereof

If no Encumbrances exist, then the property–the Deed–is free and clear. This means that there are no Liens upon it. In other words, no financial obligation remains when the property is sold. As a result, no one can claim a portion of the sales price in order to pay off a Lien.

As we have seen, a Deed is an Instrument of Conveyance between two parties and the two parties are the giver and the receiver.

Now, let us look at the transaction that occurs between giver and receiver. The giver is a Grantor and also the seller. Contrastingly, the receiver is the Grantee and buyer of the property.

Therefore, the giver tenders a note to the receiver who is the mortgagor–the borrower. By doing this, there is recognition of Entitlement for those basic rights that include Disposition, Use, Possession, and Exclusion.

In addition, there are conditions of a Title that need to be considered. The first condition is referred to as the Chain of the Title, which sometimes traces back to an original Land Grant.

An uninterrupted chain must be established for the Title that is being passed from one party to the next. This assurance is accomplished through a Title Search, summarized in a document known as the Abstract of Title, and accompanied by an Opinion as to the quality of the search in respect to the cleanliness of the Deed and the passage of Title.

In addition, Title Insurance plays an important role in all of this business because it protects both parties. For owners, the insurance protects them for the amount of the purchase price that they are paying. For lenders, it protects them in terms of the loan amount.

Furthermore, Title Insurance protects both parties in cases of forgeries that may have occurred in the present or even the distant past in respect to both the Deed and the Title.

Restrictions of Use for a property can be either private or public. The private restriction may be a Deed Restriction that is written into the Deed or some Restrictive Covenant that is added to it. For example, there may be a restriction listed in a lease in respect to how many people may reside at a property or whether or not pets can be kept on the property.

Liens constitute an obligation that cannot be collected immediately. However, we are looking for Deeds that that essentially are as free and as clear as possible.

Government restrictions may involve something as simple as zoning laws that determine how a property may be used. In addition, government actions can include the use of Eminent Domain in order to acquire property as well as the ability to tax property. These actions put restrictions on a property. If a person does not pay the property taxes, s/he forfeits the property to the government.

Encroachment and Easement

Encroachment and easement involve adjacent property and the rights of adjacent property owners. Encroachment occurs when one person uses a property belonging to someone else, such as moving a fence on to that property without permission of the owner.

An Easement is just the opposite. A simple example would involve a person who opens a car door and gets out onto a strip of lawn that belongs to their neighbor. Generally, a one-foot easement is allowed in such cases.

Now, let us look at Mortgages in a little more depth. A Mortgage tells us that the Mortgagor is the Grantee who is giving the Mortgage to the borrower who is the buyer.

For the two parties involved in such transactions, we again have a giver and a receiver. One party gives a Promissory Note and Mortgage to the Mortgagee, the lender that often is a bank. This second party is the note holder who gives loan money to the note giver, the party that is the buyer.

If we look at the monthly payment for a piece of property, it usually is a fixed amount. Of this amount, part of the payment is Principle and part of it is Interest. At the beginning of a Mortgage, most of that monthly payment is Interest. Very little of the payment reduces the Principle and pays down the balance of the loan on the property.

As time goes on and we get to the years near the end of the mortgage, most of that fixed payment becomes Principle paid and very little of it is Interest.

A mortgage is made up of different payments. Together, the Principle and the Interest are referred to as to as Debt Service. However, in most mortgages, there are taxes, which are paid along with insurance which is paid.

Both of these are paid into an Impounded Fund called an Escrow Account and they’re included as part of the monthly payment. They’re held in Escrow and then dispersed.

Therefore, we have Debt Service and we have Escrow Impounds. Together, these two items make up the total amount which is paid monthly. Commonly, this total is called P. I. T. I (pity). It includes Principal, Interest, Taxes, and Insurance.

A Promissory Note (an obligation to pay) is signed by the mortgagor who borrows money with the promise of paying it back. The mortgage is recorded and becomes a security instrument in respect to the property.

The Mortgage is a Voluntary Lien that the lender will get paid. It’s signed by the mortgagor. As a document, it facilitates the act of foreclosure. When mortgages enter the financial market in clusters, they often get bundled into other financial instruments.

What we have found in the first decade of the 21st century is that lenders were turning (to a very large degree) to the issuance of Sub-Prime mortgages–very high-risk mortgages with very little security. Potentially, because of the risk, they can earn a higher amount of interest.

However, most of these securities collapsed and caused a downfall of Lehman Brothers and vast problems for other Wall Street firms in September 2008.

Also, there are Prime mortgages. This is the standard low-risk mortgage that is liked by lenders because of the low risk. However, it doesn’t carry the highest rate of interest. Therefore, in terms of the gamble involved, it’s not necessarily the best for the lender. In addition, there are Alt-A mortgages which form a kind of in between mortgage.

What began to rise in the middle of the first decade of the 21st century were option Adjustable-Rate Mortgages (ARMs) for which the mortgage interest rate goes up or down with the prevailing baseline interest rates set by the London Inter-bank Offer Rate (LIBOR).

These ARMs have that potential put borrowers and their properties below water (where the value the property is decreased to below what is owed on the property as the interest rate increases because it’s tied to (pegged to) the general interest rates.

In these circumstances, there is a greater tendency for buyers to walk away and abandon their properties.

This episode has carried us into the second decade of the 21st century. In recent decades, the issuing and servicing of mortgages have moved away from a single bank that issues a mortgage and then services it for its lifetime.

The trend for banks has been to issue mortgages, earn a fee, and then step away by selling them very quickly to some other institutions that will service them. In large, this has been due to pressures in the financial markets to use mortgages as ingredients for other securities, like hedge funds.

The first one that we see on the left, RMBS, is a Real Estate Mortgage-Backed security that is a fairly good one.

Most of the mortgages in this security have Triple-A ratings. These are Prime mortgages. However, what began to happen in the first decade of the 21st century is that these Collateralized Debt Obligations (collateralized by the real property) began to be filled with Sub-prime mortgages. Hence, they became very risky.

However, the bond-rating services (Moody’s in particular) rated these mortgages as very good mortgages in very good securities, even though they were filled with highly toxic assets. In part, this led to the collapse of the mortgage-backed securities market in 2008.

Wrapping Up

So, what have we covered? We’ve covered the concept of Real Estate and what it is; We’ve looked at Titles and the attributes of these documents and the types of Tenancy and types of Properties; We defined and measured property in terms of the unit of the Township; We discussed possession of property by different means and looked at Deeds and their conveyance from giver to receiver; We discussed the Restrictions of Use of property; and, finally, we addressed mortgages and the role that mortgages play in the wider financial market

Building a Real Estate Portfolio on Limited Income

Here’s a question: Is real estate investing only reserved for a small percentage of “fat cats” who were born into money or is the “average Joe” able to participate in portfolio building? Of course we know that people of many income brackets participate in real estate every day.

The question is: Can people on a limited income buy investment real estate? The answer is… yes! Now of course that answer comes with an asterisk as there are many factors which contribute to a successful purchase.

Earlier in my former life as a professional musician, I was told if I could master the art of playing jazz music, then every other kind of music would be easy to learn. This proved to be exactly true and I enjoyed a long career mastering many styles of music. By the same token, if we can understand how to acquire real estate with an extremely limited income, we can probably become very successful when we have a larger budget to work with.

Let’s put this theory to the test and see if someone on minimum wage can successfully purchase real estate. Minimum wage earners at the current Canadian average of $10.25/hour make about $21,320 annually. This can be challenging when looking to qualify for a mortgage, however it is possible… you have to pick the right property and be suitably prepared for financing.

Let’s build a few scenarios outlining what anyone, including a low income earner must undertake to be properly positioned for both mortgage qualification as well as options available to build more portfolio.

Presentation

I have seen numerous financial portfolios of real estate investors over the years through my work as a mortgage broker. One of the most common factors contributing to an investor’s inability to acquire more property comes down to lack of financial preparation and presentation for a lender.

Most investors who are successfully growing their portfolios have created (and continuously update) a detailed “financing binder.” A financing binder allows any lender a cross sectional view regarding an investor’s income, credit bureau, non- real estate investments, assets and liabilities. Also, if there are rental properties owned, a detailed outline of each property is required including:

– current property value through an appraisal;

– current tax assessed value;

– mortgage statement(s): current balance, payment, rate and maturity date;

– rental income verified by current lease agreements as well as income & expense statement

– completed maintenance statement including a repair breakdown;

– pictures of the property;

– Debt Coverage Ratio (DCR) spread sheet indicating if the properties are within most lenders’ 1.1% debt coverage ratio guidelines.

Investors who maintain an updated financing binder can be looked at as a “credible business” by most lenders and as such investors are more easily able to increase their portfolios as opposed to those who do not. So, how does this pertain to those who have one or two properties… even zero properties?

The answer is simple. In real estate, financing is everything. In today’s ever tightening lending environment, it is imperative to do everything necessary to give you an “edge” and show lenders you know what you are doing. Even if you are new to the game, you must get your financing binder in order, even if there are no properties involved… yet.

Simple Financing Binder Steps

The object here is to get your income, debts, taxes, credit and net worth statement into an orderly fashion and clean up anything directly affecting your chances of getting financed at the best rates. Anyone who wants to create and grow a portfolio of income properties must have their business together, regardless of where you are starting financially.

1. Pull your own credit. Go to Equifax.ca (score power) and Transunion.ca. These companies provide your credit score at low cost (or free) and a history outline with your creditors. Many people experience an inconstancy on their bureau which can be affecting their scores negatively. By being proactive, you can eliminate any issues which may be keeping your score lower than it needs to be. There is no negative impact on your credit score if you pull it 2 or 3 times a year (which I recommend).

2. Eliminating debt. Debt is one of the things which can hamper anyone at any financial level in adding to their portfolio. High credit card balances, leases, loans or credit lines can impede the purchasing process. If you are struggling in this area and sincerely looking to make a change in your money “habits”, perhaps talk to a credit councilor or mortgage broker to put you on a plan to eliminate or consolidate your debt. One step can be as simple as calling your credit card companies and asking for a lower rate or getting a leverage loan to maximize your RRSP contribution and using the tax refund to pay down your debt. (I’m not an accountant or financial planner, so please consult the experts in this field to help you).

3. Get your taxes current. Lenders tend to not advance mortgages to people until they know there are no taxes owing. Why? Because the “taxman” comes before everyone in the foreclosure food chain. Once your taxes are complete, you will have a Notice of Assessment (NOA). This document will show the lender your net income as well as whether you have taxes outstanding. Lenders typically require the last 2 years NOAs.

4. Get your income documents current. These documents consist of your last 3 paystubs and a Letter of Employment (if you are salaried). If you are self-employed you will need 2 years of T1 Generals (Tax returns), 2 years NOAs, and proof of being self-employed. This would consist of a copy of a Business Registration as a sole proprietor or Articles of Incorporation. If you are paid by your own numbered company and T4 yourself, you will need your latest T4s.

5. Investment statements. Current statements for any non- real estate investment such as RRSPs, TFSAs, stocks, mutual funds and the like should be part of your binder.

6. Mortgage statements. The latest statement from your lender from all the mortgages you have should include the current balance, rate, payment, tax portion (if applicable) and maturity date.

7. Property tax information. A current property tax statement as well as the latest assessment is important to have for all properties.

8. Net worth Statement. You can download a template online which you can fill in your income, including dividend/investment income, rental income (if applicable) and any other income; expenses, including all debts and who they are to. Also include assets which may include properties, vehicles, jewelry, precious metals and art (and I’m not referring to your black velvet Elvis portrait). You may also include your investments, stocks, insurance policies etc. and their current value.

Completing this task has many benefits. All successful real estate millionaires have done this step first. It is the first step toward financial freedom in real estate and it keeps track of your success through your entire real estate career.

What’s the least amount of money needed?

This depends what the purchase price is and how much you are using for down payment. Let’s look at a few examples. (These examples are to demonstrate affordability do not reflect the authors opinion on a good real estate investment purchase)

Example 1

The purchase of a 1 or 2 BR, 1 bath apartment rental condo in many centres in Canada with a population of 150,000 or less can be found at under $80,000, in some areas well under $65,000. London ON, Kitchener ON, Winnipeg MB, Red Deer AB and similar areas all fit this category. In some areas you can find trailer homes for much less.

For argument’s sake let’s agree to a $75,000 purchase price. A low income earner could feasibly be able to purchase this property, but what is the lowest income amount needed for such a purchase?

Let’s do the numbers with the following assumptions:

a) You carry no debts

b) You pay $850 in rent where you currently live

c) You have a credit score of 650 or higher

d) You have a positive net worth

e) The condo you are purchasing can be rented for $800

f) The condo needs no repairs

g) The condo fees are $200.00/month

h) The taxes are $80/month

I) The tenant pays for all utilities

j) The property is self-managed

k) You have the source for the downpayment (from savings or liquid investments)

Here are the mortgage numbers:

1. Purchase Price= $75,000

2. 20% downpayment = $15000

3. 1st mortgage amount = $60,000

4. Monthly mortgage payment (at 3.19% 5 year fixed rate )= $ 289.83 (at 25 year amortization)

Summary

To afford this property, a minimum wage income earner needs to make $21,320 annually. After expenses there is a positive cash flow of $230.17 per month. If you factor in 5% vacancy and 5% maintenance, the cash flow becomes $150.17 per month.

Example 2

The purchase of a 1 BR, 1 bath rental condo in many major centres in Canada can be found at under $150,000, in some areas well under $150,000. For argument’s sake let’s agree to a $140,000 purchase price. A low income earner could feasibly be able to purchase this property. What is the lowest income amount needed for this purchase?

Let’s do the numbers with the following assumptions:

a) You carry no debts

b) You pay $850 in rent where you currently live

c) You have a credit score of 650 or higher

d) You have a net worth of $25,000+

e) The condo you are purchasing can be rented for $1050

f) The condo needs no repairs

g) The condo fees are $225.00/month

h) The taxes are $100/month

I) The tenant pays for all utilities

j) The property is self-managed

k) You have the source for the downpayment (from savings or liquid investments)

Here are the mortgage numbers:

1. Purchase price = $140,000

2. 20% downpayment = $28,000

3. 1st mortgage amount = $112,000.

4. Monthly mortgage payment (at 3.19% 5 year fixed rate )= $ 541.01 (at 25 year amortization)

To afford this property, the investor needs $40,250 of combined family income. The investor will be making $184.00/month. If you factor in 5% vacancy and 5% maintenance, the cash flow is $79.00/month. If the minimum wage earner has a partner in a similar income bracket, they could collectively afford the condo in example 2.

Example 3

The purchase of a triplex in Hamilton ON, a 6 plex in Saint John NB or a 4 plex in Winnipeg MN all can cost around $220,000 or less. Let’s consider a purchase price of $200,000. In order to purchase a property like this we have to consider the following:

The assumptions we are making are similar to the above example except for the following:

a) You carry no debts

b) You pay $850 in rent where you currently live

c) You have a credit score of 650 or higher

d) You have a net worth of $25,000+

e) The condo you are purchasing can be rented for $1750

f) The condo needs no repairs

g) The condo fees are $225.00/month

h) The taxes are $200/month

I) You pay $350/month for heat

j) The property is self-managed

k) You have the source for the downpayment (from savings or liquid investments)

Here are the mortgage numbers:

1. Purchase price = $200,000

2. 20% downpayment = $40,000

3. 1st mortgage amount = $160,000.

4. Monthly mortgage payment (at 3.19% 5 year fixed rate )= $ 772.88 (at 25 year amortization)

To afford this property, the investor needs $46,500 of combined family income. The investor will be making $402.12/month of positive cash flow. If you factor in 5% vacancy and 5% maintenance, the cash flow is $227.12/month.

The above examples have dealt with buy and hold properties. Similar calculations for qualifying can be done with properties to buy, fix and sell. The only challenge is the investor also needs money for renovations. This may mean the deal needs to go to a different kind of lender, perhaps that of a private entity or a corporation such as a Mortgage Investment Corporation (MIC). These particular lenders typically offer better solutions and less “stringent” lending criteria.

A challenge facing a low income earner may be saving for the downpayment. The first thing to consider is budgeting. Most people cringe when they hear the word budget. However, for many people who have successfully purchased even one investment property, budgeting has to come into play. Putting aside a regular amount each month and investing it into a fixed return vehicle offered by a Mortgage Investment Corporation (MIC) or a REIT will assist in faster capital growth.

Utilizing joint ventures can be another way to participate in real estate using little to none of your money. (Please refer to my article in Feb. 2012 CREW Magazine called “5 years to one million”)

The important thing to realize is that proper planning (& a great attitude) is everything. One can move from a low income to a large income by adopting millionaire habits. This can be achieved simply by consciously thinking and acting differently which in turn creates success

First-Time Tips for Buying Real Estate

he decision to become a first-time homebuyer is an exciting and sometimes even scary time in an individual’s life. After years of saving and deciding where you want to be in life, buying real estate is often the next step. Real estate can be a great investment, especially when you are looking to settle down. Follow these tips to help ensure that your home buying experience is a great one.

1. Save up for a down payment. Purchasing your first home is not going to be a decision that you can make overnight. It can take years of saving and preparation, especially when you are currently paying rent along with other bills. A down payment is a great way to lower your monthly payments while also lowering the amount of interest you will be paying over the course of your loan.

2. Get pre-approved. Before you start attending open houses and private viewings, find out what you can afford. It also doesn’t hurt to work out a budget for yourself. The cost of heating, water, and electricity are likely to be more expensive with a home as opposed to an apartment.

3. Consider what you want in your new residence. Remember, your first place is often not going to be perfect. However, it does not hurt to make a list of things you are looking for, within reason. Are you looking for a lot of land? How many bedrooms do you want? Do you want to be close to a certain location? Draw up a list of features you desire most and put them in order from most to least important, if possible. Having these things written down will make it easier for you to keep your wish list straight.

4. Find a real estate agent. Look for a reputable agent in your area. A great way to find one is by word of mouth. If you’ve had friends or family that have recently purchased real estate, they may be able to recommend a great agent. Otherwise, try an Internet search or seek out a local real estate agency.

5. Avoid buying the first “ideal” home you see. Take your time so that you are 100 percent certain of your purchase. A house is something that you are going to have for many years to come.

When handled correctly, buying property can be a fun and exciting process. If you take your time and prepare for the process, you’ll be able to make the search as stress-free as possible.

How Hard Money Lenders Can Help You Live Your Real Estate Dreams

f you are looking to fix up your property or to secure a new home, someone may have recommended the services of hard money lenders along the way. Conventional loans might seem like a more secure option to you, and that is only natural: they are conventional because they are the most common. If you find yourself in a non-traditional situation, then this non-traditional loan style might just be the best option for you.

Traditionally, there is a set of standards most conventional bankers look for when considering whether to issue a loan. Banks are the most common source of funding like this, and there are a few key distinctions between the two entities. When a bank evaluates a candidate, they look at their credit history and income, then try to gauge the recipient’s ability to pay the money back quickly based on the combination of these factors. Also called asset-based backers, hard money lenders are private investors, and they’re primarily used when one desires to purchase real estate. Here, the collateral that backs the loan is the investor’s primary focus, rather than the combination of all those elements in which the banks are typically invested.

One of the biggest advantages of choosing the services of hard money lenders versus doing business with banks is the amount of time it takes. Specifically, because loan providers of this nature are typically private entities, the process of procuring your loan tends to move more quickly than it would through a bank. If you have a limited amount of time to work with, talking to your local granter might be your best means of securing the necessary funds quickly and efficiently. It also works in favor of folks who work from home and have limited or poor credit. If you have solid assets to back the funds you hope to acquire, then it becomes a better shot for you.

Procuring loans of this nature is a wise decision for people who make their living flipping real estate properties, or owners of multiple properties looking to sell one and purchase or renovate another. It’s also advantageous if you are looking to purchase a property with a limited amount of time attached to it, such as in the case of a short sale. Because there are many situations in real estate that require a quick response time, choosing the services of hard money lenders provides you with a quick and easy alternative. You do not have to wait long to find out if you will be approved for your loan, so it’s that much faster to get moving toward your final goal.

It is imperative that you do all your research thoroughly before deciding if hard money lenders present the right solution for your particular situation. Low-interest rates and a short waiting period might be tempting, but in spite of this, it may not be the best fit for your situation. However, when it comes down to speed and flexibility, this is the path to take toward your real estate dreams.

Free Debt Relief Grants For Veterans

The US government has made provision for the Veterans by offering them numerous debt relief grants for monetary aid to clear off debts. The grants have been initiated with the purpose to offer support to Veterans who have once served our nation.

Veterans who have incurred huge debts and have insufficient finance to clear them can avail varied grant programs and options that can pull them from their crisis situation. Read the article to know your options that will help you clear your liabilities and assist you to go back to a debtless life.

Debt Relief Grants that Veterans Can Apply for

The US Grant Programs for the Veterans offer help in case of financial crisis that can be later consumed to clear debts to get back on feet. In 1989 the U.S. Department of Veterans Affairs (VA) was established with the mission to serve the American soldiers. The VA commits to provide support to Veterans and their families, shelling out almost $90 billion per year to fulfill their needs such as:

• Housing grants

• Medical care grants

• Business grants

• Legal representation grants

• Education grants

• Health and nutrition grants

• Unemployment benefits

• Disability compensation

• VA pensions

• VA life insurance

• Financial counseling

• Death benefits

• Government grants for real estate investing

• Loans and relief fund

Covering for the Debt Crisis

The government has levied many special laws and programs in favor of the Veterans and service members to help them out of debts and relieve them from the constant worry of repayment. For instance, service members in active duty need not pay more than 6 percent interest for their credit cards, they have the authority to cal off their rent with no penalty and they can remain safeguarded against foreclosure of property.

If you are still in debt, the main aim must be to clear the complete debt but that can be done sparingly by availing other probable options to reduce the load. Some options to consider can be:

Debt refinancing: it’s a popular idea where a new loan with lower interest rate is taken to clear off the previous multiple and segregated debts taken. Pay off all the debts at once and only worry for one loan to be paid. Start making arrangements from the varied options for the new loan. The VA loan offers added benefits, higher loan amount, low-interest rate, easy lending process and better repayment procedure.

Debt Settlement: it is also a preferred option that can help Veterans to negotiate and lower the amount to be paid, hence saving the dollars. Through reputable debt settlement firms the negotiation can be done. Even Department of Veterans Affairs offers options for debt settlement in case of education loan, mortgages, home loan and others

Some Tips for Buying a Property

The first thing that comes to one’s mind when buying property is the reliability of the deal. Since you are going to put in all of your hard earned money in the property, you should have to consider all the things that are related to it. Everyone’s primary concern is to get the best deal that they can for their money.

Planning and research

The most considerable factor that you would need to consider while buying property is the purpose for which you are buying it. You would need to firstly do some research before purchasing some property. Without complete research, you cannot understand the current scenario in the world of real estate. Otherwise, you would not get the best deal. So, do thorough research before buying a property or making a property deal. You could also take the help of a real estate agency to buy the property.

Expenditure

After doing some research, sort out the list of properties as per your budget. Check out the amount of loan you would be getting from the bank. This will help you get a clear picture in your mind as to which options are available to you. Make sure you include the other expenses such as the broker’s commission, notary and registration charges, lawyer’s fees, and so on in your budget so that there won’t be any hidden charges that would pop up later on.

Check legal documents

Check whether the seller of the property has any legal documents on him related to the property. Get it done from a lawyer if you cannot check it yourself. This will prevent you from getting into any kind of trouble later on. The most important is the clear title of the property. Ask for all the required documents which indicate that the property is free from any kind of liability. Also, make sure that any outstanding liabilities have been cleared by the seller of the property. Make sure all the facilities such as electricity, water, along with location, parking, etc. have been taken care of by the seller of the house.

House inspection report

After examining all the other criteria, do not hasten to make the payment. Get a house inspection report from the property inspector before investing in the property. Other than his report, try to find out whether the property has any other problems. Finally, you should take the help of a real estate agent to buy the house