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Commercial Real Estate Syndication: Property Selection and Purchase, Part 1
So what is the best kind of investment real estate? In the process of putting together your groups, you’ll come to realize that not all types of real estate are “created equal” from an investment perspective. Here is a breakdown of property types and their attractiveness as syndication investments:
LAND: Including Remote (currently unusable), agricultural, and “pre-builder” land.
1. “Remote” land is held for a long period of time with the expectation that growth will increase its value. Unfortunately, it’s highly risky and provides no current income for investors. The biggest down side is that investors would have to make periodic contributions of capital to cover expenses for taxes, insurance, and possibly loan payments.
2. Agricultural land is used to create crops for sale. It is essentially unimproved land used in a business and its value is derived from the ongoing operations of that business.
3. “Pre-builder” land is subdivided and sold off to various builders who complete the end product, whether housing or commercial. The land is effectively inventory and its value is created in the subdivision process.
CONSTRUCTION: Including new commercial and sub-division projects, beyond the pre-builder stage.
EXISTING: Operating residential and commercial income producing property.
If we go by the list above, we’ll soon realize that as syndicators, we’ll want to focus our efforts on only one of the major categories. This would be income producing rental property.
Original Post : Carolyn Said, San Fransisco Chronicle Staff Writer
A vast “shadow inventory” of foreclosed homes that banks are holding off the market could wreak havoc with the already battered real estate sector, industry observers say.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.”
“There is a real danger that there is much more (foreclosure) inventory than we are measuring,” said Celia Chen, director of housing economics at Moody’s Economy.com in Pennsylvania. “Eventually those homes will have to be dealt with. If they’re all put on the market, that will add more inventory to an already bloated market and drive down home prices even more.”
More than one-third locally
In the Bay Area, a Chronicle analysis of data from San Diego’s MDA DataQuick shows that more than one-third of foreclosures are in shadow territory – that is, they are not registering in county records as having been resold.
For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.
Turnaround usually quick
Realtors say foreclosures generally go on the market a month or two after the bank takes title and then sell fairly quickly, often getting an accepted offer within a week or two of being listed and then closing escrow within 30 days. That means that foreclosures should register as being resold within three months.
But taking the foreclosures in any given month or selection of months and looking at what happened three months later also reveals a big gap between what banks took back and what they resold.
Tom Kelly, a spokesman for banking giant Chase in Chicago, said the bank sells foreclosed homes in a timely fashion.
“We try not to be in the business of owning homes,” he said. “Our goal is to get them back on the market as quickly as possible. We want to maximize what we sell them for and yet do it quickly.”
Foreclosure Hardship Letter Sample For Loss Mitigation
Author: Simon Volkov
A foreclosure hardship letter is used when homeowners are facing foreclosure. It is an integral part of any loan modification or short sale package. Loan modifications are offered to homeowners who want to save their home from foreclosure and have the financial means to become current on delinquent payments. Short sales are offered to homeowners who are unable to become current on their mortgage note. Lenders who accept short sale offers agree to accept less than the amount owed.
Most people find the foreclosure hardship letter the most difficult aspect of loan modification or short sale packages. It can be quite challenging to express the circumstances which caused you to fall behind on your mortgage payments.
Foreclosures are handled by the Loss Mitigation Department of your lender. Employees of this department are known as Loss Mitigators. When you are facing foreclosure, the bank will assign a Loss Mitigator to oversee your account. This individual can make or break your deal, so treat them with respect and provide them with the information they are seeking.
Your hardship letter will be read by your assigned Loss Mitigator. Keep in mind these individuals receive dozens of hardship letters every day. It’s important to keep your letter short and to the point, while including pertinent facts.
The foreclosure hardship letter can either be handwritten or typed. If your handwriting is difficult to read, it’s best to type the letter. The hardship letter is crucial to a successful transaction; therefore, it is imperative the Loss Mitigator can easily read it.
Click Here to watch video Sorry! The Sound quality does get better after a couple of seconds.
HVCC Appraisal Regulations Bad For Real Estate I have been in the real estate markets for 16 years now and I find it amazing how much change can be sold to the American citizens through the lack of proper information, the press and our beloved federal government. The new revelation is that appraisals now should […]
sticking point for real estate investors these days…
If you’re one of our regular readers, you know that we teach
a great deal on how to get private money. But, I still get tons of comments from investors like . . .
= > I don’t want to ask people I know for private money . . . where should I start?
= > The people that I know with money aren’t interested in lending right now . . .
= > How can I get private money without experience as an investor and a proven track record?
= > Everyone I talk to is holding on to their cash right now. Are there really people out there
lending private money in today’s market?
. . . and the list goes on and on. If you look closely at these comments, all they really are is excuses.
More often than not, most people just want something for nothing. They want the easy way out.
They want to reap the harvest and have private lenders beating down their door but aren’t willing
to till the soil, plant the seeds, and nourish them into full bloom . . . which is what it takes to get
private money for your deals!
The farmer doesn’t demand a crop from his field whenever he feels like it. He doesn’t plant his
seeds in the fall. Neither does he plant his seeds in the spring and go on vacation for the rest of the year.
A farmer knows that to have a bountiful harvest, he must till the soil, plant seeds, and tend to his crop.
He knows there is a specific order that must be followed and that even when he “does everything right,”
he is still not guaranteed a harvest. He must work hard, work smart, be flexible, and learn from everything
he experiences day by day.
4 Step Process to Harvest All the Private Money You Need for Your Deals
Step 1 – Till the Soil
There are two things that every person that you know and every person you come in contact with should know . . .
you are a real estate investor and you have investment opportunities available.
But that’s it at this stage in the process. You’re not explaining the details of your investment program, how the
investment is secured, what rate you are paying, how it’s all structured, etc.
the 30 second commercial. This was covered in Video 3 of the private money video series we did a little while back.
If you want to know who the best prospects are for getting private money, check out the article,
3 Types of People Most Likely to Invest With You.
Here’s another tip: Do not disqualify anyone as a potential private money lender. That’s one of the most costly
mistakes you can make when getting started. You don’t care if someone has the wherewithal to invest or if
they’re currently interested in becoming a private lender.
Your job in this step is to get the word out about who you are, what you do, and how others can profit from it!
OK . . . now that interest has been piqued and people want to know more, go for the formal appointment.
Step 2 – Plant Seeds
When you have a formal sit down appointment with a private money prospect and they leave the appointment
with a FULL understanding for exactly how your program works and where they fit in the process, you have
successful planted a seed. Nice work!
At first it wasn’t easy. We didn’t sign up a private money lender for almost a month and a half into our marketing efforts. “Hi Trevor, Finally, someone who is for real. I just started listening to your info and I am thrilled at the value of the content. After being bombarded with useless information […]
Investment in real estate – 5 proven tips to make money in real estate Author: Ashish Investment in real estate is perhaps the one of the most important financial decisions that you will make in your life. With the land available in our world being finite and the population increasing by the day, real estate […]
The one question that always comes up from private money sources
“Am I writing a check directly to the real estate investor? Or do I write it to
an escrow/title company or attorney? “
This is an important question to ask BEFORE you trust your hard earned money
in a private lending transaction. Make sure that the company you work with has
you write your check directly to the escrow/title company or the attorney handling
the closing of the transaction. If the investor asks you to write them a check
directly… be wary and walk the other way.
If your an Investor and your looking to use a private money source.
Consider these points
Do You Need Money for Financing Your Real Estate Deals?
With the Banks tightening guidelines and requirements it has become very difficult to get conventional financing.
Have you heard of a Private Money Loan?
A private money loan (not to be confused with a Hard Money Loan) is basically a loan made to a real estate investor that is secured by real estate. In other words a individual or even a company becomes the bank. A Hard Money Loan can be from the same sources but usually they are in the business full-time charge more and now days are have a-lot more guidelines and may ask you to sign personally.
The first mortgage that secures your legal interest in the property thus securing your investment. We are not talking about high Loan-To-Value (LTV) ratios the banks and savings and loan institutions make on homes (which is what got them in trouble. All of private money loans are negotiable, you and the Private Lenders decide what the LTV is. Typically the LTV is below 70% for the security of the loan.
As a standard, LTV ratios are under 70% of the value of the property securing the loan and frequently as low as 60% to 65%. This means additional security on the investment for the Private Money Lender so they are always in a good position.
For example, It’s probably safer now the prices have fallen so much. if we purchase a property that is valued today at $200,000, our Private Lender will loan at the most $140,000 dollars on the property. That’s a 70% loan-to-value ratio.