Saturday, October 31, 2009

Contract Sales- The Past and Future of Investment Real Estate

Once upon a time, people owned real estate. They lived there, farmed it, and paid it off if they had a mortgage. When they wanted to sell the property, they often sold it using a contract that they negotiated directly with the buyer. The buyer would bring in down-payment money and then pay the seller over time.

There was no bank qualifying.
The government did not dictate terms of qualifying and condition of the property.
There was no real estate agent.
There was no appraiser.
There was no home inspector.
The county recorder recorded the transaction.
The cost of the transaction was minimal.

People did business with people.

Over the year, the trappings of the real estate industry became ingrained into the American way of life. More and more government intervention over who can borrow and under what conditions. Banks drove most home purchases through lending practices. The 30-year mortgage became the standard way of life. Appraisers drive prices. Real estate agents block sellers and buyers from talking with each other.

Transaction fees climb higher and higher. Sellers pay 10% or more to sell a house- 6% to real estate agents, 3% towards mandated FHA buyer selling costs, 1% to title and closing fees, hundreds for home warranties, and the list goes on...

Fast Forward to 2009
Bank credit is tighter. Fewer people can qualify due to lost jobs and lower credit scores.
During the years of loose credit and easy qualifying, the art of one person selling a property to another was lost.Only a few "old-timer" real estate investors kept the skill alive- contract sales from one person to the next. Peter Fortunato and Jack Miller are two of the best and they never stopped teaching this art. Even as "no money down", "short sales", and "REO's" come and go as fads, they taught seller financing decade after decade. (By the way, the funny thing is, they charge hundreds of dollars, not thousands or tens of thousands like the infomercial "gurus.")

Where Did All the Bank Loans Go?
The banks are tightening credit standards. At the same time, people are losing jobs and losing points on their credit scores. The government backs almost 98% of all residential housing loans, imposing rules and regulations that add cost and time to transactions. Appraisers are afraid of overstating prices and over-compensate by comparing fully renovated homes to uninhabitable bank-owned properties when establishing market value. They completely disregard valid arms-length contracts between willing buyers and sellers.

So if it's so hard to get an owner-financed loan, what chance does an investor have? Oh, no problem. Just own the property for at least a year, put down 25% cash on the property, have great credit and W-2 wages (as an employee, it can't be your own company) and the loan is all yours!

Contract Sales: Coming Soon to a House Near You
Enter the revival of the contract sale. People want to sell properties. Their buyers can't get a bank loan. Solution? Buyers put down 10% or more and sellers carry the contract. They record the transaction with the county. They decide the market price, and the interest rate, and other terms and conditions of the transaction.

Think you need to drop your asking price to sell your home? Think again. Get flexible on terms. Carry a contract. Name your asking price. Seller financing financing is worth a LOT to buyers who can't get a bank loan. And there are MILLIONS of people who want to own their own home, but can't get a home loan.

Learning How to Do a Seller-Financed Transaction
Want to learn how to do seller contracts? Find an investor who's been around for a while. Go to an investor club meeting and ask. Looking for a meeting? Shaw Watkins has picked up these skills and is passing them on to a new generation of investors. Click on his name and learn more on his web site.

Tell me about your seller-financed deals.

Thursday, October 29, 2009

Welcome to Clear Day Capital

Clear Day Capital provides bridge-loan financing (hard money loans) for professional real estate investors with projects in northern Utah. We listen to our clients, understand their projects, and help them make the project a reality.

New Clients
We work with a limited number of repeat clients that usually have multiple loans outstanding. We carefully screen new clients for experience, capital resources, credit worthiness, and their business plan. If you are interested in becoming a Clear Day Capital client, here is the process:
  1. Call David Safeer at 801.747.6343 and set-up a time to meet
  2. Meet with David for about 1-2 hours for a new client orientation. Please be prepared to discuss who you are, your experience, at what you are trying to accomplish. If you have partners, they should attend the meeting as well.
  3. David will clearly explain Clear Day Capital's underwriting standards, loan documentation, past-due loan policies, origination fees and interest rates, and how to make a formal application to become a client
  4. If there is a mutual agreement that we want to work together, you will make a formal application to become a client by submitting a 1003 (uniform residential loan application) and a current credit report. Click here to get the 1003 form.
  5. Plan that the first project will take 1-2 weeks to underwrite and fund. Subsequent projects should take about 3-5 business days to underwrite and fund.
We want to make the process as easy as possible and at the same time set the foundation for a long-term working relationship.

Contact Information
Clear Day Capital can be contacted at:

801.747.6343 Phone
801.401.7267 Fax

Monday, October 26, 2009

Investor's Workshops- Social Networking For Northern Utah Real Estate Investors

If you invest in real estate, one of your key success factors will be your ability to network with your peers. They will bring you your next deal, provide you with references for resources you need, and perhaps be your clients.

How Do You Stay in Touch?
Using the phone, in person meetings, mastermind groups, and real estate investment club meetings are all still valid ways of building and maintaining your network. You can add to that your Facebook or Twitter networks if you want to. Even better, join an on-line social network built just for what you are trying to do- invest in real estate.

One example is . It has a national footprint and over 40,000 members. I belong to it and I find good general information that I could also read in a book. It is very good for general information and, if you dig hard enough, you can make contacts with Utah investors.

Social Network for Northern Utah Real Estate Investors
If you want to resources for Northern Utah (Davis County and north) then you should join . You can find dozens of real estate investors who focus on northern Utah. You can ask them about resources ranging from general contractors and handymen, to title officers and real estate agents who know how to work with investors.

Set-Up Your Own Social Network
If you have a niche market that you want to have a social network with, try setting it up using as a platform. Starting at $7.95 per month (less than mailing list software) you can establish your own social network. (Yes, I am an affiliate and we will make some money if you join. You can make money as well off of your network.)

What is your best social networking tool?

Thursday, October 8, 2009

Afraid to Foreclose or Evict? Don't Be!

Sometimes real estate investors are afraid to take action to evict a renter or foreclose on a house they sold on contract. Where does the fear come from? Ignorance of the facts.

Fear that Your Renter/Buyer Will Become Your Enemy
A renter or buyer should neither be your enemy, nor your friend. They should only be viewed as the custodian of your hard-earned asset. They agreed to pay your for the use of the asset while they care for it.

Taking legal action doesn't mean creating an adversarial relationship. Legal action is an extension of the business relationship. Here is an example of how to communicate and maintain a good relationship:
"Mrs. Jones, I understand that you intend to pay the rent on the 15th day of the month, instead of the 1st, when it was due. We'll look forward to receiving the rent on the 15th. In the mean time, you'll understand that we are giving you a 3 day pay or vacant and moving forward with the eviction process. As you as you have paid the rent, we'll be able to stop the process. We look forward to having you live in this home for a long time."
Fear that Legal Action Will Delay Your Payment
I've talked to landlords who say, "They promised to pay and I am afraid that if I start eviction they'll decide to leave and I won't get paid. So, I will do nothing and if they don't pay me next Friday I'll take action then."

The opposite is true. For people who are concerned about paying the rent, they will find the money from friends, relatives, selling something, etc. The legal action becomes a fire that lights them into action.

The other tenants are never going to pay, so the faster they are out, the sooner you have good tenants that will pay you.

Fear That Eviction or Foreclosure Costs Too Much
Not taking action costs more. If your rent is $800/month and you wait for two weeks to take action, you just lost $400. In the state of Utah an eviction takes 3 weeks. Late on the first? Have them out and re-rent the house by the first of the next month. Need help? Attorney Ron Dunn will evict for $450. Tell him I sent you and he may give you a discount. Same fee for a foreclosure. You pay filing costs, he does the rest.

What are your issues with foreclosure or eviction? Share a success story.

Friday, October 2, 2009

There Is Shift From Owning to Renting, Census Data Shows

Here is an article recently published by MHN Online. I am reproducing it exactly and giving them all the credit. This is important for all real estate investors to know. Even though this article talks about multi-unit housing, there will be a similar effect in the single-family home market, duplex, etc. When apartment prices go up, people start looking at single family homes.

Special thanks to David Svikhart of Sperry VonNess for providing the article.

There Is a Shift From Owning to Renting, Census Data Shows
September 30, 2009
By Anuradha Kher, Online News Editor, MHN Online

Washington, D.C.--More families at every income level are facing housing cost burdens, while households with the lowest incomes continue to be disproportionately affected by the shortage of affordable rental housing across the country, according to an analysis conducted by The National Low Income Housing Coalition (NLIHC) on newly released data from the 2008 American Community Survey (ACS).

The data show that renters are paying an increasing percentage of their incomes toward rent. The number of renters with unaffordable housing cost burdens—those spending more than 30 percent of their income on rent and utilities—increased from 16.8 million to 17.4 million from 2006 to 2008. The lowest income renters are the hardest hit: 87.6 percent of renter families earning $20,000 or less are experiencing an unaffordable housing cost burden, compared to 15.3 percent of those earning $50,000 or more. In addition, median gross rents increased from $763 to $824 between 2006 and 2008. The share of units renting for under $500 fell from 16.9 percent to 16.3 percent, as the share renting for $1500 or more rose from 10 percent to 11.2

The good news for the multi-housing market is that there has been a shift from owning to renting since 2006, as households lost homes to foreclosure or put off the decision to buy in the declining for-sale home market. However, this shift has led to more crowded living conditions for renters, likely as a result of some families doubling up or taking in tenants and larger families moving into smaller, more affordable units. The average household size of renter-occupied units increased from 2.41 in 2006 to 2.44 in 2008. The percentage of occupied housing units with 1.51 or more occupants per room increased from 1.52 percent to 2.35 percent.

“The new ACS data validates the reports we are getting from across the country, National Low Income Housing Coalition President Sheila Crowley says. “More families are renting, rents are going up and the lowest income households are struggling to pay for the most basic necessities. This data was collected before the rapid rise in unemployment, which means the situation today is even worse. As Congress considers giving even more tax breaks to support homeownership, equal attention must go to the diminishing housing choices of low income renters.”

The U.S. Census Bureau recently released the ACS estimates.