Renters Plan to Continue Renting. Blame Uncertainty

Do you own rental properties? If you do, take heart for good vacancy rates for the foreseeable future.

People who are renting plan to continue renting. Why? Here are the reasons that I hear:

1. Difficult to get financing

2. Perceived difficulty to get financing, so qualified people don't even try

3. Fear of real estate prices declining further

4. Change of attitude- people don't want the responsibility of home ownership

5. Perception that it is more expensive to own than to rent

Read more about the trend...

Renters Plan to Continue Renting. Blame Uncertainty

What about you? Are you renting and continuing to rent?

The 20 Happiest, Healthiest Cities In America

2nd High Ranking in the same week!

This time Ogden, UT is ranked one of the happiest, healthiest cities in the U.S.

Farmington is half-way between Salt Lake City and Ogden, so I get the best of both cities.

Read all about it here....

The 20 Happiest, Healthiest Cities In America

One of my basic goals is to be happy and healthy, so I'm glad I live somewhere that supports both of those goals!

The Australian Subject-To Home Purchase

So I am sitting at the Pizza Factory with an investor friend and he is explaining to his partner how he bought a house last night...

A guy calls from Australia and he needs to sell his house in Layton, Utah NOW! It's been on the market for months with no nibbles an his family is about to leave for Australia to join home for his new job.

The bottom line: The investor is buying the property for $25,000 more than the owner owes on the property, subject to the underlying mortgages staying in place. Included will be some furniture, appliances and a 50" TV!

The buyer is paying closing costs and the monthly mortgage of $1,250 and it should rent for $1,600 or more!

Good deal, huh?

Financing Gets Lower and Lower

Financing rates for home owners is getting lower and lower. Record low interest rates have made headlines for the last few weeks. The Salt Lake Tribune announced that record low interest rates are fueling re-financing.

That's all well and good for home owners, but what about investment property owners? I'll write some blogs about two situations:

1. A new real estate investor who has two properties purchased on contract who has great credit, W-2 income, but put little money down and has an income level that does not support rental properties without the income from rents. He is trying to get financing for the 3rd time, after being rejected twice.

2. A Real Estate Investor who has held properties for at least 4 years and up to 6 years, has very high credit scores, very high W-2 income, and a lot of cash in the bank. His challenge? He has 11 properties in his name and most have high LTV's.

The New Investor

He has applied at a credit union that said "yes" to the pre-application, and then underwriting turned down the file. He then applied with a portfolio lender that doesn't follow federal guidelines. They said "yes" for two months, and then once again the underwriters said "no."

He is now working with a mortgage bank that has local preliminary underwriting. They have a loan officer that is prepping the file in accordance with the structure of the contract sale and the requirements of the lender. We will make adjustments to the structure of the contract sale to conform with the lending requirements.

The Seasoned Investor with 11 Loans

The 11 loans might kill any kind of refinancing, but we are going to try. He got one loan refinanced with HAMP- a federal loan program. CHASE did that loan and they were outstanding to work with. That one loan will reduced the monthly payment over $400 per month! It makes the property go from break-even to profitable.

Four other loans were rejected by Citibank under the same program. They were a nightmare to work with and ultimately came up with what we considered were excuses. They were incompetent at best. I would never work with Citibank again if I could avoid it.

I'll keep you up to date on both investors. Stay tuned....

Farmington, Utah is 12th on CNN’s ‘best places’ list | The Salt Lake Tribune

Do you love where you live? I do!

Now CNN is telling the world that I live in one of the "best places" to live in the U.S.

Seriously, read it for yourself!

CNN

http://money.cnn.com/magazines/moneymag/bplive/2011/snapshots/PL4924740.html

Salt Lake Tribune (see the other Utah Cities that made the top 100)

Farmington, Utah is 12th on CNN’s ‘best places’ list | The Salt Lake Tribune

We also used to live in Solon, Ohio. It's the only place we liked as well as Farmington! It's ranked #3 and we still have great friends there.

http://money.cnn.com/magazines/moneymag/bplive/2011/snapshots/PL3972928.html

Low Home Ownership = Good Rental Market???

So if people don't own a house, does that mean rentals will be in more demand?

Probably....

...unless there is a basic over-supply of houses

...unless children move in with their parents

...unless parents move in with their children

... unless young adults stop getting married

So read this article about home ownership...

U.S. home ownership falls to lowest since 1998 | The Salt Lake Tribune

... and then think about why NOW is a good time to buy real estate:

.... housing prices are LOW

.... interest rates are LOW

.... pent-up demand is HIGH

.... rent vs. price is HIGH

So why are you waiting to invest?

Private Mortgage- Money at High Interest Rates, Secured by Real Estate

Private mortgages are as old as real estate itself. People borrowing money from other people and then secure their loan using real estate as collateral.

Banks became popular and the lender of choice for most Americans, especially when the U.S. government starting promoting home ownership in the 1950's with the introduction of the 30-year mortgage.

Most Banks Sell Their Notes to Private Investors

Most banks sell their mortgages soon after they originate the loan. Until recently, most were sold to private investors, either directly or through REIT's and/or mortgage backed securities. These were pools of mortgages, all combined and many times jointly owned by multiple investors.

The quasi-governmental mortgage companies FannieMae and FreddieMac now buy 95% or more of the bank loans.

Where Did the Private Money Go?

Private money is still investing in first-position mortgages. The difference is the money is now backed directly by individual properties.

Want to learn more?

Click Here to for a FREE copy of the Private Mortgage Report. It's easy to read and will answer a lot of questions, including:

• Increasing security of your loan
• Why Private Mortgages are a hedge against taxes
• Long Term Income through Private Mortgages
• Using Balloon Payments to shorten the length of the loan
• Use Private Mortgages for Estate Planning
• How to Document Your Loan for maximum security

Want to learn even more?!? The CALL ME! I'd love to talk with you.

David Safeer 801.510.3566

Our Local Hero Wins for Disabled Senior Citizens

My friend and associate, Anthony Marler, won justice without having to go to court.

Do you remember my first blog post about this? Anthony was denied development rights to his land after the city council declared it a "wetlands." The city attorney warned them that Anthony could sue and that the council's position was indefensible.

Did the city council listen? No-o-o-o-o-o-o!

So, Anthony sued in federal court.

It wasn't much of a fight.

The city capitulated.

Quickly.

Without a fight.

Farr West council permits assisted-living facility - Standard-Examiner

Now the only question is: How much will it cost the citizens for Farr West to pay for the stupidity of their elected officials?

Beware the Homeowners Association

Did you know that a home owners association can foreclose if you don't pay dues?

They can regulate your lawn? Your garbage?

They can have a "special assessment" that MUST be paid, regardless of how much it is?

Read this, it's a real eye-opener...

Neighbor vs. neighbor as homeowner fights get ugly | The Salt Lake Tribune

Have you ever had a run-in with an association?

Transaction #3 of 52 in 2011: Deep Discount for REO 4-Plex

Small, multi-family properties have been hit hard throughout the country. In Utah the duplex, tri-plex, and four-plex prices have been hit much harder than single-family homes.

Why Multi-Family Has Been Hit Harder than Single-Family in Utah

The answer is quite simple: Supply and Demand. The supply for multi-family residential is growing as investors try to divest and other investors have problems and the banks foreclose.

Demand is down for two reasons:

1. People feel that real estate is not a good investment right now- even when it is on sale.
2. Credit is more difficult for multi-family purchases. Banks are asking for 20% - 25% down. Most banks require this to be cash. Credit needs to be 700+ for most banks. Finally, the new rules limit investors to four properties so active investors that have cash and good credit still won't qualify.

We Make a Bid We Couldn't Refuse

After searching the MLS for properties, we made an offer on a 4-plex. The purchase price plus estimated fix-up was HALF of what the property would have sold for 2-3 years ago.

The bank accepted the offer.

The property will cash flow for years to come.

Far West City Hates Senior Citizens?

Anthony Marhler is a business associate of mine. He is honest and poured a lot of money into the development of this project only to have it rejected over fear of 24 dissabled senior citizens.

Read the full article:

OUR VIEW: NIMBY anger - Standard-Examiner

He should be allowed to build. What's your opinion?

Transaction #19 of 52 in 2011: We Borrow Private Funds

Private financing creates wins:

1. We win by having someone we can work with. Not a bank, but a real person that we can talk to about our project, show them our property and work out terms.

2. The private lender wins from much higher interest rates than banks are offering and the securing of a first position trust dead.

We Borrow $45,000 Against a $90,000 House

That right, a 50% loan to value. We borrowed it from a financial friend that we new for over two years before we did our first transaction.

Now that we've done our first transaction, we expect to pay him back soon. When that happens, he said he'd be happy to re-lend it to us for another project!

Does anyone you know what to lend money secured by rental real estate? Let me know!

Bank of America vs. Citizens of Utah: Continued

Once again, the private sector comes through! The Utah attorney general's office threatened to sue Bank of America, but the Salt Lake City law firm of Mumford West & Snow struck the first blow last week.

Learn more from our friends at the Salt Lake Tribune.

Utah law firm sues to halt Bank of America foreclosures | The Salt Lake Tribune

So, who has a mortgage with Bank of America?

Is Real Estate Better Off without Government Intervention?

We know that loose lending standards creative financial bubble.

Now it looks like tight lending standards are preventing a housing recovery.

U.S. Housing Recovery Stymied by Government - Bloomberg

My opionion: Government should do less, not more. Set fewer rules and then police them better.

Some Good News: Spring Buying Boosts RE Prices in 13 Major Cities

The good news continues to come out little by little.

News is always looking in the rear view mirror. This is a glimpse into the rear view mirror of the recent past.

My opinion about Utah? Utah will lag 12-24 months behind the rest of the country.

Why? That's just the way it is here. We saw the impact of the economic downturn late and we'll see the same on the recovery. The same can be said of fashion, hair styles, etc. Another opinion: Our time lag is one of the reasons we have a more stable economy here.

Want more information? Read this article from our friends at the Salt Lake Tribune.

Spring buying boosts home prices in 13 top cities | The Salt Lake Tribune

One area that Utah seems to lead the country in trends? Foods! Smoothies, Kentucky Fried Chicken, A&W, Jello.....

More Buy & Hold Real Estate Investment Opportunities in Utah

Home sales fall, opportunities for buy-and-hold real estate investors increase.

Why?

1. If people don't buy they need to rent. Buy and Hold investors need renters.

2. If people don't buy, prices stay low. The key to holding is monthly cash flow. The key to cash flow is buying low.

Read more:

Home sales fall to ‘11 low as first-timers balk | The Salt Lake Tribune

Are you convinced yet that NOW is the time to buy and hold?

Aha! The WSJ Takes Note: Investors Buying and Holding

I've mentioned that eventually the popular press will catch ip to reality: NOW is the time to buy and HOLD real estate.

Check out this Wall Street Journal article. The note that there IS competition for properties- a lot from first time buyers who want to buy and hold.

Can you find them and mange the properties for them? They need professional management or they'll be selling at distressed prices in about two years!

http://blogs.wsj.com/developments/2011/05/26/with-buyers-scarce-investors-rule-housing-market/?mod=wsj_share_facebook

Are YOU buying and holding? Where? How? Why?

Transaction #4 of 52 in 2011: Success! Contract Buyers Refinance with the Bank

All too often, people who "rent to own" or "lease option" or "buy with owner financing" never complete the transaction- they never own the house.

At Clear Day, our goal is for every person who inters into a "creative financing" purchase with us to complete the purchase so they can enjoy the benefits of ownership that they desire. With Clear Day, the buyer has all of the control- it is up to them to complete the purchase, yet at the same time we are willing to do what it takes to help them complete the purchase, if it is reasonable and legal and a win-win solution.

A Couple Purchases a House FIVE Years Sooner than Planned!

So transaction #4 (yes, this is out of order!) revolved around a couple that purchased a house from us in July of 2010. She had mid-500's credit scores and he had NO credit score! They had been through bankruptcy and he never applied for new credit.

The couple and Clear Day met with a credit repair specialist and he gave us the opinion that they were only six months from having the needed credit to get bank financing. They were stunned! They had been told that it took seven years to qualify for a bank loan and here they were looking at year three and qualifying.

We moved ahead with the sale and they purchased it for about $2,000 more than it later appraised for. The couple immediately started to repair their credit.

Eighth Short Months Later

It did not take six months, it took eight months to get a bank loan. That is still almost 4 1/2 years sooner than they anticipated. The refinancing lowered their interest rate significantly and their monthly payment went down almost $200 per month.

There was one challenge when they refinanced: Their credit scores were about 20 points to low because their debt was about $500 too high. The credit repair coach / mortgage broker said it would take another 1-2 years to get their credit up if they just made monthly payments. Solution? Clear Day lent them another $500 that they used to pay their credit card. Result: Their credit scores went up and they qualified for the loan.

They are happy in their new home. They are happy to have a low-interest, fixed-rate 30-year loan. They are happy with Clear Day to make their purchase and refinance happen.

Foreclosed homes: Fannie Mae and Freddie Mac hold summer clearance sales - latimes.com

Good idea, but why include only owner-occupied and not real estate investors? We are helping clear-out inventory 2, 3, or 4 houses a quarter. We are their best clients, but we are treated like their worst clients.

Once again, government genius at work.

Foreclosed homes: Fannie Mae and Freddie Mac hold summer clearance sales - latimes.com

If you are an investor, how do you feel about being treated like a second-class client?

With home market in tatters, high-end sector suffers even more | The Salt Lake Tribune

The market as a whole is down. The high-end down more than entry-level.

We have always focused on entry-level housing. There will always be demand for solid 2-4 bedroom houses with 1-2 baths that rent for $800 - 1,200 per month.

This is what happened to local high-end housing:

With home market in tatters, high-end sector suffers even more | The Salt Lake Tribune

What do you invest in? High-end? Low-end? Somewhere in-between?

Post Recession Real Estate Boom Inevitable: Steve Dexter, Real Estate Expert, Pens Article Predicting Better Times Ahead

We think there will be a boom in real estate as the economy recovers, so do other investors.

Post Recession Real Estate Boom Inevitable: Steve Dexter, Real Estate Expert, Pens Article Predicting Better Times Ahead

What do you think?

Transaction #16 of 52 in 2011: Investor Refinancing Still Lives!

Have you heard that it is impossible for a real estate investor to get a loan on an investment property? It's just an ugly rumor!

One of the strategies that we are using when we sell properties on contract to real estate investors with good credit is that we agree:

1. The investor who buys from us on contract will get an equity line of credit from a financial institution to repay Clear Day Capital as much as possible
2. Clear Day Capital will carry a second for the balance of the purchase price

Pretty simple, right? Yes!

Transaction #16 was the refinance of a duplex we sold on contract. The refinance went smoothly. It was with Golden West Credit Union and was fairly quick. The biggest challenge was the appraisal was much lower than hoped. Duplexes are on sale and it really dragged the price down.

The good news? We found two banks that are offering up to 75% investor loans- fixed rate and 30 year amortization. You'll have to keep reading to learn more about them.

Buy vs. rent: These days, buying wins - May. 13, 2011

We don't look at winning vs. losing when we think about home ownership. We think that everyone can win by dividing the seven benefits of home ownership.

If you want to see a traditional view on winners vs. losers in the housing market, take a look at this story from CNN Money:

Buy vs. rent: These days, buying wins - May. 13, 2011

Either way- buy or rent, contact me if you ever want to learn more about sharing the benefits of real estate.

Bryan Ellis Real Estate Letter - SEC May File Civil Fraud Charges Against Credit Rating Agencies

It's about time. The major companies that contributed to the HUGE miss-steps by note providing the services they were contracted for, and worse- being complicit in misleading investors, the government, and the public should be held accountable.

Bryan Ellis Real Estate Letter - SEC May File Civil Fraud Charges Against Credit Rating Agencies

Transaction #18 of 52 in 2011: We Sell a Property and Take a Long-Term Interest

Clear Day never wants to sell real estate. Our goal is to have long-term real estate holdings that will bring us income for the next 30 years or more.

Once in a while, we decide that the best opportunity is to sell properties- but we STILL want to have a long-term interest even after we sell. Here is the scenario:

We foreclosed on a property that had one (1) lot with two (2) houses. The first house was a 2 bedroom / 1 bath with a 1-car garage. The second house was a 1 bedroom / 1 bath with off-street parking. Based on rents, the house was worth about $120,000. The problem? Banks won't lend on rent-based appraisals anymore. They will only lend on sold comparable properties.

The real estate investor that had repaired the property had tried to sell it for $120,000 unsuccessfully. The problem? People wanted the property, but appraisals were coming in much lower than justified by rents OR the square footage of the two properties combined. Why? Because the appraisers only county the larger property as "regular" square foot value. The second, smaller house was only counted as an "extra" building- like a shed!

Why was it a shed? Because those are the rules! No further explanation given by the appraiser.

So when we were approached by an investor who liked the property because of the great cash flow, we sold it to him at a slight discount to full price. He received what he wanted- growth, profits, income, tax benefits, and amortization.

We sold it at a discount because he was willing to lease the property back to us and share the cash flow, growth, and amortization. We received what we wanted: a long-term position in the property that gives us ongoing cash-flow from rents and property management as well as long-term profits when the house sells at a much higher price than we can sell it right now.

Here are the approximate numbers:

Income-based property value : $120,000

Sale price to investor : $110,000

Monthly rent : $ 1,300

Monthly property management : $ 130

Quarterly Additional Cash Flow : $ 200

Right now we are lining up more properties for more investors to work with us and share growth, equity, and cash flow. Interested? Let me know.

Why You Need a Good System to Screen Tenants

The title of this article says it all. If you own investment real estate, be prepared for knots in you stomach when you read this.

Lesson: Careful screening of tenants is NOT an option! The only thing more expensive than a vacancy is a non-paying tenant.

NJ.com : Carter: Landlords say Newark man refuses to pay rent, trashes apartments, then ties them up in court

What's the longest someone has squatted in one of your properties?

Bank of America: The Tables Are Turned

A small piece of poetic justice... Bank of America refused to settle a lawsuit so the plaintiff foreclosed on the local branch!

This will make you smile!

Sheriff Takes Cash from Bank!

Well... Did you smile?

Let me know if you did!



- Posted using BlogPress from my iPhone

Now is the Time to Use Your Credit to Invest

We are working with several credit partner investors to get them investment property loans for under 6%

Fixed mortgage rates drops for 7th straight week | The Salt Lake Tribune

Talk to other investors, friends and neighbors and then buy or refinance with great long-term loans.

Transaction 17 of 52 in 2011: I "Broker" a Loan

More transactions! More deals! More fun!

I help Shawn Watkins of Investors Workshops find some short-term money when a buyer was delayed coming in with funds. So I called a financial friend who had never lent money short-term and asked him if he was interested.

His first reaction was "no," not interested at all.

Second reaction was, "maybe depending on the numbers, please send them to me."

Third reaction was, "this sounds good. I'll probably do it after I review the numbers."

The numbers looked good. $20,000 short-term that would come from an equity line at a low-interest cost to the lender secured by a second dead of trust against the subject property.

The money came in two days later. Shawn closed the transaction. Funds paid back as promised. Our financial friend is ready to do the next one.

Utah vs. Bank of America: Round 2

As far as government goes, the State of Utah has a good one! They are fighting for the rights of its citizens to have a local office to work with if they are facing foreclosure!

I posted last week that Bank of America is IGNORING a court order to STOP using out of state foreclosure services! When I posted this on Facebook I said "Maybe Utah should SHUT DOWN all Bank of America foreclosures!"

Well, someone must have read my blog because now the attorney general is suing Bank of America to stop using out of state foreclosure processors.

Click here to read the original Salt Lake Tribune article.

Well, don't you love it? A small state sticking up to a GIANT bank to defend it's citizens!

Social Outbreak- The New Tool to Grow Your Social Network & Real Estate Business

Clear Day Capital just signed up for Social Outbreak, the Facebook application designed to help Fan Pages look good and grow a Fan Base.

Since the tool is new (it is still in Beta Testing) I decided to start a blog to talk about my experience with the application and the company. Check out my new blog:

The Social Outbreak Experience

Let me know what you think!

Bank of America to the State of Utah: You Can Take Your Laws and ...!

The State of Utah passed a law requiring foreclosures to be done by a local business entity or attorney. Bank of America does not have offices inside the state and they don't work with local attorneys.

So, did B of A stop foreclosures or did they open a local office or did they hire local legal representation? Of course not. They are deemed "too big to fail."

Apparently now they feel that they are "too big" to comply with state laws.

BofA to keep foreclosures despite new Utah law | The Salt Lake Tribune

How Long Will Deep Discounts Last?

I am often asked, "How long can we keep buying deeply discounted properties?" My best guess: At least three years.

Why?

1. A large current inventory. That should last a year or so!

2. A large number of foreclosures are already in process and they are taking up to two years to process. That means new bank-owned inventory coming on the market for at least two more years. (Take a look at this article and keep reading- things are not getting better, the banks are just slowing down.)

Pace of foreclosure filings slows in Utah, U.S. | The Salt Lake Tribune

3. We are still in a period of high unemployment so we can expect ongoing high foreclosure rates for at least another year.

Add it all up and we are talking 3-4 years of high levels of bank-owned inventory.

Is it a good time to invest in real estate today? Yes.

Will it be a good time to invest in a year? Yes.

Will it be a good time to invest 2, 3, 4, 5...10 years from now? Yes, yes, yes, yes... YES!

Want to invest in Northern Utah but don't know where to begin? Contact me!

Already investing in real estate and want to work with another experienced investor? Contact me!

In a home search? These websites can help | The Salt Lake Tribune

People ask us "How do we find bargain houses in Utah?" The answer: We have multiple sources.

Are you looking for multiple sources to find a home or investment property? Check out this Salt Lake Tribune article:

In a home search? These websites can help

Peter Fortunato Training- June 11 + 12, 2011

We use the concepts we learn at Peter Fortunato's classes almost every time we teach real estate concepts at the Northern Utah Real Estate Ivestor's Alliance (NUREIA) or talk to new investors. I'm always asked about when and where his next class will be, so I decided to post his next class information.

Here is a link to his web site: Real Estate Acquisitions Techniques

I've been to the class it it is more than worth the price of admission.

By the way, I don't get any benefit for you to go except a better prepared real estate investor to do more business with.

Transaction #2 of 52 in 2011: We Do a Simple Loan, With a Surprise Ending

Clear Day Capital started business in 2006 as a lender to real estate investors. As the investment real estate environment changed, so did Clear Day Capital's business. Over the last two years we significantly increased the qualifications of our borrowers.

When a repeat borrower called in early January and told us he needed a loan for $20,000 that could be leaned in first position against three separate single family homes, we said yes. He was reliable, the properties needed repairs but he had a plan for rehab, and the land for one property alone was worth the total amount of the loan.

THE FIRST SURPRISE

The borrower contact us a couple of weeks later. The contractor who was scheduled to bring in the fix-up funds and do the work was no where to be found. Did we have additional funds to loan?

Sometimes we say "yes" to lending more money. In this case, there were several challenges that made us think twice about about lending more money. First, these houses are in locations where we wouldn't normally invest. Second, the two of the three houses where in much worse shape than we normally rehabilitate. Last, the quality of the houses were much lower than we normally invest in (less than three bedrooms, and really small lots.)

So... the answer was "no" to fix-up funds.

THE SECOND SURPRISE

About a week later, the investor came back to us with an update: All three houses were scheduled for destruction by Ogden City. They had been vacant for over four years and destruction was imminent. Without new funds, the best we could hope for was three vacant lots with liens from the city to pay for destruction and scrap removal. Our money would be stuck. Lots aren't selling. Lot's don't bring in rent. Lot's cost money. The liens would be equal to the value of the lots. Lots of problems with lots!

THE SURPRISE ENDING

We decided to take the properties back from the client. We did it as a purchase, without paying cash to the borrower. We took over the note and added additional cash.

To stop the destruction of the properties, Mayor Matthew Godfrey of Ogden Cityrequired us to put funds into an escrow account for each property. We then pulled permits and went to work with our general contractor, Bryan Kawa.

Do you want to read what happened to the properties? Check out my blog posts on Transactions #12-13.

Dead Raccoon- Don't Watch This If You Have a Weak Stomach

You know it's a tough rehab when dead animals start showing up. Take a look if you want to see one of the interesting places an animal can curl up and die.

By the way, this is transaction #13 of 52 in 2011.

FREE Resource for Creative Real Estate Investing

RealEstateSuccess.com is a FREE website to learn about creative real estate investing. It is one of Peter Forunato's recommended sites.

Check it out if you are at all interested in investing in real estate. There is a TON of good information.

Transaction #15 of 52 in 2011- Duplex Contract Sale

Sometimes we sell properties on contract to people who want to own a home but cannot get credit from a bank. We sell it to them and then give them 2-4 years to get their credit put into shape and re-finance with traditional financing.

For this transaction, we sold a great duplex on contract to a couple new to real estate investing but have no cash or real estate investing experience. What they do have is GREAT credit. So we sold them the property with the agreement that they will take out immediate financing from a local credit union that will do a 50% LTV (loan to value) home equity line of credit (HELOC.) We will carry-back the balance of the sale price as a note.

Since the buyer has no property management experience we brought in The Equity Growth Group, a property management company that has experience with multi-family properties. They will master lease the property and sub-lease it to tenants.

This is a real win-win-win. Clear Day Capital gets a full price sale that gets us cashed out and leaves us with a note that gives us monthly income. The new investor couple gets monthly cash flow, property value growth, amortization of their loan, and deprecation tax benefits. The Equity Growth Groups receives the joy (and compensation) of management.

This type of a transaction really works great for a new real estate investors who have good credit. It protects them from a lot of the pitfalls of finding, rehabilitating, and managing the property. It gives them two experienced real estate investment companies to work with and learn from.

Are you a new investor or thinking about investing? Do you want to learn and reduce your risk? Then give me a call at 801.510.3566 and we'll talk some more about this transaction and what you want to accomplish with real estate investing.

Just For Fun- Matzo Man!

It's that time of year again! Time to celebrate Passover with friends and family. I am heading east with my family to be with my parents, brothers, sister and their families. Our "adopted" brother Bob and his wife Amie and son Ethan will be there as well.

So for all of you who can't celebrate with your family this year, here is a great way to celebrate: with the Matzo Man!

Enjoy.....

Video Blog of Transaction #14 of 52 in 2011- Before (After in a Month or So)

I asked on Facebook if people prefer video or written blog postings. The answers were mixed so I decided to do both! This is our transaction #14 of 52 in 2011:

We usually don't buy this kind of property, but we needed to salvage a loan that we did so we ended up owning this property at 2053 Adams in Ogden, UT. Drop buy and visit some time if you want to see a rehab in progress (April 5, 2011 until about May 1, 2011.)

It needs a new roof and we need to create a bedroom. Right now it is just a really big studio. We met a next door neighbor today and he had a huge smile on his face when we said "yes" to his question "Are you going to fix-up that place?" It has been vacant for at least four years. How do we know? It didn't have water for the last four years!

You can see why it was condemned for destruction by the city. It's ugly from the outside and there are no bedrooms on the inside! We will spend $18,000 - 20,000 on clean-up, fix-up, and curb appeal. We will have less than $50,000 total investment and a $700 a month rent by the time we are done.

Come back in about 3-4 weeks and I'll have the "after" video ready for viewing.

Transactions #12-14 of 52 in 2011

Transactions #12-14 are actually directly related to the first transaction of the year. How? Let me explain...

For the first transaction of the year, we lent $25,000 to a real estate investor that we had done business with before. He used the funds to put a down payment onto three properties and the owner carried the balance. One needed light rehab, the other two significant rehab. He told us that he had a contractor lined up and that the contractor would bring in fix-up funds.

Two weeks later he called back. His contractor disappeared. No one to do the work and no fix-up money. What did we want to do? Could we bring in the additional funds? He didn't have the resources. Oh yea, by the way, the city has a demolition order on all three properties and we need to convince Mayor Godfrey to stop the destruction order!

Clear Day Capital was not in a bad position, we had only $25,000 into the project. Worst case, we would have 3 vacant lots. The problem? Demolition is not free and the lots would have liens from the city for the cost of demolition and garbage removal. Lots cost money each year- taxes and insurance. New construction is not something we want to do- rehabs are much easier and less expensive and less time consuming.

We needed to make this a safer, more secure transaction and protect our investment. We wanted to make lemon-aid out of lemons. If we funded our current borrower the LTV would not be good and we would not have control. On the other hand, we didn't want to take the properties back- they did not fit our typical property profile and we didn't want to manage them.

Our original borrower went to our good friends and business associates (Shawn, Angel, and Sarah) at The Equity Growth Group (TEGG.) The borrower knew that they specialize in this type of house. What did they do? They called us since they know that we have capital!

We decided that we would work on this together. To make it safer, Clear Day Holdings purchased the three houses after we got approval from the mayor to delay destruction by 120 days. He required that we put rehab funds into escrow and have a firm bid from a licensed contractor, which we did.

Clear Day Capital provided the additional rehab funds, TEGG provides rehab supervision and property management when the houses are ready to be occupied.

We will be into the three houses about $150,000 total. This is low enough that we will be able to have good cash flow. The key for long-term benefit will be finding private money investors who want to lend us long-term (5-10 years) money and terms that we both win.

Want more details? Send me an e-mail, leave a comment, or give me a call!

Transaction #11 of 52 in 2011- Another House

When we purchased our first sub-$40,000 property we were really happy and surprised that we could purchase a house so inexpensively and with so little repairs needed. (This was in November 2010 when we purchased a house for $23,900 put $4,000 in repairs into it and rented it immediately for $695/month.)

Now buying houses for under 50% LTV is common and we are purchasing duplexes for under $50,000! So #11 was the purchase of a single family home for $49,500. It needs about $7,000 in repairs. When we are done it will be worth about $99,000 and we will rent it for about $950 per month.

We are now talking to several investors interested in loaning us money for 5-10 years as a first position mortgage holder. They'll earn 8-10% on their money, maybe more!

Transaction #10 of 52 in 2011

We closed transaction #10 of 52 on the 16th of March. It was a simple cash purchase of a duplex which was already rented and completely rehabilitated about 4 years ago.

We are selling it this week to an investor who likes the terms we can offer. We take our equity over time, he gets cash flow, tax benefits, growth, and amortization.

This was a quick transaction. The keys were our cash and our purchasers ability to use his credit for partial take-out financing. He will give us our cash back in about 2-3 months and then we'll use it to buy another and do this all over again! Let me know if you want to learn more about how we do this.

Transaction #9 of 52 in 2011

We just completed our 9th transaction of the year. Fairly strait-forward: a single family home in Ogden. Why did we buy it? Cash flow.

The house is a solid, no-frills property in a good neighborhood. It will cash flow:

$900 Rent

- 90 Management

- 45 Vacancy Reserve

- 45 Repair Reserve

- 38 Insurance

- 33 Taxes

$649 Cash Before Mortgage

We will find a private mortgage and pay 7-8% to someone for 10 years or more. They will get a first position lien against the property and a payment of $500 - $550 per month.

Everyone wins! Obviously we win. So does:

• The City of Ogden: A rehabbed property
• The Tenant: They have a great place to live
• The Private Mortgage Holder: Secured, reliable income for a long, long time
• The Local Economy: $7,500 in repair costs for materials and labor and $1,000 in closing fees

Would you like to be a part of one of our transactions this year? Let me know at 801.510.3566. We are always looking for people to participate in our projects. There are lots of ways to win and we enjoy working with new people.

Look for transaction #10 by next week!

Transactions #6,7, and 8 of 52 in 2011

February started out as a slow month, but it closed with a bang with three similar transactions in just three business days.

All three transactions were private money refinancing of properties that we already own. Here is how it works:

Step 1: We paid cash for all three properties in December or January using our own funds

Step 2: We fixed up the houses with our own funds

Step 3: We rented the houses (2 out of 3, still working on #3)

Step 4: We did two CMA's on each property and averaged the two

Step 5: We borrowed 75% of the property's CMA value

• Borrowed funds from three different lenders. Two split two houses, one funded the 3rd
• 5 year term (one has an option to extend 5 more years)
• Different financing structures for each, but all have yields targeted at 10% or more
• ALL have positive cash flow even AFTER debt service, management fees, taxes, vacancy reserves, insurance, and maintenance reserves

This is a real win for everyone. Interested? Let me know! We are always looking for new financial friends to work with.

Transaction #1 of 52 in 2011- Contract Sale with Credit Partner Bank Loan Cash Out, Retaining Ongoing Cash Flow and Equity Participation

I committed in my last blog to go back and write about our first four transaction of 2011. (A transaction is a purchase, sale, refinance, or loan.) A transaction allows Clear Day to make a profit- now or in the future.

We started the year selling a Clear Day Capital property (two houses on one piece of land) on contract to a credit partner who used his credit to get us cash so we could pay off our underlying loan. This was a foreclosure property and we sold it for more than we lent on it. If it had been a traditional sale we would have had a break-even or loss due to price discounting and transaction costs, especially a 6% real estate agent commission.

Here is how it worked:

1. We spelled everything out in a real estate purchase contract.
2. Our investor/financial friend went onto title to give us joint interest in the property. He also signed a re-conveyance that went to an escrow company in case everything fell apart or something happened to him we could take him off title.
3. Since he was on title, he was eligible to get a credit union equity line of credit for 65% of the property value.
4. The credit union loan paid bought out our interest in the property. It didn't quite pay off the loan, so Clear Day Capital took back a 2nd mortgage, behind the credit union, for the balance owed from the sale.
5. At close we also established a lien for one half of the cash flow and one half of the equity in the property.
6. Clear Day Property Management leased the property from our investor/financial friend who has no desire to manage properties. CDPM's management fee is 5%, which is low because this is an "in house" deal.
7. Money will be set-aside each month for vacancies and repairs (5% for each) to build up reserves.
8. Clear Day Capital will split the cash flow with our financial friend every quarter (after reserves) and eventually split the equity when the property is sold.
9. Our financial friend get's a the other half of the cash flow and equity. He also receives the depreciation that offsets the income from the property and may help offset his other income as well.

That's it! Pretty simple when it is laid out in writing. Questions? Comments? Let me know!

Transaction #5 of 52 in 2011- Contract Sale for Deed

The first four transactions are NOT posted yet and I'll try to put them up soon. I wanted to do #5 now for two reasons:

1. It is still fresh in my mind

2. I am presenting it at NUREIA tonight- so please come if you are reading this on February 3, 2011 (click here for more info)

So here it is:

Indian Camp Road Contract for Deed to Mr. Persistent

SITUATION: Four years ago Chapter Two Realty rescued Mr. & Mrs. Iwanastay by buying their house on a short sale and the leasing it back to them at $1,695 per month and selling them a 3-year option for $10,000 with a sell price of $189,000. Now the house has a market value of $165,000 and the Iwanastays decided to build a new house instead.

THE PROBLEM: Current Market Rents are $1,295 and with management fees and vacancy and repair costs, Chapter Two will lose about $388 a month! Chapter Two owes about $171,000 and selling the house in a traditional sale will mean that they need to bring over $16,000 to closing, which is simply not feasible.

PROPOSED SOLUTION: Chapter Two decided to do a contract sale to get a higher purchase price, reduce transaction fees, and have flexible seller terms to maximize their opportunity. They found Mr. & Mrs. Persistent through a realtor who understands creative financing. The proposed sale price is $179,000 with $11,000 down and a 40 month term with an 8.04% interest only contract sale. The realtor agreed to 1.5% now and 1.5% when the house was refinanced.

BENEFITS: Mr. & Mrs. Persistent are able to buy a house now and fix their credit over the next three years. The receive a mortgage tax deduction and the pride of ownership. The love the house. Chapter Two has a $16,000 swing in cash flow and will end up postive by almost $1,000 when the sale concludes at re-finance. They will have no vacancies, no repairs, and no management concerns for 40 months. They have pre-sign reconveyances in case the buyers don't pay.

REQUIRED DOCUMENTS: Note, Trust Deed, Escrow Agreement, Re-conveyance

52 Transactions in 2011

OK, I know that it has been way too long since I posted. I've just been waiting for something significant to blog about. So here it is...

I have set a personal goal to be a principal in 52 transactions during 2011. That's an average of 1 per week either buying, selling, refinancing, or controlling (i.e. with a master lease) a property.

Each time I complete a transaction I'll post details so you can follow along. Anyone care to join me? My partners and I are looking for:

• Really inexpensive properties to buy with cash
• Capital to borrow for a 1st or 2nd mortgage
• Properties to manage through a master lease
• Properties to pay full price with terms that work for us
• More people to network with to create win-win deals
• We work with residential from SFH to 40 units and with small commercial

Contact me if you want to be part of 1 (or more) of my 52 transactions this year!