Wednesday, December 22, 2010

Eliminating mortgage interest tax deduction being discussed

Talk in congress about eliminating the mortgage interest rate deduction is a very bad idea and in my opinion, just another way to divert attention away from the real issue. It would be like raising sales tax or implementing a national sales tax. Tax the masses to avoid closing loopholes for billionaires. I'll break it down. If you make $80,000 per year and you currently pay $30,000 in mortgage interest per year, unless you can make it up with another deduction, with an estimated tax rate of 25%, you'd have to pay an additional $7,500. That calculates out to $625 per month. That is a lot of money for a lot of people. If we cut that down to the average income of $36,000 with a $1200 mortgage payment, you'd get an increased tax bill of $1500 which calculates out to $125 per month. Regular people are scraping by and this would be a huge hit, making it worse that they won’t close the carried-interest loophole for hedge fund managers. That would increase their tax rate on 1 billion+ per year income, from 15% to 35% like the rest of the people making over $300k per year.

Find you senator at:

And email them:

Dear Senator,

I am against any and all talk of eliminating the mortgage interest rate deduction. This is a tax on the middle class and is completely unacceptable while keeping tax loopholes for billions.

Please, I implore you, do not support this proposal.



money, wall street, finance, blogs, business, blogging

Friday, December 17, 2010

Why should I use hard money to buy real estate?

From people not familiar with hard money financing, I get this question a lot. Some people just can't fathom why someone would take a 9% or even a 12%+ interest rate when buying or refinancing real estate. They see that banks are offering rates in the 4% range and just don't understand which then results in lost opportunities and wasted time.

Commercial Properties:

Hard money for this type of property is common when the commercial property is distressed in some fashion or another. It's foreclosed and partially vacant. The current owner has too big of a mortgage forcing him to rent the property for top of the market or higher which eventually forces a foreclosure or short sale. Maybe there is damage to the property, maybe it's not in the ideal location for a conventional commercial lender, and maybe the seller wants the buyer to close quickly and not have a 3 - 6 month escrow wich is the typical time period for a conventional commercial lender. It can be a whole host of circumstances which make a hard money loan the ideal, and potentially only avenue to obtain financing.

Residential Properties:

Right now, hard money for this type of property is most common when the property requires rehab and is not up to FHA or Fannie Mae standards. It's also a common occurence when an investor owns more than 10 properties or when their credit isn't up to Bank of America standards. In our diligence when buying properties, we see many angry homeowners that, right before foreclosure, trash the property, sometimes very extensively. That fact gives us many opportunities in todays market.

As you can see, hard money financing can be very useful and there is ample opportunity where it is required.

Sunday, December 5, 2010

How to make money buying and rehabbing investment properties with very little money.

As a trust deed specialist at FK Capital Fund and FK Bancorp, I talk with hundreds of different potential borrowers monthly. I can't even begin to tell you how many people have recently completed weekend seminar's and now consider themselves experienced professionals.

There are some people that have no money and bad credit and think that, if they can find a property, they'll get someone such as ourselves to fund their transaction. The important things any investor and would-be investor needs is at least some money and some know-how.

First step is having the financing available to you. For a vast amount of the rehab investment purchases that we do, we fund the purchase price, the fees, an interest reserve, and a portion of the rehab. Every transaction is different though. We will fund 65% of the fair market value, but require at least 15% of the total transaction to be brought in by the borrower. That is our standard rule of thumb. To go into that a little further. We have some people that come to us with a property that they say is worth $500,000 and they're able to buy it for $100,000 (hypothetical transaction). We aren't going to fund 65% of $500,000. Here is an example of our 100% Investor Rehab Program. So with that first step, if you have at least the money for the rehab, then we can probably fund the transaction.

There are other factors like credit that we do consider, not for the purposes of approving or denying a loan, but for the purposes of deciding how agressive we might go on the loan amount. If a borrower has a 550 FICO score, we're not going to be as agressive as someone who has a 750 FICO score. It's very simple.

Now for the more difficult side of this business; finding the right property and successfully getting that property into contract. Everyone tackles this differently. Some people try and secure properties through Fannie Mae or other large wholesalers, some people try to find these property themselves via the MLS, craigslist, or other similar sites, and what we recommend is for people to talk with local agents that are contracted with the banks. Agents that have 5-10 bank owned REO's have the ability to work with you, where you can build a personal relationship and successfully get that property into contract. Feel free to call us for more tips and assistance.

Tuesday, November 23, 2010

Why the stock market can't ever go down...and that is the problem.

Fairly recently I read an article where the CEO of JP Morgan Chase, Jamie Dimon, said that if the government takes away their income streams like overdraft fees, atm fees, and debit card swipe fees; that his bank and others like it would end up just charging more for the services that they do have. Makes sense? I don't think so.

It comes back to the stock market. Once the bank posts a certain profit, they cannot ever go down. At the same time that Chase is saying that they'll have to make up for lost income in other ways, they're posting multi-billion dollar quarerly profits. So why does Chase need to make up for lost income? Answer: The stock market.

For example, if they post a $3B quarterly profit, their stock will go up accordingly and many investors and hedge funds and pension funds and whomever else will buy that stock at that price. Now, they're stuck. If they EVER make less than $3B quarterly profit, then the stock price will go down, people will lose money, it can cause some sort of panic, maybe a sell-off, etc.

That is the reason why the banks MUST make up for that lost income in other places, because of the almighty stock price that can never go down, it must always go up..unfortunately.