Archive for the ‘Real Estate Investment’ Category

2-4 Unit REO Madness

Wednesday, April 28th, 2010

If your market is anything like mine here in Los Angeles or in many other parts of the country, it’s in the middle of 2-4 Unit REO Madness.  Now more than ever it’s time for you to take advantage of this market to secure your financial future and start building that passive annual income stream.  2-4 unit properties everywhere are being sold as Short Sales and REO’s at prices not seen since the early 2000’s.  And if you’re willing to venture into lower-income neighborhoods (what I call C & D’s), you can find properties in the 5.5 -7.0x GRM range, guaranteeing your client a 10%+ cash on cash return against today’s current financing.

Remember the Golden Rule is to make sure that properties debt cover even or better so that you have enough money after paying for taxes and expenses to cover the mortgage payment.  And the lower the GRM the greater the cash flow.  Be prepared for many properties in the $250,000 and less range to sell very quickly, over asking and in many cases ALL CASH.  The market is moving very quickly right now so make sure you are prepared to act quickly and visit properties within a day or two of them being listed on the market.

And once you’re lucky enough to have an offer accepted by a Seller on a Short Sale, be prepared to be patient.  The process can take 30-60 days or more and can be frustrating.  So continue looking for deals while you wait to hear from the Negotiator as to what the lender will do.  Don’t be surprised when they ask for more than you’ve offered and remember it’s a negotiation.  You’ll win some deals and some you’ll walk from.  It’s part of the ‘fun’ of dealing with Short Sales.  If you aren’t up for the waiting and back and forth steer clear of Short Sales and deal only with Foreclosures/REO’s and normal sales.  This will guarantee a smoother experience.

Three Reasons to Invest in Real Estate

Tuesday, January 19th, 2010

Lately I’ve been asked if now is a good time to invest, and my answer is always the same – YES! Now you might be saying to yourself that this sounds like optimistic broker speak, but it’s not. The reality is that we’re in the midst of a perfect storm and there are 3 great reasons that both you should be investing in income property right now. Click here to learn more about investing in real estate.

  1. Cheap Debt – interest rates are still at historic lows and you can get a 30 year fixed, non-owner occupied investment loan on a 3-4 unit property in the 6.0% range. That is fantastically cheap money.
  2. Low Prices – prices in most areas have fallen back to 2001 and below levels making this a great time to buy. You know the old adage, ‘buy low…sell high’.
  3. Inflation – with our federal deficit growing and over $1.2 trillion of new money recently printed, most experts agree we’re about to go into a period of significant inflation. And while this isn’t great as a consumer, as a property owner you like it for two reasons: first, you’re repaying your debt with deflated dollars and second, your rental income will increase meaning your passive income will increase as well.

For many new investors the largest impediment to success is fear and an inability to get financing. The first obstacle can be overcome through education and by working with a knowledgeable real estate professional. That is where the information on this site comes in. The second can be addressed by speaking with your mortgage broker and making sure you qualify for today’s cheap debt.

So act now. Today’s low prices and great financing, coupled with tomorrow’s inflation, will be the foundation of your future wealth.

Importance of Education

Friday, September 25th, 2009

By Jon Swire

If you have previously purchased your first home or even started looking at income properties, I am sure you remember when it first closed. I certainly do. It was a great feeling to sign those documents and truly own my first property, but many investors also feel unsure of what they are doing in terms of a long-term investment strategy. After all, you don’t know what you don’t know.

The key to success in any business is education and planning. The first step is to learn as much about your subject matter as possible, which will provide you with confidence when doing current and future deals. In this case, it’s learning to use 2-4 unit properties to make successful investments to secure your financial future.

I’m a big believer in education and that’s one of the reasons I teach at UCLA Extension and around the country, training folks on 2-4 unit properties. It is also why I launched my program and have now built the tools that every investor—no matter how experienced—needs to succeed in real estate investing.

I’ve had the opportunity to work with and train thousands of investors and real estate agents over the past few years and the most consistent feedback I hear is that the training they received provided them with the confidence they needed to work with income producing investment property. Remember, knowledge is power and the perfect first step to securing your future is to gain the knowledge so you can make the best investment decisions possible.
In addition to books, DVDs, webinars, and financial models to analyze investments, I also offer one-on-one coaching to help investors effectively sort through their real estate investment opportunities. Click here for more information on this proven real estate investment training program.

Investing In A Down Market

Tuesday, August 18th, 2009

By Jon Swire


In this edition of my video blog I discuss the current state of the market and the 3 reasons why now is a great time to invest in real estate. Not only is debt historically cheap but prices have fallen down to 2001 and below levels in many areas. And you remember the old adage, ‘buy low and sell high’. Finally, we’re predicted to go into a period of high inflation making it a great time to be a real estate owner. You’ll repay that cheap debt with deflated dollars while your rental income rises due to inflation.

So stop thinking about investing and get in the game. Take the first step towards creating the foundation of your future wealth.

Educational Webinar: Understanding CAP Rates

Friday, June 26th, 2009

By Jon Swire

If you are interested in real estate investment, but need some help in learning some of the intricacies of the investment process, then visit There’s No Free Lunch in Real Estate News & Events page to access a wide range of tools, information, and resources. These webinars are helpful learning tools to start you on a path toward financial freedom!

My most recent webinar is focused on helping you Understand CAP Rates, and how to accurately calculate the most important metric in income property investing. I’ll show you how to avoid common pitfalls and make sure the deal you’re considering makes sense. My goal is to guide your choices for potential investments and ensure you earn the greatest return on your investments.

You can gain access to this webinar by simply clicking here.

I look forward to helping you develop your real estate profile and turning today’s market into your future wealth!

Jon Swire
There’s No Free Lunch in Real Estate

Working with Real Estate Agents – What to Expect?

Monday, May 11th, 2009

By Jon Swire

Are you ready to invest in income property but not sure what level of service to expect from your real estate agent?

Investing in income property can be a stressful experience, but remember, your real estate agent is there to help you every step of the way. As a Buyer, your agent will be compensated by the Seller at the close of escrow. What this means is that while she works for you, she’ll be paid by the Seller for her services. Fees typically average 2-2.5% of the purchase price, so on a $500,000 purchase, your agent will earn between $10,000-$12,500. Some of this money will go to her brokerage firm and to cover costs, but remember that your agent is being well paid for her job. So take advantage of her services to the fullest to ensure the smoothest and most enjoyable experience.

So, what should you expect from your agent? First, once your agent has your search parameters, she will set you up to receive daily updates from your local MLS or other services. This will allow you to see all the new listings that come on the market in your price and criteria range. Most clients like to drive properties on their own, and only bring their agent with them once they’ve identified a property they’re interested in. However, don’t be afraid to ask your agent to spend more time with you at first to help you figure out what works and doesn’t work for you. And, if you’re unsure of the exact geographic location you’d like to settle in, ask your agent to drive you around to show you more about the local neighborhoods, schools, and amenities. This is a great way for you to familiarize yourself with the area and available options.

Once you’ve found a property, your agent will be the one preparing the contracts and negotiating them on your behalf. Ask her to explain everything to you and make sure you understand what you’re signing. She’ll also walk you through the property inspection and all disclosures you’ll have to sign as well as help you with the loan process. If you don’t already have a mortgage broker, ask your agent for a couple of referrals she’s successfully worked with in the past.

Buying an income property can be a long process, taking 45-60 days or more, depending on how quickly your search goes. Once you’ve found the property, be prepared for an intensive 2-3 week process while you do your property inspection and work with your lender. If at any point during the process you feel uncomfortable, take a step back. Remember, making an investment can be challenging, but it should also be fun and as exciting as you’re on your way to securing your financial future.

Please visit http://theresnofreelunchinrealestate.com/ for more information, tips, and services.

Finding a Real Estate Agent

Monday, May 11th, 2009

By Jon Swire

Are you ready to make your first income property purchase and not sure how to find an agent or what to expect? If so, you’ll want to read my tips on choosing the right agent for you!

If you’ve been thinking about investing in real estate, now is a great time. Interest rates are at historic lows, and prices around the country have fallen to 2002 levels in many places. The questions is how do you find a Real Estate agent, and what should you expect?

First, a great place to find an agent is through referrals. Either from friends, colleagues or other professionals, someone who has worked with the person in the past and can vouch for their integrity and responsiveness. After all, this person will be representing you in one of the biggest investments of your life, so you’ll want to make sure they are trustworthy and put your interests first. Another great option is to visit local Open Houses in your area, and speak with the agents working them. This will give you a feel of how busy they are based on the number of homes they have listed for sale, and it will also give you a chance to speak with the agent in an informal setting to find out how knowledgeable and personable they are.

Once you’ve identified a potential candidate, you’ll want to interview them either in person or on the phone. Ask them how long they’ve been in the business, what type of product they specialize in – SFR’s or income property – what areas they work and for the names of 2-3 satisfied clients you can speak with. And remember, first impressions go along way. Make sure they are on time and have strong follow up. After all, if they can’t get it right with you, how well will they do representing you to another agent?

Once you’ve selected an agent, you’ll want to give him clear parameters of what you’re looking for. Is this your first investment? How much do you have to invest? How far from your home are you willing to consider? And of course, what is a comfortable price range for you?

And remember, Real Estate is like most other service businesses, where the old adage holds true….”20% of the agents do 80% of the business”. So spend time before get you started finding the right agent for you.

Please visit http://theresnofreelunchinrealestate.com/ for more information, tips, and services.

1031 Exchanges & Cash–Out Refis: How to Explode Your Wealth

Thursday, April 30th, 2009

By Jon Swire

Have you started investing in real estate and aren’t sure how to take the next step to grow your portfolio? If so, you’re going to want to read my tips on how to use 1031 Exchanges and Cash-Out Refis to Explode Your Wealth.

Now that you’ve taken the first step and started investing in real estate, the next step is to learn the basics of 1031 Exchanges and Cash-Out Refinances so you can use these tools to explode your wealth. By using each of these where appropriate, you’ll be able to grow your real estate portfolio and passive income stream, without paying any taxes. The key is to take advantage of each in the right situation.

Cash-Out Refis are used when you own a property that has appreciated in value, and therefore so has your equity. Under current tax guidelines you’re allowed to do a cash out refi and do whatever you’d like with the proceeds, tax free. So, you can take the money and use it to purchase another property, thereby increasing the size of your portfolio and your passive income stream. You’ll go from owning 1 property to 2, and having two income streams instead of one.

Like Cash Out Refis, you’re going to consider doing a 1031 Exchange once your property has appreciated in value and your equity has increased. 1031 Exchanges allow you to sell a property and defer taxes until sometime in the future. You can then use those funds that would have gone towards taxes to purchase another larger property that generates an even larger cash flow stream than the one you sold. You can do this over and over throughout your investing career, and I have clients who have been doing this for 30 years or more. Remember, there are time constraints placed on 1031 Exchanges that you must meet, and you should discuss these with your accountant and real estate professional.

Cash-Out Refis are best used in situations where the property you own is one you’d like to keep. Maybe it’s in a good location, has a solid tenant base, or has excellent prospects for future appreciation. 1031 Exchange’s on the other hand, are best used when you’re ready to sell a property and move on. This typically occurs for any number of reasons: you’ve exhausted your depreciation, the building is older and has higher maintenance costs, the area is declining or the tenant base is troublesome, meaning it’s difficult to collect the rent on time each month.

Make sure you analyze your real estate holdings at least once per year to figure out if its time to do a Cash Out Refi or 1031 Exchange. The key to exploding your wealth and climbing the Property Ladder is to keep your equity moving and continually increasing your real estate holdings and the size of your passive income stream. Remember; before you make any financial moves you should always consult your Accountant or Tax Professional to fully understand the implications of what you’re planning.

Understanding 1031 Exchanges

Thursday, April 30th, 2009

By Jon Swire

Are you thinking about selling an investment property but aren’t sure what a 1031 Exchange is or how to do one. If so, check out my tips that will save you thousands of dollars in taxes.

1031 Tax Deferred Exchanges are one of the biggest benefits of real estate investing. This tax code allows you to sell a property today and defer taxes on the gains well into the future, thereby using those monies to purchase a larger property with a larger cash flow. 1031 Exchanges are one of the tools you have available to help you climb the Property Ladder and grow a portfolio that can generate enough passive income for you to retire on.

The key to a successful 1031 Exchange is to understand the rules that govern them. There are 3 key rules that you must follow and not run afoul of. If you don’t, you risk blowing your 1031 Exchange and having to pay the taxes today that you’ll owe on your gains.

The first rule is that you must replace debt with debt and equity with equity. This means that the total value of the mortgage on your new property, or replacement property as it’s called, must be equal to or greater than the mortgage on the property you sold. And, you must use all of the equity from the sale for the purchase of the replacement property.

Next, the proceeds, or funds, from your sale property must pass directly from your escrow company handling the sale straight to your accommodator. An accommodator is a 3rd Party Intermediary that will help you with the transaction and will escrow your funds for the time between when you close your sale property and when you complete the purchase of your replacement property. Remember, you can NEVER take possession of these funds, or you will void your exchange and have to pay taxes.

The final rule deals with timing. Within 45 days of the close of escrow of your sale property you must identify in writing to your accommodator what your anticipated replacement property is going to be. This is critical as it’s necessary to have on file in the event of a tax audit. And, you must complete your exchange within 180 days of the close of your sale property. This is also critical as it results in an invalid exchange if it doesn’t happen. It’s one of the easiest things for the IRS to monitor, so be careful with regards to your timing.

If you follow the above rules you’ll successfully complete your 1031 exchange and defer your tax bill sometime into the future. You can continue to do this from one property to the next over many years and even generations. Finally, make sure you speak with your accountant or tax professional before making a decision to sell. You want to be clear on the tax code and any other issues you may not be aware of.

Please visit http://theresnofreelunchinrealestate.com/ for more information, tips, and services.

Also visit http://theresnofreelunchinrealestate.com/news.html to view  complementary webinars on 1031 Exchanges and other investment topics!

Commercial Loans – How they differ from Residential Loans

Tuesday, April 21st, 2009

By Jon Swire,

Are you ready to buy your first Investment property but aren’t sure what types of commercial loans are available and how they differ from  residential loans?

Loans for investment property such as multi-family apartments and retail and office space are also referred to as commercial loans. And the lenders requirements for these loans differ greatly from residential, so you want to make sure you understand the differences before you start looking at buying a property that will require one.

The first and biggest difference is that the lenders are going to require you to put enough money down so the property debt covers. This means that you’ll have enough rental income each month to pay for all your expenses including taxes, insurance, and your mortgage, and still have some money left over. So, each month and year you’re going to have positive income and spendable cash flow. Be prepared though, because this typically means you’re going to be putting down a minimum of 20% and sometimes as much as 35-40% or more depending on the area you’re investing in.

The second difference is that commercial lenders are much more focused on the real estate than the borrower. So, they are going to be more concerned about the location of the property and the quality of the tenants and income stream rather than your credit history and annual income. Commercial lenders want to make sure that the property you’re investing in will continue to generate a healthy income year after year from which you can repay the mortgage you are borrowing. After all, their main concern is getting their funds back and not ending up owning the property.

Finally, commercial loans are typically fixed for 3, 5, or 10 years, and usually never longer. So, you can’t get a 15 or 30 year fixed that you often find in residential lending. After your initial fixed rate term expires, be prepared for your interest rate to adjust and float according to the Index you’re tied to, such as Prime or LIBOR. So, if you plan on holding the property longer, it’s a great time to consider doing a refinance when your rate begins to adjust.

I always suggest to my clients that they speak with a loan broker to discuss their situation and goals and fully understand the options available to them. Commercial lending can be quite different from residential, so do your homework and make sure you’re prepared.
For more information, tips, and services visit http://www.theresnofreelunchinrealestate.com/