Scottsdale, Arizona Coldwell Banker Real Estate – the Residential Buyer

When buying a home in Arizona, the buyer usually has several commonly asked questions about the process and most importantly, about the monies involved. Every single Real Estate transaction is like a finger print, no two are alike. This article is designed to help people that may have questions about purchasing Real Estate in Arizona.

What is the first step when thinking about purchasing a home in Arizona? The first step is to get pre-qualified for a loan, unless you are planning on paying full price cash for the home. Very rarely will someone pay full price cash for a home, so they most obtain a loan. When you obtain a loan, you will have a monthly payment, much like purchasing a car. Depending on how much you are putting down, and how much you can afford towards a monthly mortgage payment will determine how much house you can buy. The purpose of getting pre-qualified for a home loan is to determine your price range, and also to make sure all documentation the lender requires to finance your loan is obtainable by the buyer. If you do not know a lender, a qualified Real Estate professional should be able to recommend one to you.

What is the next step after getting pre-qualified? After you are pre-qualified for a loan, it is now time to go with your Real Estate agent to look for a home in your desired area in your price range. Once you find a home in your price range that is available, you simply write an offer to purchase the home with your Real Estate agent.

How long after you write an offer to purchase a home can you move into the property? That is completely up to the buyer. However, a good Real Estate agent will recommend that at least thirty days from the time you write the offer, to the time you move in. This gives the lender, the Real Estate agents, and all other parties involved to complete the paper work needed to finalize the transaction between the seller and the buyer. The reason this process takes a minimum of thirty days is because an inspection needs to be completed, an agreement between the parties on what is to be fixed between the parties, an appraisal, documentation from each party, loan document preparation, and many other factors. Thirty days is the sort of the industry informal standard, however, the buyer and the seller can negotiate a close of escrow date that fits both of their schedules. In Real Estate, most everything is negotiable.

After we have made an offer, and the contract has been accepted by the seller, what is the next step? The next step is to begin the inspection period. Generally, the inspection period is ten days but can be negotiated shorter or longer if a modification in the contract is made in writing. The inspection period is designed to give the buyer time to get the home inspected to make sure that there are no major issues with the home. The buyer has the right to do an inspection on a home and is very highly recommended. Generally, home inspections cost any where between two hundred and fifty dollars and four hundred dollars depending on the size of the home. The buyer pays for this inspection up front. The buyer may waive their right to do a home inspection and not spend this money, however, that is not a very good idea.

When purchasing a home, who are all the people involved? There should be the buyers agent, the buyer, the seller, the selling agent, a title company, an inspector, an appraiser, and a lender. It is the Real Estate agent’s job to make sure all of these people are on the same page. If just one of these people drop the ball, there may be delays regarding closing escrow on time.

Why is it so important to use an experienced Realtor? The difference between a good Realtor and a bad Realtor could cost you a lot of money. Would you rather have an agent that has lived in Arizona their whole life, has done countless transactions in the area, and has a college degree, or would you rather use a Realtor that is a high school drop out and has only completed one transaction? When you are dealing with hundreds of thousands of dollars, it might be a good idea to select an agent that has the experience and the education. If you need a good, experienced, qualified Real Estate professional in Arizona to help you buy or sell property, please click on the link below.

Nick McConnell
http://www.articlesbase.com/real-estate-articles/scottsdale-arizona-coldwell-banker-real-estate-the-residential-buyer-138763.html

Retirement and Quick House Sales

You have found your ideal retirement property – safe, secure, convenient and neighbourly. All you now need is to sell your old home – easy!

It should be but the process is rarely trouble free and never quick. A recent MORI survey said that transaction times in the UK now averaged over 6 months, among the slowest in Europe.

The problem revolves around the fact that, with some 80% of people owning their own home, most need to secure a sale on their present house before they can purchase a new one. As a result, even when you find your dream retirement home and a buyer for your present property there is invariably a chain of transactions which all need to be pulled together simultaneously.

However, for many situations, time is of the essence and deadlines have to be met. This can be for a variety of reasons, eg you may have found your “dream retirement home” but need to secure it quickly or, a builder may be offering huge incentives for a quick completion while you are constrained by the market to a later and uncertain timescale.

Selling to house buying companies is the only foolproof method of avoiding the stresses, delays and uncertainties of selling your present home in the open market. Most importantly it secures the property you want at the time you want it as they can synchronise our purchase of the current home with your new purchase. If the old home is worth more than your new one you may even manage to buy without the burden of a mortgage.

How can house buyers help?

In short, house buyers can buy your existing house, quickly and for cash, enabling you to secure your retirement property.

Some of their schemes have proven especially appropriate for people buying in the retirement sector as the combination of convenience, speed and the certainty of achieving the move they want in a cost effective way without continuing liability suits their needs precisely.

What are the benefits of using a house buying company?

• You can guarantee the purchase of your new retirement property
• We can complete the sale process quickly and to suit your timescales
• You avoid estate agency fees
• You avoid the stress and uncertainty of selling on the open market
• You avoid having the stress and security issues of multiple viewings
• Your next house, its cost and your moving timescale is guaranteed, enabling you to relax

Paul Twocock
http://www.articlesbase.com/online-business-articles/retirement-and-quick-house-sales-679576.html

Sell Your House – Finance It!

Ever thought about seller financing? It does not always work out that a buyer will connect with a seller that can afford to offer seller financing, but there is always the chance that it is worth asking. There are even a couple of new web sites that will assist you in setting it all up.

However, there are risks involved with this sort of sale, even though they can also be very successful, so why would anyone want to become involved?

One of the deciding factors will be how badly you want to sell your home and how much mortgage is owing on it. It is fairly difficult for sellers to find prospective buyers at the moment and it is also difficult for buyers to find financing. This means that the financial climate is right for both parties to try and find a solution outside the norm. However, you will need a very low mortgage or, ideally, no mortgage at all, to be able to follow this route.

Often prospective buyers will go and look at a home that is offering seller financing whereas they may not normally bother to become involved with house-buying. Looking at a home that you may have the chance of buying is more encouraging than just viewing homes and hoping that you can get financing.

A prospective buyer will be more responsive to the pleasing aspects of a home that they feel they could actually own. They may have even given up looking if they are struggling to get financing, so the offer of seller financing could draw them back into the market.

If you are leaving the country or for whatever reason, you simply have to sell your house and do not need the lump sum of cash to pay off your own mortgage on the house, this could be one option that you could investigate. You will definitely need the help of a good real estate agent and a good lawyer, both of whom need to be experienced in seller financing.

There are many options that you can choose from if you are thinking of this solution. As the seller, you will be calling most of the shots; this is because you own the investment (property) and therefore you are taking most of the risk.

How much risk you take will depend on your choice of finance plan. The buyer can also negotiate certain aspects of the plan with you, for instance the type of plan, the number of years, the down payment and the interest rate, to name but a few.

It must be reiterated that you DO need to have experienced professional personnel on board in a deal like this. Having said that, here are a few of the options that you can draw up in a seller financed sale.

The buyer can give a legal Promissory Note and the seller will carry a mortgage for the sale price of the house. This is sometimes called an All Inclusive Trust Deed (AITD).

The buyer puts a down payment on the house, receives the deed and the seller will arrange to hold a mortgage on the remaining balance.

There is also a system that uses the lease option or lease purchase, also known more commonly as ‘rent to own’. The most popular way of doing this is for the buyer to rent the home for a set period, during which time it may be agreed that some of the rental portion may be used against the future house purchase. Once the lease/purchase period is up, the buyer will have hopefully arranged a loan to buy off the rest of the property.

There is also the equitable title system of financing, where the buyer shares the title with you but the seller retains the deed. A contract is then put into place in which the buyer makes payments to the seller, at the end of the full pay out of the purchase price, he is given the deeds. The contract can be written up to allow the buyer to keep paying a monthly sum or to have the opportunity to pay down – or pay off – the mortgage.

All of these options mean that you will be receiving more cash for your home than the asking price. This is because whoever carries financing (in this case – you) will also be charging interest that is payable to them each month. In this respect you can find yourself ‘better off’ by becoming a private financier, as long as you and your lawyer draw up a contract that is water-tight. Get his opinion on the contract in writing by email or letter.

Water-tight means that if the new buyer reneges on the contract at any time, it reverts back to being your private property. You do not want to have a contract where you have to go to court to evict the unhappy new ‘owner’ and have to rely on a judge to make the decision of whether this is an appropriate action.

Nancy Gleason
http://www.articlesbase.com/real-estate-articles/sell-your-house-finance-it-370860.html

Building your Real Estate Investing Power Team

Our company buys houses across the United States and we are constantly asked, “How do you do this successfully and live so far away from the properties you buy? How are you handling the rehab living so far away?” and “How are you so successful at this and not even living in the same states you’re investing in?” Here is my answer: I have an awesome power team of people that I trust in each and every market we go into. This team includes lenders, contractors, handymen, property managers, appraisers, attorneys, real estate agents and brokers, sign companies, insurance agents, tenants and buyers! It can sometime take a while to put this team together and yes you are probably going to go through a few not so great ones to get to the ones you like, know and trust. As your portfolio begins to grow, you will need more people on “your team”. The very BEST place to find these people is by a referral. That referral can come from another investor, a local real estate investment group member, a member of a local landlord association, a realtor, a friend or anyone else that you trust. Just be sure that they are “In the Business” and understand what it is that we do as investors. Always remember, the due diligence end of things is always your responsibility. Just because an investor recommends you use a certain agent, appraiser, lender or contractor does not mean they are the best person for the job. You should always get references from anyone you are even thinking of using.

Property Managers – Like your real estate agent and attorney, you need to find someone you can get along with. Interview them, as if you were going to rent a property to them. You want to make sure your property managers will handle your house like a landlord not a slumlord.

Insurance Agents- Shop Around to find an agent who can do non owner occupied (NOO) properties and give you a fair rate! I always look for a broker who can give me a competitive rate and is fair and most importantly, honest. I like to find insurance agents through referrals-that usually seems to be the best!

Lenders – This can be a tedious process. However, once you find just a couple of lenders in a specific area and they understand Investment property and NOO (Non-owner occupied) loans, you’re set! First and foremost, you will need to find someone that can loan in the area you are looking at investing in. There are private money and hard money lenders that are available in every state there is and sometimes using private money or hard money loans can be the easiest way to buy and rehab a house without using your own cash, especially if you don’t have good credit or much cash to put into the deal. Most private and hard money lenders charge anywhere from 4-8 points to originate the loan and 10-18% interest. This is not cheap, but it’s not really a horrible price to pay for the convenience of having money in 1-2 days. Sometimes, its not the cost of the money but the availability of the money that is most important. As long ad the yield is higher than the cost….that’s all that matters. In other words, if you are going to make more than what you spent to get into the deal, it should be a no-brainer! Here is the difference between lenders: Private and Hard Money Lenders are quick and can provide you with the cash you need quickly, but you are going to pay more. They provide a service that mortgage lenders and banks cannot typically do. They give you the money to purchase the house as well as provide the money to complete the rehab on the house. However, you must remember that you can’t keep a hard money loan on your property for any long period of time and expect to make any money-the money is expensive and will eat up your profits quickly. When taking out a private or hard money loan, you should not plan on keeping it more than 90-120 days at the most. If the project cannot be completed in that timeframe, don’t use hard money! To get a copy of our Hard Money Lender Rolodex, go to reitrainingcenter.com or reiconferences.com and enter your name and email on the popup that comes up.

Conventional Lenders are much less expensive but usually require better credit-at least decent credit. There is definitely more documentation and it takes a lot longer to complete a deal-typically 30-45 days to close. It’s nice to find a funding source that can provide both; however that’s usually not your typical scenario.

Whatever type of lender you decide to use, be sure to always line them up before you go searching for properties. It’s always best to have the money in place BEFORE you need it. Then, when you go to make offers, there I no delay. The last thing you want to do is get a property under contract only to find out you can’t get the money to purchase it. The investment market is a very small one and you definitely don’t want to develop a reputation for not being able to close deals!

Sign Companies – You can pick any sign company out of a phone book or wherever. I have previously used sign companies to put out and pick up signs in addition to showing my vacant properties to prospective tenants.

If you are going to manage your own properties, while living in another state, you will need a person to show the property to potential tenants. Realtors, Handymen and sometimes even appraisers can be great people to use for this, but sign companies are going to put out your signs in front of the house anyway. For a nominal fee, they may be willing to let someone in and show them the property. Don’t try to use a large national company for this. Call a local one-man type of shop. You can sometimes find them through referrals from other real estate investors or realtors.

Real Estate Agents & Brokers – This is not the easiest person to recruit for your team! You should never put all your eggs in one basket (ie…one realtor) However, you definitely want to develop strong relationships where agents know you, know you are a serious investor and that you are serious about purchasing multiple deals in one given area. You need to be on a mission to find a buyers agent who is willing to put in some legwork and then be compensated accordingly. If the agent knows you are looking to buy properties in this same area over and over again, they will almost always do whatever they can to accommodate you (take picture, email you comps in a timely fashion, for research, run the financials, etc) There are a lot of gents out there doing the real estate thing part time-those are not the ones you want. You also want to din agents whoa re investors themselves or who work with investors frequently and understand how to “play the game.”

After, you have a property in mind and you are calling an agent for the first time, you need to know a couple of things about the property. What work does the property need? What will it be worth once the work is done-that is the ARV (After repaired value)? What will this property rent for-what are rents in the area for properties similar to this one (Have them send you a rental analysis or something on paper-don’t just take their word. Alternatively, you can look in a local newspaper for the area and calla few local property management companies to verify local rents) What is the average time on the market if I were to resell the property? What do the ¼ mile and ½ mile comps look like? If the agent can’t give you this information on a property , they are not the right agent. Also, you will want to make sure you find an agent who will go to the properties you are looking at buying and take several digital pictures and send them along to you. If they are not willing, find another agent! These agents need to understand that the chances are that you are going to buy this property without seeing it. They are acting as your eyes and ears on this purchase and its important that they look at this as if they were going to buy the property themselves and pay close attention to detail. After you purchase a home or two from one agent, they are going to be more willing to work with you and do what you need them to do. They want to see that you are serious and then they will usually perk up, pay attention and do whatever it is that you need them to do. This is the type of relationship you are seeking.

Attorneys – You need to employ the services of any attorney when wholesaling houses to other investors. We won’t get into the legalities and tax issues of “double closings”. This is where you use your buyer’s funds to pay the seller. You don’t spend any money out of your pocket. Your buyer writes a check to the attorney, the attorney pays the seller and writes you a check for the difference. Some attorneys will do this, some will not. If you don’t have the cash to fund the purchase, it’s nice to identify an attorney who will allow this. It can be as simple as asking. “Will they do a double close? And can you use buyers funds for your deal?” I recommend the honest approach, tell the attorney what it is that you want to accomplish and if he can make it work, great!

Before you decide who you are going to use, speak with a few different attorneys via telephone. Make sure are clear about your investment goals and what you are trying to achieve. Also make sure they are experienced attorneys who are used to working with investors because if the attorney understands you as an investor and what you are trying to accomplish, he or she can better protect you in the long run!

Tenants – If you are planning to buy, fix and rent out your properties, then you need to have tenants for your properties. Two great places to look if you want to rent your properties out through Section 8 is www.socialserve.com and www.gosection8.com. They will allow you to list your property in their databases for free and then those properties are marketed to tenants with section 8 vouchers who are looking for housing. This program is great and has saved me thousands of dollars in advertising costs to get tenants! If you decide not to rent your properties through section 8, you can run ads in the local newspaper. Also, be sure and put a sign in the yard letting everyone who drives or walks by the property that it is for rent. You will be surprised how quickly the word will travel!

Buyers – If you are going to wholesale a house here and there to another investor, you need to have a list of people that you can sell to and who buy houses wholesale to rehab and rent or sell. Its best to develop this list of people BEFORE you go out and put properties under contract.

As a company,, we have thousand of people on out list that say that they “Buy Properties.” However, our core list of really serious buyers who have lines of credit lined up and can pay cash for a property on a days notice is less than 100 people long. In your area, you need to know who that core group. You can always find buyers at your local landlord association or investment group meetings. You can also find buyers via referral through other investors or even agents. WE find a lot of our buyers online in local news and chat groups like yahoo as well. Ask local appraisers and title companies who the “Serious Investors” in the area are. They are usually more than willing to share this information with you. As you develop a reputation in a given market, the buyers will come to you for the deals. This is the best case scenario!

Appraisers, Handymen and Contractors – With these contacts, you not only need to find professionals that you trust and can work with. But you also you need someone that is preferably an investor themselves but if not, understands investment property and the end financial result you are seeking. A $45,000 home in a lower income neighborhood would be rehabbed differently than a $450,000 house in an expensive neighborhood and your appraiser and rehab crew need to understand those differences. Also your appraiser must understand the need to go through the house and give you an after repair value (ARV)as if any needed repairs were complete. In other words, he need to give you an AS-IS appraisal and at the same time a solid professional guesstimate of what the ARV will be when the property has been rehabbed completely.

You may need to go through a few appraisers to find a good one who is honest. You can usually call your bank or lender you are planning on using. This is sometimes best as they have specific lists of people they will and will not work with.

Take the same approach with your handymen and contractors. Tell them you need the job done for $4000, when you know it will cost $8,000. Make sure they are not cutting costs when they give you a bid, just to get the job. Some trimming is fine, but cutting the price in half, just to get the job, will almost always end up in a poor quality job as far as workmanship is concerned.

When identifying a new contractor, be tough. Ask for the moon and stars. Tell them that you want a rehab quote with pictures and estimates broken down by labor and materials as well as room by room. If they offer to give you this, then you have someone who is flexible and is willing to work with you.

Since time is the biggest factor when rehabbing a house, make sure your contractor gives you a firm date that the job will be completed. Also, when getting bids,make sure you get them back from the contractor in a timely manner. If you have a 7 day inspection clause in your purchase contract, tell your contractor “We are rushed and need thi back within 48 hours. Can you get this done for us right away and fax the bid to me within 48 hours?” You want to make sure they follow through on what they promise.

Also, send more than one handyman or contractor to a job, unless you’ve worked with them before. If you are working with someone new, make sure they are not the only quote you get. They may be too high or may do poor work and you will have no idea-even if they have been referred. If you get three or four bids for that same house, you will have a really solid idea of the scope of work and an accurate price of what it’s going to cost you to rehab that property.

Charrissa Cawley
http://www.articlesbase.com/real-estate-articles/building-your-real-estate-investing-power-team-55049.html

Get Your Financing For Santa Monica Real Estate

So you’re ready to go House Hunting…you have a Realtor, you have your down payment, and you’ve put on your favorite walking shoes…now what? Well first of all, congratulations! Today is a wonderful time to buy real estate. It’s truly a buyers’ market, so now more than at any time in the past decade, your dollar will really stretch nice and far. That’s the good news.

The challenging news is that because of a little sub-prime mortgage drama, obtaining a home loan now lies somewhere between “difficult” and “giving up your first child.” But rest at ease…lenders don’t really want your kids. And all of us at SANTAMONICA-REALESTATE.COM are here to help you. We have three great useful tips designed to not only help you get your loan, but also to make sure your offer looks as good as possible, so that you’ll soon be reading articles like this, in the home of your dreams!
 
TOP THREE THINGS YOU NEED TO DO

1. GET PRE-APPROVED

The first item of business is to get pre-approved! Pre-approval is basically finding out how much house you can afford, and how you’re gonna afford it. Time and again home buyers set their sites on a dream house only to find out they either can’t afford the home, or the home gets sold to another buyer who was pre-approved and could therefore move faster into escrow.

To get pre-approved, first pick a reputable mortgage lender. If you don’t have one, ask! At REALESTATE-SANTAMONICA.COM, we have a number of lenders we trust…we’re happy to point you in the right direction.
Now that you have a mortgage lender, you have the person who is gonna help make your home owning dream a reality. This person is almost as important as the Realtor. So give him or her all your financial information: how much money you earn, how much is in the bank, how much you owe, etc.

The mortgage lender will run your credit history, so all of this information will come up anyway, but it’s always nice to just be upfront with your lender during the initial conversation, so that he/she can begin helping you right from the start! You will soon know how much you can comfortably spend on a home…and you’re that much closer to going on your first House Hunt!

2. GO FULL-DOC

The next item of business is to ask your mortgage lender to pre-approve you with full financial documentation. In the real estate business, we call this “Full Doc.”

Before the sub-prime mortgage situation, many mortgages were given to home buyers based simply on their credit score (this is called your FICO score) along with their earnings statement (your W-2 tax form). These loan approvals are commonly known as “stated income” loans.
Many of the homes going into default now are owned by buyers who were “stated income” and banks are understandably wary about approving loans this way.

To make sure you get your loan, and your perfect house, we are recommending that you go “Full Doc.” This process takes a little longer than just simply getting you pre-approved with your income, credit history and debt. Going full-doc actually requires the mortgage lender to go through your tax history for the past two years to determine your true actual income.

Why go “Full Doc”? When you start writing offers on homes, the listing agent and the seller will want the home to go to the most qualified buyer. They will not want the home falling out of escrow because the buyer really couldn’t get financing based on his/her pay stubs.
Time and again I’ve seen listing agents and sellers go with offers that were for less money, but were from “Full Doc” buyers. So go the extra mile…it may save you money when you buy your house!

3. PROOF OF FUNDS

We’ve saved the easiest tip for last…show “Proof of Funds.” In short, “proof of funds” is showing both the listing agent and the seller that you truly have the money on hand that is necessary for the down payment and the closing costs.

Because many loans now require more of a down payment than loans of the recent past, it’s becoming more and more important to show that the buyer has available cash.

This “proof of funds” can be anything from a bank statement to a retirement account. It’s just anywhere from which you can draw the liquid cash available to complete the transaction.

To many experienced home buyers reading this article, this tip can seem really like a “so what” type of thing. But the truth is, in today’s challenging real estate market, anything you (the buyer) can provide the seller to show that your offer is serious, and that you really have the money, will separate you and your offer from all the others.
And as I mentioned before, I have seen many offers that were for less money get accepted because the offer included full documentation, and proof of funds will only help strengthen your offer.

So remember, now more than ever offers are being accepted from buyers who may not necessarily have the highest offer, but from buyers who can close the deal!

Happy Hunting, and remember that REALESTATE-SANTAMONICA.COM is just a click a way!

Colin Whelan

Buying A Franchise – Mr. Franchise Buys His First Franchise

For the last twenty-eight years, as a franchise attorney, author, instructor and recognized franchise expert, I’ve helped firms enter and prosper in the franchise industry – each hoping to become the next “McDonalds” of their respective industries. Along the way, I’ve met and worked with an interesting group of entrepreneurial founders. From apparel to water treatment, the franchised concepts were also incredibly diverse. Some of them interested me to the point where I considered buying a franchise myself. In two or three cases, talks were initiated to discuss the possibility, but never moved forward. I just couldn’t find the precise set of criteria to satisfy my exacting requirements. After all, I had advised hundreds of prospective franchise buyers, and developed sophisticated radar for detecting the good, the bad and the ugly in franchise investments.

In May of 2002, my life changed dramatically as I took the plunge and became a first-time franchise owner. I’d just completed a franchise development project for a San Francisco Peninsula company poised to enter franchising. They operated a very successful home improvement business that specialized in a unique niche. Targeting homes constructed in the 1960′s to the 1980′s having old, flat, ugly interior doors, this company replaced all interior doors in a home with new, freshly-painted raised panel designer doors, locksets and hinges. Their advertising mantra was “Replacing America’s 1.16 Billion Interior Doors.”

After interviewing a couple interested franchise candidates who didn’t sign up, the company became concerned about selling its first franchise. Selling the first one is usually the most challenging task facing any new franchise company. There are no other franchise owners a prospective buyer can talk to about financial performance, training, ongoing support and other franchise relationship issues. Because of this void, selling the first one is difficult. After I was repeatedly asked when they could expect to sell their first franchise, my hand finally jumped up and I volunteered for the assignment. My franchise agreement was signed May 22, 2002.

Let’s consider the major assumptions and factors I evaluated in making my buying a franchise investment decision, and see how things worked out.

INDUSTRY TREND
As stated in the previous franchise article, a major issue is finding a franchise in a cutting-edge industry that is doing well currently and is projected to do well in the future despite any economic slowdown. From my experience in evaluating hundreds of franchises, I observed the home-improvement industry was a stable segment. People are always looking for ways to improve the appearance and value of their homes.

Unlike other home improvement companies that concentrate on a single, high ticket improvement (a kitchen remodel, for example, that can cost $50,000 and more), for a couple thousand dollars ($2,000 to $5,000), a homeowner can give every room in their entire home a major face lift by replacing their old, flat doors with new raised panel, designer doors. In the aftermath of the 9-11 attacks, and the country’s high security anxiety, I felt more people than ever would be nesting at home. A home typically represents the most valuable asset in a family’s portfolio. If the homeowner can be educated and motivated to improve the appearance and value of this asset, by making a reasonable investment, sales are easy.

Major home improvement chains, like Home Depot, realized this and were aggressively promoting interior door replacement. However, they were not organized to meet the needs of the target market in a cost-effective manner. The franchise company had discovered and perfected the “do-it-right” approach for this market, and actually welcomed competitive bids from the Home Depot and other large home improvement chains. In my estimation, all of this bode well for home improvements in general, and this franchise company in particular.

TOTAL INITIAL FRANCHISE INVESTMENT
The franchise company estimated initial franchise investment between $127,00 and $180,000 in its Franchise Offering Circular. Turned out, I came in below the low end of the range. Including the $20,000 in franchise fees and the $78,000 I used against a home equity line of credit, our total investment was just under $100,000. Incredibly, this was enough to get the business operational AND reach the critical break-even point where cash flow paid all the bills. As discussed in the other franchise article, reaching the break-even point in many businesses can take a year, two years or more.

Getting operational happened fairly quickly. From the time I signed the franchise agreement at the end of May, 2002, secured the real estate in mid-July, 2002, completed improvements then training in August, 2002, and began operations like a rocket in the first week of September, 2002, about four months elapsed. We hit the break-even point in mid-October, 2002, just six weeks after operations started, and began to accumulate an ever-increasing balance in the business savings account.

When I sold the franchise in September of 2003, our interior door replacement business was rocking and rolling. Residential home owners negotiated for position on our six to eight week waiting list to get their old, ugly, flat interior doors replaced with new raised-panel, designer interior doors and shinny lock sets. The new owner paid $236,000 for our franchise, and I received $235,000 after escrow fees. Subtracting our $100,000 investment left a tidy $135,000 profit. Not bad for operating the business exactly one year, and this didn’t include operating monthly income before the business was sold.

REAL BUSINESS
I operated a retail business with a storefront, as opposed to a “work out of your home” operation.

FRANCHISE MANAGEMENT EXPERTISE
The management team of the franchisor had no past achievement and experience in operating a franchise company. They had just started the franchise company and were learning on the fly. That was definitely a major risk. However, I’d given them detailed seminars on how to operate a franchise company and manage franchise relationships based on my twenty-plus years of franchise industry expertise, and had every reason to believe they’d follow my advice. And, because I was their very first franchise, I also believed they would do everything it took to make me a success. My goal was to develop the first franchise from scratch, build it up, then either develop other franchises for them, or sell out – depending on what happened in the franchise relationship. I opted to sell out.

NORMAL WORKING HOURS AND DAYS; SUFFICIENT INCOME LEVEL – FRANCHISE PROFITS AND FRANCHISE PROFITABILITY
The nature of this business was a normal five-day, forty-hour workweek. Our business hours were 9A to 5P, Monday through Friday initially. After talking with the owner of the second franchise in early 2003, I discovered and copied his idea of a forty-hour work week spread over four, instead of five days.

Although this meant our employees needed to work four ten-hour days, they were very receptive to the idea. By starting on Monday and getting all door orders for the week installed by Thursday, everyone had a three day weekend every week, not just on an occasional holiday. Of course, I didn’t have to work ten hours a day. I arrived by 10 a.m. and usually finished by 4 p.m. – Monday through Thursday. Supervising four employees, working 24 hours a week and having 3-day weekends off every week – try finding that in another franchise!

What about the financial picture? Let’s take June of 2003, the tenth month of operations when I started interviewing a number of interested buyers. Sales were $47,000 less expenses of $35,500, left an income that month of $11,500. Of course other months varied, and the business was still in the start-up development stage operating with only a single crew of four employees – but you get the idea. Using the results for June and multiplying by twelve for an annual result, I’d entered financial performance territory only enjoyed by a select group in the entire franchise industry.

MINIMUM NUMBER OF EMPLOYEES
Remember my key question here: can you operate the business with six or fewer employees? When we started business operations in September, 2002, we had two employees. A month later, we added another. When the business sold a year later, our crew consisted of one part-time and three full-time employees.

LEASING AND LOCATION
Our interior door replacement business operated from a low rent commercial business zone, so high square foot rent and triple net leases were never a concern. The 7,200 square foot warehouse and retail showroom we settled on in San Carlos, CA, with rent starting at $0.65 per foot the first year, seemed almost too big (and expensive) initially. Cutting a rental check to the landlord for about $5,000 every month, by far the biggest initial operating expense, made my heart race while I thought “is this whole thing going to work and how long will it take to reach the break-even point?” But, as things turned out, our location was perfect, sales were never an issue, and we hit break-even just six weeks after operations started.

Due to the size of the facility and nature of the interior door replacement business, three crews were possible and bringing them online, one crew at a time, would double then ultimately triple sales. Also, because we were the first to enter the franchise system, we selected the very lucrative, exclusive territory that stretched from Palo Alto, CA all the way up to San Francisco, CA. Although we never expanded the business beyond a single crew, these “next steps” in the evolution of the business in such a prime territory were strong selling points. The new owner of our franchise ultimately took the next steps and with three crews enjoys weekly sales of $30K to $35K – which is over $1.5 million per year.

IMAGE AND LIFESTYLE
I didn’t need to flip burgers, scoop ice cream or clean restrooms. As a franchise co-owner, my principal job was creating and maintaining client relations. I placed ads designed by the franchise company, responded to customer phone calls, set up appointments, did estimates and sent out contracts. A lot of my working time was spent driving to customer’s homes, meeting with them over coffee, taking measurements of all their interior doors, going over the options and explaining our one week production cycle – picking up their old doors on a Monday and installing the new doors by Thursday.

Back at the office, I’d enter the estimate information in our computer and generate a contract proposal. Then I’d email or fax the contract to the customer and wait for their deposit. About 70% of the proposals turned into jobs. Customers called back, gave me their credit card billing information, faxed in the signed contract and I scheduled their production week. By the time I sold the business in September of 2003, residential homeowners negotiated for position on our six to eight week waiting list to get their interior doors replaced.

I also ordered the new doors, lock sets, hinges, paint and accessories. Finally, I paid the bills. It was a very efficient business, great cash flow, no billing and no waiting for payment. As I look back, I saw some very nice homes and met some very interesting people. The pickup, production, painting and installation process was handled directly by our employees under the supervision of our contractor, so I wasn’t involved in this aspect – although I did go out with our crew for about three months picking up and installing doors. That way, I understood the process firsthand, and this helped considerably in knowing how to bid jobs and cover contingencies in the contract.

TRUE FRANCHISE VALUE

I knew going in this franchise investment was not with an established ‘blue chip’ franchise company. After all, I’d purchased their very first franchise, becoming the ground breakers, the pioneers – willing to accept a much greater degree of risk than other franchise buyers. In return, I expected an adequate level of support from the franchise company. Virtually every new franchise company gives not only adequate, but extra support to its first franchise to compensate for that franchisee’s help in pioneering the new franchise system and the additional risk they’ve assumed. There’s also a self-interest in providing extra support – the future growth of the franchise network hinges on the success of the first franchise.

The ultimate test of franchise value came in November of 2002. I was en-route, driving our box van, jamb-packed with doors, power tools, lock sets, hinges, etc., headed to our biggest installation job yet, with our contractor, Scotty, who supervised our team and was our franchisor-approved manager. Everyone else was back at the shop, frantically cutting, sanding and painting the rest of the 100-plus doors scheduled for other jobs that week.

Knowing we had taken on the busiest week of our fledgling business, contractor Scotty complained all week about his wages, saying he wasn’t being paid enough. I’d explained, numerous times, our cash flow wouldn’t support any pay increases at the moment, that he’d only been working for me a little over two months, and his pay was exactly what he requested when I hired him. Scotty wasn’t listening and his complaints continued during our drive along El Camino Real to the client’s house. We were stopped at a red light, waiting to make a turn when Scotty abruptly announced “I’m out of here, I quit.” Opening the passenger door, he jumped out, and walked quickly down the sidewalk of El Camino Real, leaving me stranded in a van that’s a bit larger than a UPS delivery truck. Scotty believed he was indispensable and his theatrics were nothing but a hardball, power play for money.

Looking back at all those freshly painted doors in the van, I knew there was no way one person could install them. I completed my turn, pulled over, and called our shop with my cell phone. Our main door cutter and best employee, Brian, confirmed what I already knew. He could leave and meet me for the install, but that would throw off our entire schedule for the week.

Then, I remembered something important. “That’s why I bought a franchise,” I thought to myself, “we’re in business for ourselves, but not by ourselves.” Surely the franchise company would know exactly what to do, and help us, their very first franchise, deal with a problem that could cripple or kill the new business. They were just a short twenty-minute drive away, had multiple crews, etc. I called the founder, Mr. Interior Door.

The first thing Mike said, after I’d related my predicament was: “Do you think Scott will start a competing business?” I assured him that wasn’t even remotely possible. Starting a door business usually cost upwards of $350,000, requires a sizeable warehouse-showroom, power tools, delivery van and other things. Scotty, besides his personal tools, had no assets. He’d even moved into our warehouse from day one so he didn’t have to pay rent and lived paycheck to paycheck.

I quickly redirected Mike to the purpose of my call and asked for his advice and H-E-L-P. Perhaps a couple of his door installers for the rest of the week, at my expense? Answer – no. What about one person for the rest of the day? Answer – no. What about one person for just a couple hours? Same answer – no. Incredibly, Mr. Interior Door said he couldn’t spare even a single person (including himself) for a couple hours to help us out.

So, no help – but what about advice? Mike’s only advice: call all our customers, including the one I was en-route to, tell them we couldn’t make it this week and re-schedule all jobs forward a week. Since we’d already booked other jobs over the next two weeks, this would have been a disaster, not only to our cash flow (payroll, rent and supplier bills were due that week) but also for our customers who’d already scheduled time off work to be at their homes on the scheduled dates.

That’s when I realized we were in business for ourselves . . . and by ourselves. After thinking things over in the silent van, I called the shop and told Brian to meet me at the customer’s home for the installation. I figured at least we’d collect $4,000 doing this job and just have to see about the rest of the week. By the time Brian and I finished, the day was over. We arrived back at the shop at 4 p.m. – quitting time for our construction workers. Our door jobs for the next day were not even close to being finished. The crisis was finally upon us – should I follow Mike’s advice, call all our customers and try to reschedule for the following week?

I decided on a different approach. I held a little meeting, explained the situation, and asked our employees if they’d be willing to work overtime, so our new business wouldn’t go out of business. I also fully realized our employee’s concerns. They’d been working very hard that week to help us achieve our ambitious goal. Our team leader, Scotty, was history, and they all had families and responsibilities at home. Under normal circumstances I’d be up the proverbial creek without a paddle.

MANAGEMENT STYLE TO THE RESCUE
From the very beginning I treated our employees like members of a family. It was a very extended version of theory “Y” management style I’d studied in my graduate business classes. Everyday, I bought lunch for all employees and we ate together, discussing what was new in their lives as well as exchanging door stories. I also provided soft drinks, coffee and snacks throughout the day at the shop. On birthdays, I’d take the person out to a movie of their choice and dinner afterwards.

Luckily, I didn’t have that many employees, but every month saw an ever-increasing total for these benefits on our profit and loss statement. I questioned myself about it, thinking Mr. Interior Door only provided employee meals once every couple months for a special occasion. But I realized if some day I really  needed them, they’ll be there for me.”

This management style kept the business in business and on track that November. All employees immediately agreed to work overtime. I ordered pizzas for everyone for dinner and they worked from 5 p.m. until 1 a.m. the next morning. This dedication repeated itself over the next two days, which is nothing short of incredible, given they all had to report back to work at 7 a.m. each morning. We completed all jobs scheduled for that week, collected our money and all customers were very satisfied. By the next week, the business was on track, humming along, and strengthened by overcoming the adversity.

SUMMARY
Looking back, I happened to be in the right place at the right time, and was willing to take a calculated risk. I didn’t rush in, took a lot of time evaluating many factors, and kept emotions out of the franchise investment decision – avoiding the three mistakes made by most franchise buyers.

It was definitely an effort getting the business established, finding the right location, the right workers, and navigating a new business on my own. But the challenges were a learning experience, and overcoming them was very rewarding. Although I’ve advised hundreds of individuals and firms about the in’s and out’s of franchising, the insights gained and lessons learned in operating my own franchise and interacting with the franchise company retooled my knowledge of franchise relationships.

© 2003-2008, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved

For more information, visit the Franchise Foundations website

Kevin B. Murphy, Franchise Attorney, MBA – Mr. Franchise

Tips for Investing in Real Estate

Beginning a hobby or career in real estate investing doesn’t have to be so complicated or such hard work if you will only begin with what you have, right where you are at this moment.

Look for someone who really needs to sell their home and solve their problem. One of the fastest solutions if they are about to lose the house is to take over their payments on a subject-to contract. By giving them some walking money, they can afford to move and still have the cash to rent another home.

Then, clean up the property, lease it out to a future buyer on a rent-to-own basis which is called a Lease/Option. You get to collect an up-front, non-refundable deposit. Three to five percent of the future purchase price is a good figure to shoot for. You can actually do this every month and make some additional cash, or concentrate on this method as a full time lifestyle.

Have the renter/buyer sign a contract. You pocket the difference between what you’re paying the original owner and the amount you’re collecting from the new renter/buyer. The spread is higher on nice, expensive homes in great neighborhoods, so don’t be afraid to search in these areas.

This is a good method of collecting extra cash flow every month. There is no limit to the number of these deals you can do other than your time and effort.

Call on every “For Rent” ad in the local paper and just ask if they would be willing to sell the property in a couple of years if you sign a long-term lease. If you get a yes, negotiate a fair purchase price, sign a contract and find a renter/buyer. It really is that simple. Of course, you want to have a lawyer check out the contracts on the first deal to protect both parties.

Try to get at least $150 more per month than you are paying. Also get a minimum of $1000 above and beyond what you have paid out as the option deposit. You don’t want to be working for free, do you?

Let’s look at some figures from actual lease/options. A couple were behind on their notes because he lost his job, and she didn’t make enough to pay all the living expense. The stress was causing marital problems and they wanted to sell, but the house stayed on the market for six months with no takers.

They were getting desperate when a neighbor mentioned the situation to her church group. One of the group’s members had a son who was looking for a house that could be leased with an option to purchase in a few years. He and his wife didn’t have a lot of money for a down payment, but they knew that buying was better than renting.

After looking at the property, they decided it would be a perfect first home if they could manage the financing. The couple offered $1000 as a non-refundable option deposit, if the current owners would give them two years to qualify for a new mortgage. The timing was right and the current owners accepted the offer. The monthly payment they agreed on was $200 less than similar house rentals in the area.

Both couples were happy and they signed contracts for the deal the next day. The new couple didn’t even move in. They saw an opportunity to make some quick cash and a good monthly cash flow, so they lease/optioned the house to another couple for $5000 down with payments that were $300 above their obligation.

If this new couple closes on the deal in 1 year, they will have earned $5,000 up front and $3,600 over the course of the year in monthly cash flow. By the way, the sales price was $12,000 higher than what they had agreed to pay the original owners. Added up this equals $20,600 for just a few hours work.

These deals exist in every town in the world. You can do these until you build up your bankroll and monthly cash flow. There are no geographical limits. Travel the world doing deals, living where you please and life is no longer on a budget.

John Long
http://www.articlesbase.com/non-fiction-articles/tips-for-investing-in-real-estate-50755.html

Why Buy Home Insurance?

If you do not own your home out right then the mortgage or lean holder does and they will insist that their investment is secured through a home insurance policy. If you do not provide one then they have to right to choose one at their discretion without any regard as to rate or policy cost.

So what are the advantages to having home owners insurance?

First and foremost home insurance protects both the house and your property in the event of catastrophic events. The policy could be set up to pay out a cash value for the home depending on its current market value or it could replace the house exactly as it was no matter what the current cost is to rebuild. Secondly any and all property that you had in the house at the time of the incident which was destroyed or lost can be fully covered and a cash settlement awarded so that these items can be replaced. The policy can be set up so that any ‘specialty items’ such as collectables (comics, figurines, etc.), jewelry (family heirlooms, expensive pieces) or art work can be replaced or repurchased.

If you have a rental property or rent (or lease) yourself you can also protect your property from loss due to theft, fire or negligence (water left running in the apartment above that soak through to your apartment).

Home insurance also protects the policy holder against damages to other individual’s property or person.

What can affect the price of the home insurance policy?

What construction material of the house. Wooden framed houses usually have higher cost policies than those constructed of brick.

How old the house is- Insurance companies may not even insure a house that is too old, or at best, only offer a policy that has severe limitations attached. On the other hand, newer houses often qualify for discounts and full replacement coverage.

What is the available local fire protection like? Things such as the distance of your home from the hydrant and the quality of the local fire department play a significant part in the classification of the policies fire protection.

Both the amount of coverage you want and the amount of the deduction both play a significant role in the cost of your home insurance. The more you want covered and the less deductable you want to pay, higher the monthly cost of the policy.

Buyer purchased safety measures can reduce the cost of your home insurance policy. Most companies offer substantial discounts if the policy holder installs a fire and/or burglar system. Also some home improvements can both add to the value of your house and simultaneously lower the insurance policy rates.

Home insurance can be tailored to fit the particular requirements of the buyer and before any decision is made it is strongly advised to shop the market for the best rates for the coverage you want. Remember not all insurance companies offer the same protection options.

Singhania

How Listening to the Guru’s Almost Got This Investor Thrown Into Jail

I thought I’d heard it all when it comes to real estate investing stories until I heard this one!

I was speaking with one of my real estate investing student’s the other day and he told me a frightening story.
Here it is, in his own words:

“When I began investing in real estate
he was somewhat clueless! Granted, I had definitely done my homework by researching everything related to real estate that I could get my hands on, but I was still desperate to do deals with little real world experience. The only thing I really knew was what I had read in the books and heard on the Guru courses I had listened to. A lot of this information is pretty good. As a matter of fact, most of it is pretty good. However, some of it needs to be taken with a grain of salt.

For example, one of the first deals I ever did was a preforeclosure deal and I tried to apply one of the techniques I had learned from a pretty famous Guru. I will leave his name out, because it is unimportant.
Before we go any further with the story, let me just say that most of what I have learned about this technique before I tried to use it as well as after I used it point to the fact that it probably is not illegal. If it is illegal in any way, it is possibly a civil situation…..certainly not criminal! However, what counts is that the detective who looked at the case did in fact think it was criminal.

So, here goes……

The deal went something like this: I found a motivated seller from one of my marketing campaign who was in foreclosure. The seller had a little bit of equity but was 2 months behind on their mortgage payments. The only way I could see to make a deal out of this (remember, I was very new to investing) was to find a way to get control of this property and keep the loan in their name. So, using one of the techniques I learned from a Guru course, I talked the seller into giving me a lease on the property with an option to purchase it anytime I wanted within the next 2 years. I agreed to use my money to reinstate the loan if she would consider that money the option deposit.

The next thing I did was rush right out and start advertising that I had a house for sale and I would offer owner financing on it if someone had $7000 to put down. With that 7k, the monthly payment was going to be around $1300 or so per month. In other words, the buyers down payment got them in and their payments kept them in. That was it, no credit check or job verification required.

As you can imagine, my phone started ring right away with people who wanted to buy this house. So the first person to show up with 7k plus the first months payment got the house. I gave them a contract for deed, which is basically owner financing without formally transferring the deed into the buyers name, and then I took 2k from the buyers down payment and reinstated the loan. The paperwork said that the buyer had to refinance within 18 months or they lose the house.

This worked great for the first few months.
Here’s the short version of the rest of the story…..the loan got reinstated by me and then the original seller decided she wanted her house and equity back. So she hounded me and hounded me to try to get the house back. Of course, that just wasn’t going to happen. Finally, after the new buyer had been in the property for a couple of months, the seller came knocking on the front door while the new buyer was having dinner with her family from out of town…..showing off her new house!

OUCH!

So the seller and buyer decided that I must have done something illegal since the deed wasn’t actually in my name and yet I was “selling” the house to someone already. They ended up going down to the police department and talking to a detective who sided with them. The detective called me and told me that if I didn’t refund the down payment and walk away from the deal then the seller and buyer were going to
press charges on me.

WHAT? I hadn’t done anything wrong! I had a legal option to purchase the property and if/when the buyer went to refinance the house I was going to exercise my option. Legally this should be fine. However, the detective thought different. To make matters worse, the new buyer went and got an attorney, Pro Bono (free).

At this point I decided it just wasn’t worth it. I took some money I had from other deals I had done and refunded the buyers money. She then ended up buying the house from the owner at a HIGHER price than she would have with me.

WOW…smart move! Oh well, you win some, you lose some. I certainly learned a couple of valuable lessons from this experience.

First, you should never do anything without disclosing it to everyone.

Second, you should question everything you learn from Guru’s or anyone else for that matter.

Third, you should always protect yourself and everyone else involved in creative deals like this one by having a valid and proven exit strategy.

While what I did was probably not illegal (criminally), it could have turned into a pretty big mess. Let’s say I didn’t get thrown in jail because the detective was wrong…..I still would have ended up getting sued. Anyone can sue anyone for anything these days. Plus, if the buyer would have forced the issue and tried to refinance the house, I wouldn’t have been able to uphold my end of the bargain. I didn’t have the cash to close my end of the deal at the time and even if I would have, there would have been a chain of title issue which would have caused the deal to fall apart. In other words, the underwriter doing the loan for the new buyer would have seen that I only legally owned the house for a few minutes and they wouldn’t have funded the deal.”

So, the moral to this story is, of course, be very careful who you take your advice from and always do your due-diligence before you go jumping into your first deal. Get a teacher you know you can trust and your investing career should be in good shape.

Keep your eyes open for my next email. I will share some more fun and exciting real estate lessons that will hopefully help you toward a successful career as an investor.

Sean Flanagan

How Much Should You Sell Your House For?

Quite possibly one of the most difficult things to do when selling your for sale by owner home is to set a fair asking price.

(there is a free ebook: 101 Tips For Selling Your House,for you to download,that helps you set a price for your house, from a link at the bottom of this page).

This seems to be the case because of the wavering definition of what exactly is “fair.”

It is quite easy as well as understandable to place a higher value on your for sale by owner home than what is expected, simply due to the fact that it is your home; the home you have cared for and lived in for however long of a time period you have lived in it.

You may have replaced the kitchen cabinets or retiled the floors or even have had new carpet put in.

Other things that you might increase value in your for sale by owner home would include the addition of a swimming pool or a nice flower or vegetable garden in the backyard.

Unfortunately, all of these things mean nothing in the grand scheme of setting a fair asking price. Well, they may not mean absolutely nothing at all but they will not play much of a role at all in the price that your house demands.

The single biggest reason for sale by owner homes fail is because the owner has set an asking price far above what other houses in the neighborhood have sold for.

This is the main determining factor in deciding how high to set your asking price. As was mentioned before, for sale by owner home additions are nice, but simply because the addition was what you had always been wanting does not necessarily mean that the potential buyer will agree with you and want to pay extra for what you felt was a luxury item.

The swimming pool example holds up well here. Someone with no children and who is afraid of water will not want to pay extra money for something that they consider to be a liability. For these reasons, it is important to check out the previous selling prices of homes in your neighborhood.

If you require assistance in this matter, it is always a good idea to enlist the aid of a real estate appraiser, however, nowadays; Internet databases make this task easier than expected.

There are a few other things to remember when considering the asking price of your for sale by owner home. It is important to consider all selling costs such as closing fees as well as to consider how much cash you want after the sale.

It is a bad idea to start with the amount of cash you want from the sale and work backward to get a price. This complicates the deal and can end up causing you to raise the price unnecessarily.

It is best to consider the fair market value of your for sale by owner home and in order to raise the price a little, you may want to either offer what is known as seller financing or allow the buyer to simply assume the mortgage payments to your for sale by owner for sale by owner home.

Seller financing is an option that should be used under the guidance of an attorney in order to draft proper contracts. A financial advisor should be involved as well in order to determine appropriate interest rates.

The asking price should be fair and accurate in order to avoid any unnecessary complications in the sale of your for sale by owner home.

If you follow the tips above, you will stand a good chance of selling your home quickly.

Geri Mason
http://www.articlesbase.com/real-estate-articles/how-much-should-you-sell-your-house-for-96158.html

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