Archive for the ‘real estate debt’ Category

Security in Retirement with Fixer-Uppers

Monday, February 20th, 2012

Are you like me and never socked much money away for retirement? We are not alone. The Employee Benefit Research Institute’s Annual Retirement Confidence Survey found that pre-retirees (Americans between the ages of 55 and 65) greatly underestimate how long they are likely to live and how much money they will need in retirement.

Experts say that we need to change our mindset from “assets” to “income” in retirement planning. It’s not enough to know how much money we have in savings; we need to know how much income our savings can generate over time.

There is no better way to change our mindset and our portfolio from “assets” to “income” than by investing in real estate. If we invest wisely before we retire, and can have a stable of reliable rental properties that generate steady monthly income. We can look forward to a retirement that provides security instead of uncertainty.


Don’t rely on politicians to provide you with retirement security. If you want it done right, you must do it yourself.

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How to Get Money to Buy Rental Houses (Video)

Thursday, September 16th, 2010

During my interview with the inimitable Dan Ramey, at WBEX 1490 1490 AM in Chillicothe, Ohio, he asked whether or not people should be concerned about refinacing their house to make a downpayment on a rental house.

Naturally, people are nervous about making financial changes during a recession. But, refinancing your existing house to take down payment money out of your equity and buy a rental house is one of the safest ways to start investing in real estate. It’s the most common way that real estate investors use to purchase investment properties.

If you have a steady job and a good credit rating, now is a rare opportunity to get a loan in the 4% interest range. And, houses are selling at fire sale prices!

It’s a good idea to refinance a house that you have owned for a few years before reinancing to take some equity out of it.

Refinancing an existing property for downpayment money is a lot better than waiting until you have enough cash to purchase a rental house withouta loan. Having a loan gives you leverage, because you don’t have to use all of your own money, which could take 20 years or more, to save.

The great benefit is, after you have purchased your rental house, is that you have a stream of income that is in addition to your regular 8:00 to 5:00 job.

You can be laid off, or fired from your regular job, but you can never lose your rental property job!

Here is my new video that shows the process of putting your lazy home equity to work for you:

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Money for buying rental houses

Tuesday, August 10th, 2010

A good question came up today during my radio interview with Dave Kebler of WRNJ Radio in Hackettstown, New Jersey.

I was asked if it was now impossible to get a loan, either to refinance a house or to purchase a fixer upper rental  house.

The answer is no, it is not impossible to get a loan. Granted, it requires more paperwork and squeaky clean credit, but loan money is still available and at great 4.5% rates for 30 year loans.  I have taken out 3 loans in the last 12 months.

Is it worth it to take out loans for investment properties?

The economy is still as flat as Rush Limbaugh’s trampoline, but there has never been a better time to invest.  From the perspective of mortgage interest rates and low real estate  prices, this is a time of great opportunity.

When I was a Peace Corps Volunteer in Central America,  people would ask me if the streets of American were paved with  gold. I said, they’re not paved with gold, but they are paved with opportunity. And they still are.

Upcoming radio interviews

Aug. 11, 8:10 am, Mark Wayne show, WICH 1310 am, Norwich, Connecticut.

August 17, 6:50 am, Jason Mansmith show, WRPN 1600 am, Ripon, Wisconsin.

August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.

August 25 at 8:08 am,  I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.

Should I refinance my house to buy a rental house?

Tuesday, June 22nd, 2010

I recently received the following email from a student who is taking my free 7-week course.

It addresses the very topical issue of refinancing your existing  home, and taking out equity to purchase a rental property. Below is the question and my response.

From: Janet
Sent: Friday, June 18, 2010 12:12 PM
To: ‘Terry Sprouse
Subject: Re:7-Week Fixer-Upper/Rental House Course: Lesson 7

How does the refinancing work in this underwater market? i just bought a house in Jan, do i have to wait 10 years to do this? i am 50 now, should i wait till i am 60 to start doing this? sincerely, Janet

Hi Janet,

That’s a good question.

Everything depends on how long it takes to generate some equity in your house. And, of course, that depends on the situation that the market is in. Right now, as I’m sure you know, housing values are not going up very quickly. In fact, in many areas of the country, housing prices are going down.

So, in your case, all you can do is wait and see what happens. If the housing market improves again, you may be able to refinance sooner rather than later. But, until the equity in your house increases, you would not be able to refinance and buy an investment house.

Best regards,

Terry

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Usually you need to live in a house several years before you have enough equity to refinance and purchase another house. I lived in my house ten years before I took out the equity to buy my first fixer-upper rental house.

Another possibility it to find a partner with more equity in their house, or who has some cash, and to jointly buy an investment property.

***Warning! Shameless Book Promo Coming Up***

If you are new to investing, make sure you have a good inspection done of your investment property, and follow the safe steps for investing, as I discuss in my new, easy-to-follow guide for beginning investors, “Never Sell Your Home! How to Turn Your Home into a Rental House.”

Buying an investment rental house with the equity from your home is one of the safest and easiest ways to start a reliable new income stream.  But, timing and planning are everything.

I wish I had remembered that before I spilled spot remover on my dog, and he disappeared.

But in real estate investing, one of the most basic principals, like the law of gravity,  is that you must  have some equity in your house before you can take it out and use it.

You can’t rush things, or you’ll wind up with your dreams broken faster than a movie star wannabe, just off the bus from Kansas.

Review of "Real Estate Debt Can Make You Rich"

Sunday, January 4th, 2009

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Review of the book Real Estate Debt Can Make You Rich by Steve Dexter

While perhaps aimed at newer investors, this book also provides useful information for more experienced investors, and if you are doing fixer upper houses you will find it one of the better books on the subject.

I particularly liked the section describing “rate sheets”. Rate sheets are what lenders, like the author, use to set the interest rate that borrowers receive for their home loans. The more risk factors that a borrower has, the more points they have to pay, and ultimately the higher the interest rate.

The author has a table with a column of all the risk factors that are considered by loan officers, and a column of the points each risk factor will cost you. A few examples:

credit score below 620% = 0.5 points
non-owner occupied with 75-80% down = 2.0 points
loan amount <$100,000 = 0.5 points
loan amount <$50,000 = 1.5 points
manufactured home = 0.5 points.

The whole process is explained in a very understandable way.

The author writes in a style that is very accessible to the reader. He makes it easy for the reader to understand the process behind a loan, and describes how to improve one’s chances of getting the best loan for each individual’s needs.

I liked his point on the value of holding free and clear properties (no mortgages on them), and for rapidly paying down loans with appreciated equity from houses that have appreciated in equity over the years,and not from after-tax income.

The author provides a long list of useful web addresses in the Appendix that I found quite helpful.

This is a book well worth reading.

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