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Get the Latest Snapshot On Realty411 Readers – Statistics from Our VIP Network

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Dear Realty411 Reader;

Thank you for following the Original Realty Investor magazine!

While others have attempted to copy our SEO, distribution route, and many other key elements of our core media business, Realty411 remains growing in popularity and influence, not only across the nation, but globally as well.

Recently, we compiled statistics from personal questions we asked members of our VIP Network.

Nearly 1,750 investors took part in the survey, giving us a glimpse into who the Realty411 reader is. We are excited to share our findings with you.

Discover why Realty411 is the most popular real estate investor magazine in the nation, and why investors from around the world visit our site daily.

Feel free to download our latest report, and tell your friends about Realty411, thank you! Our network has expanded greatly because our members share our resources with others.

How Investors Can Deal with Balloon Payments

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By Bruce Kellogg

Creative Investors needing to maximize cash flow and leverage will often finance an asset using a two-step mortgage that requires a balloon payment after a set number of years.

A balloon payment is a substantial payment due at the end of a loan, if it does not reset. The loan may be a mortgage, commercial loan or or other amortized loan. Two-step mortgages often allow borrowers who might not otherwise qualify for a traditional loan to acquire investment properties.

Thus is the caveat to this creative structure: It loosens leverage options, but increases risk.

Investors who forecast appreciation, rent increases, interest rates, or capital improvements incorrectly could be in trouble when the balloon note is due. Here are some important factors to consider before financing a property with the balloon-payment structure.

“Amortizing” Versus “Balloon” Notes

An “amortizing” note is one where the principal amount is paid off over the term of the loan. A “balloon” note is one where the payments are not sufficient to retire the debt, and an outstanding balance is due at maturity.

What Is The Problem?

The problem arises when the borrower does not have the funds necessary to pay the “balloon” amount when it comes due. Oh, oh! So, here are some ways to deal with that!

Refinance the Property

The first recourse for an owner who wants to keep the property is to refinance either the property itself, or another property in the portfolio. This is a good approach as long as financing conditions are favorable. If conditions are not favorable, other approaches will need to be considered.

Sell the Property

If the owner does not care to own the property any longer, they can sell it and have the sale pay off the loan. Or, they can sell another property to pay off the loan. If conditions are not favorable for selling, again, other approaches will need to be considered.

Renegotiate With the Lender

This is not an ideal approach because the borrower is negotiating from an inferior position. The lender “has the upper hand” because they can always foreclose. So, the borrower should offer the lender a monetary “inducement” for an extension, either a fee, an increasein interest, or payment amount, or both. But, it gets the job done! (Unless the lender says, “No”!)

Protective Note Terms

The best way for a borrower to protect themselves from becoming in an uncomfortable position is to negotiate protective terms in the note in the first place. One might be called a “rollover clause” or an “extension”. Here, for example, the borrower gets a time extension, say two years, for a 2% interest rate increase. This must be written in the note as one of its terms.

Another approach is to convert the note into an amortizing one when the balloon payment is due. Again, these terms need to be negotiated when the note is written and included with the other terms. In some cases, lenders do not need a cash payoff and enjoy receiving reliable note payments from a proven borrower.

Bring In A Cash Partner

If the above approaches aren’t working, the borrower can bring in a cash partner. This basically involves selling a partial interest in the property for cash to pay off the “balloon”. An escrow is recommended with title insurance, and an attorney should draw up an agreement between the parties, who might not be familiar with each-other.

Return the Property to the Lender

This is the least-desirable alternative in most cases. It involves giving up. If it’s going to be done, it needs to be done right, with an escrow, deed with a “Deed-in-Lieu-of-Foreclosure” recitation, title insurance, and transfer of any rents and deposits back to the lender. The lender should cancel the note, and return the original to the borrower. The lender should also record a “Full Reconveyance” in the escrow to clear the title.

File Bankruptcy

This is an alternative, but a risky one, and should only be used as a last resort. The day a bankruptcy is filed, a 30-day “Automatic Stay” of all collection actions is established. After 30 days, the lender can file a “Relief from Stay” request to foreclose on the property. There is a hearing, and in the case of homeowners the bankruptcy judge will urge the parties to work something out. In the case of investors, the “sympathy factor” is usually low because investors are considered to have resources and several years to handle the “balloon”. The lender is due the money, the judge is likely to rule. (i.e., no relief!)

Conclusion

A “balloon” payment is one of those things that isn’t a problem, until it becomes a problem. It is best to deal with it up-front, in initial negotiations, when the note is originated. During the term of the note, keep working to pay it off. If the due date comes and the payoff funds are not in-hand, find expert help. You’re going to need it!

Good luck!

About Our Contributor

Bruce Kellogg has been a Realtor® and investor for 36 years. He has transacted about 500 properties for clients, and about 300 properties for himself in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches. He is available for listing, selling, consulting, mentoring, and partnering.

He Lost $50K Believing an “Expert”, Yet He Remains Hopeful

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Tens of Thousands Lost, But Southern California Investor Is Still Positive

By Linda Pliagas

Publisher of Realty411.com

Last week, I had the pleasure of speaking at a real estate club meeting in Los Angeles, California.

Normally, I shy away from speaking engagements, as we host many events nationally that when I’m home in Santa Ynez County, California, I become a bit of a recluse.

It’s not that I am not social, it’s just that when I’m home I want to spend time with my family — plus, it’s so beautiful where I live, it’s honestly difficult to leave my office when I’m home! Nevertheless, I wanted to support the club leader, so I decided to make the five-hour drive to share my knowledge, and I sure was glad that I did.

I met an Asian immigrant (“AJ”) living in Los Angeles. He is in his late 40s; his real estate investment horror story impacted me greatly. The investor’s eyes were glistening as he recalled the disappointment with his first-time purchase investing in homes out of state.

AJ mentioned a company I am familiar with, one that used to speak often at numerous events around the country. He shared with me how he met them at a Southern California event. He was drawn to them because they added many spiritual quotes into their presentation.

One of the company owners claimed to also be an ordained preacher, which lowered the investor’s guard.

“I believed everything they told me,” he said, adding: “They said they would help me renovate the properties if I bought them — that it would be so easy.”

The company sold the investor a tape of four single-family REOs for $50,000 cash, all spread out about the country. The investor purchased them based on the information given to him during the presentation.

Only after the purchase did AJ discover that all the properties were in dilapidated condition and uninhabitable. They were also in areas where most people would not even want to drive through, let alone own real estate in.

“As soon as I gave them the money, they stopped returning my call.”

It’s a story I have heard much too often: Investors meet turn-key providers who promise them the world only to then sabotage their success by abandoning them after the purchase.

AJ did not expect to find that his properties were uninhabitable. He knew he was buying “fixers”, but never imagined he would find one of the properties leaning, and others with large holes in the floors. The properties he purchased we not “fixers”, they were essentially tear-downs.

When the company came back a year later to speak at another event in California, AJ went to confront them. Instead of receiving advice and tips, he was belittled. The investor chose to walk away from the properties shortly after that.

In the past 11 years of operating Realty411, I’ve heard of numerous companies that sell REO tapes of single-family homes to investors, and I always wondered how things turned out for them. Apparently, one did not fare so well.

Don’t Expect to Run a Marathon Without the Proper Experience

The lesson that AJ learned about purchasing REO properties is one that needs to be told.

When he had confessed to me what he had done, I immediately reprimanded him: “You should never buy properties out of state sight unseen.”

His response: “I didn’t know. I was knew and trusted what they told me.”

It is especially important for new or investors just starting out to be careful. Always do your due diligence, not just on the property and city, but on the company peddling the deals. Some questions to ask yourself, include:

  • Are they licensed brokers?
  • Do they have any complaints against them?
  • Are the properties in areas that are losing population and jobs?
  • Do the company owners have any current or past lawsuits?
  • Have any of the company owners been to federal prison?

The amount of misinformation and actual fraud in this industry is very real and a high level of due diligence is needed. Unfortunately, in media we often don’t hear about the horror stories until after because the companies that deceit investors put on such a reputable front.

AJ really stirred emotion in me that I have not felt in a long time. It brings back memories of when my husband and I were the victims of online fraud years ago. We lost over $10,000 right before Christmas, and it was one of the worst experiences of my life. Needless to say, our family didn’t enjoy the holidays that year.

I know what it’s like to lose a lot of money so scammers can benefit from a windfall. I remember the shame I felt because I told myself: “You should have known better.” Here I was a college-educated JOURNALIST, yet I fell victim to fraud!? I felt like a complete and total loser.

But I was not to blame, and neither was AJ.

As human beings we all want to trust. We all want to believe in the goodness of humanity. And yes, we do believe others who tout their success, and who claim that they now want to help others.

But I’m here to tell you: DON’T BELIEVE, VERIFY!

The facts don’t lie, get the numbers. Do your due diligence IN PERSON. If you’re planning on buying properties in another state, invest the time and money to actually VISIT and walk the property… before you sign your name on the dotted line!

Trust, me there are properties I wouldn’t take even if they GAVE THEM to me.

News flash: Properties can be liabilities too, not just assets.

Don’t get stuck with the hot potato that others are trying to unload.  Some real estate knowledge arrives with time, don’t expect to run a marathon if you’ve never trained for one.

Get the proper education and knowledge before taking on the huge risk of buying fixer-uppers thousands of miles away. We suggest also networking with people from the area, online and in person, to ensure you want to invest time, energy and resources in that economy.

I hope I did not deter you from your investment goals, this was not meant to do that. I simply want to ensure that everyone takes on that extra caution of care needed when purchasing properties from someone they don’t know and may never see again.

On the other side of the spectrum, there are many amazing turn-key providers out in the marketplace, ones who truly are in partnership with out-of-state investors. Our business dealings with out-of-state real estate companies and property managers should be that of an equal partnership because long-distance landlords invest billions into cash-flow markets around the nation.

It may not be as easy for residents in the local area to scoop up available properties, but it is easy for a middle-aged, first-time investor living in a Coastal market, who is swimming in hundreds of thousands of dollars in home equity, to spend $50,000 on a rental home or mortgage note in the Rust Belt.

But remember: Just because you can do it, doesn’t mean you should pull the trigger without proper research.

AJ is still hopeful. He learned a valuable lesson, but remains in the game for the long-term. The sting of losing tens of thousands of dollars due to blind trust still hurts, but he is channeling the pain to propel him forward with a balance of determination and caution.

Read more informative articles, tips and strategies by subscribing to Realty411 or REI Weath magazines today.

We want to help investors avoid expensive mistakes, please call us if we can refer a real estate turnkey provider, broker, property manager, private lender, or other service associate: 805.693.1497. Disclosure: We are a media company whose mission is to serve investors. We do not take referral fees from companies we recommend. Some companies may be active or past sponsors of our publications, which will be disclosed.

Why Private Funds Are More Attractive Than Ever

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Featured Article by Fuquan Bilal

Private funds are becoming increasingly attractive to investors. As more understand their superior benefits, and the necessity of this type of asset in their portfolios, both individual investors and institutional ones are weighting their portfolios more heavily with them.

 

Avoiding Volatility

One of the big reasons for the shift to private funds from publicly traded REITs and the stock market is avoiding market volatility. It’s no secret that those publicly traded vehicles have been trading at incredibly high multiples. Many are speculative gambles at best and we’ve already seen them begin to tumble. One recent expert forecast projects an 80% chance of a new recession within the next 36 months.

Even those stocks which might be close to being priced right, will almost invariably suffer with big selloffs. It just gets emotional. And the selloff gets even more irrational than the rise.

Some of us invest because we want gains and growth. All of us invest for security. If you were on a train and knew there was an 80% chance the brakes were going to go out after the next stop, you’d probably get off right? Well, losing your entire life’s work and investments is an incredible tragedy too. Especially when it is avoidable.

If we are investing for income, or wealth preservation, we want those dividends and capital to be there when we need it. The thing is that we never really know when we’ll need it.

We may not be able to work anymore after tomorrow. Or we could have another 20 years. We don’t know. What we do know is that we need some balancing of this volatility, so that when some of our assets slow in performance, others are making up for that.

The Wrong Keys

Another big shift in investors recently is from direct investment in single family homes and turnkey investment programs to private real estate funds.

Even most of the biggest public funds have realized they really don’t have what it takes to manage these portfolios themselves. They have passed a lot of those assets on, and are letting those with better systems and experience and local expertise handle it.

Turnkey rental property investing spiked over the past few years. So many people who didn’t even think of real estate investing until 2008 are now self-proclaimed gurus, and are pushing turnkey properties, without really having sustainable systems in place.

A lot of these buyers are finding out these programs weren’t the keys to financial success they thought they were.

You’ve got to make sure the person behind the investment can really deliver on those promised yields. That they have a plan for what’s next.

Many investors are just finding it makes more sense to invest in a fund that can give them the same promised yields, without the risk and headache that comes from directly owning these properties.

Self-Directed IRAs

Then there are millions of Americans who are waking up to the fact that they now have the ability to direct their own IRAs and retirement investments. They don’t have to abdicate that, and leave it to chance or a broker who doesn’t have their best interest at heart.

Some have $100,000 in these accounts. A few might have as much as $300M. They can self-direct their investments into private funds with good risk-reward balance and nice yields.

Diversification

This is not about an exodus from stocks and fad gurus. Someone will still likely want to own a share certificate for Apple just so they can pin it on their wall. What it is really about is diversification, and creating a buffer against the future.

If you can pick up great yields and gains in the process, that’s awesome.

The smart money is finding these things in alternative assets. Especially private funds which are already internally diversified. For example in tax liens, mortgage notes and real property. That model offers great simplicity, with all the other benefits they need to check the boxes, like tax breaks.

What are you investing in, and why?

For more information:

Find out more about investing in secured debt and real estate, visit NNG Capital Fund

Read additional articles about private money, join our complimentary VIP Network, CLICK HERE

Realty411Daily.com Helps Busy Professionals Stay On Top of the Most Important Realty News of the Day

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Santa Barbara, Calif. – Every day Realty411.com‘s editorial team, comprised of reporters and editors based around the nation, ensure the most vital headlines in the real estate industry, as well as their own specialized articles, are gathered in one place: Realty411Daily.com

Since 2007 California-based Realty411.com has provided real estate information and resources to newbie, as well as seasoned investors, through their print and online magazines, nearly a dozen websites, and live conferences and expos around the nation.

Realty411.com’s mission is to educate and empower people to invest in real estate. Their publications also reach real estate professionals with news and information designed to increase their business.

Recently, Realty411 wrapped up production of both their print namesake publication, as well as their digital REI Wealth Monthly; both publications equal over 200 pages of the latest insight, strategies and wealth-building tools that individual investors need to begin, maintain, or expand their portfolio.

The company also completed hosting three events in the month of November and reached their fans in person in Las Vegas, Nevada; as well as Northern and Southern California — Pleasanton and Marina del Rey.

Realty411, known in the REI industry as the original realty investor magazine, was founded in 2007 in California. The company has produced dozens of conferences annually across the nation. These events have united thousands of investors nationally, allowing the company to showcase their print and online publications, as well as their corporate and educational sponsors.

Realty411‘s newest issue featuring Charles and Lena Sells from The PIP Group. Their company focuses on purchasing properties acquired through the tax sale process. This lucrative and creative niche is gaining massive popularity because of the opportunity for individual investors to buy properties at discounted pricing.

Additionally, Realty411 also just released their newest monthly REI Wealth digital issue featuring Justin French with SDIRA Wealth.  The company was founded by the creators of a revolutionary retirement investment strategy. French and their team use real estate and finance as a way to accelerate and increase returns for their clients utilizing the SDIRA Wealth Solution.

Besides their double publication drops this month, hosting a dozen events this year, and the production of a regular investment podcast, Realty411 recently launched Realty411Daily.com, an ever-changing media website spotlighting the most important real estate news affecting the industry.

Realty411‘s editorial team chooses vital headlines from their growing global contributor list that is then highlighted on their site, and sent out via email to subscribers daily.

The founder of Realty411.com is Linda Pliagas, an entrepreneur based in Santa Barbara County who spent most of her adult life in Los Angeles. Pliagas has a journalism degree from California State University, Long Beach, where she was the recipient of the Bobit Magazine Scholarship for creating her first national magazine while still a student.

Realty411.com’s founder is an active real estate investor. She has inspired and impacted tens of thousands of people to invest in real estate throughout her 20-year dual career in media and real estate.

CONTACT 411:

For more information, please call:

Kasey Barrett @ 805.693.1497

or email [email protected]