My Pinole Real Estate

1. REO/ Foreclosure

REO stands for Real Estate Owned and is a foreclosed property that goes back to the mortgage company after an unsuccessful foreclosure auction.

 2. Short Sale

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.

 3. BPO (Broker Price Opinion)

A BPO is like a Comparable Market Analysis (CMA). Banks pay local Agents to give their ‘opinion’ on how much a house would sell for, using comparable Sold, Pending, and Active listings.

 4. PMI

Private mortgage insurance is required by the mortgage company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.

 5. LTV

Loan-to-value is the percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower). For example: you purchase a home for $100,000 and you get a mortgage for $90,000. Your loan-to-value is 90%, therefore, the mortgage company would require PMI. 

7. ARM

Adjustable Rate Mortgage is a mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes. There is usually a cap (ceiling) on the amount to which the interest rate can increase.

 6. Negative Amortization

Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment, it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment. The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.

We all remember the way property prices shot through the roof. Those times of skyrocketing appreciation are over. Prices have now dropped precipitously around the country.

Because of the drastic price drop in all areas of real estate, owning rental property makes even more sense now. Most rental property can be purchased with cash or with 25% down under $200,000. Cash flow and rates of return close to 10% are easy to come by in this current buyers’s market especially if you are willing to purchase a property that needs a little improvement before you can install a renter. In the same way property values went up the past 10 years, RENTS will be increasing over the next few years!

Now is the time to own income-producing properties. Home ownership is difficult for many at this time. Due to the tight mortgage market and record numbers of foreclosures, our markets are starting to see a large amount of renters. Just as the housing market cycles, so does the rental market. We are currently in the beginning of the upswing in rental rates. Especially if you are willing to offer a home for rent to someone who has gone through a recent foreclosure, someone whose credit is not good, or someone on section 8, you have the ability to ask for slightly higher than market rates as these renters have a reduced pool of homes to choose from and will look for those code phrases when searching for a rental home.

Have you found yourself wishing you had bought more properties 10 years ago? Imagine how your life would be different if you had taken advantage of the low prices, and purchased more properties. Don’t make that mistake of inaction again by missing this next rise in the rental market!

1. Huge profits while demand and prices are low!

The lack of competition in the market right now allows investors to negotiate great terms, get lower prices, and find more deals. 

2. The right properties WILL Sell!

There has never been a larger demand for entry-level housing. By finding the Highest and Best Use of a property, investors can create large amounts of affordable housing. 

When we maximize the potential of a property, the future value of the property skyrockets. The secret is to acquire a property at the low “current value”, and THEN expose the Highest and Best Use or higher “future value”. Doing this creates affordable Entry-Level housing by adding density in areas with that potential.

 3. Rents are rising, Rising, RISING!

Smart investors will own cash-flowing rentals in the near future. Jjust as property prices soared over past 5 years, RENTS will be increasing over the next few years! 

The national market is creating a LOT of renters. With low purchase prices, and rising rents, cash flow has never been better.

 4. Sellers are very flexible right now

Right now, sellers have more urgent needs, and are more willing to agree to things like Seller Financing, longer closings, and other negotiated terms.

 Remember, Seller Financing is often even better for the seller than it is for the buyer. Don’t forget to educate sellers you work with on this point!

 5. Know how to see the “vision” of foreclosures

The vast majority of foreclosed properties are single family residences with bad financing. For most of these properties the only options are traditional foreclosure techniques. These are not the type of properties we are looking for.

 However, there is another large segment (15-20%) that have upsides most investors don’t see. When a foreclosed property has an unexposed Highest and Best Use, THAT is the kind of foreclosure we want! An example is a single home on half acre of land. Another is a home on a lot actually zoned for a much higher density. Foreclosures can be a great way to find deals with this kind of potential.