I want to avoid the formality of a hedge fund and create a partnership of investers that don’t have the time or know how to flip fixers however they have the funds and want to make high profits of real estate investing.
Thanks in advance.
I want to start a real estate investment group. Should I form an LLC or where should I start?
September 1, 2010 By
Can Investors and Home Owners Get Lenders to Cover the Costs for Renovation and Closing Expenses?
April 20, 2009 By
Copyright © 2008 by Ralph Marcus Maupin, Jr.
The answer is YES! In fact, as a realtor and investor with over 20 years of experience, I personally suggest that all investors get mortgages that include the cost for rehabilitation. Look for mortgage companies with programs for investment properties because they will likely offer funds for rehab and renovation as part of the loan package. Some have programs where they set up escrows for rehabilitation and renovations and have inspections on the work in process in order to get the next draw.
Over the years I’ve encountered a vast number of lenders who have different rules and policies which is why we now add disclosures to all of our real estate purchase agreements. This assures buyers that we are using lenders with programs that work for them.
The following is an example of the disclosure language we use in our purchase agreements, addendums, assignments, and buyer broker agreements:
Lender and Title Company Restrictions. The buyer(s) and seller(s) agree that buyer(s) will disclose to buyer’s lender all relevant considerations regarding the purchase of this property. Due to the nature of this transaction, buyer(s) will only use a lender who allows a buyer to receive funds from the seller to cover allowable closing costs, permissible allowances and expenses of rehabilitation and renovation. This purchase agreement is void if buyers(s) and/or their choice of lender knowingly violate state or federal laws that govern this transaction. If found in violation of applicable law, buyer agrees to forfeit their good faith deposit.
Title Insurance Companies, as part of the services they perform, carry out the terms and conditions of the purchase agreement and any other relevant sales documents. They make sure that the purchase agreement and other documents you use in your real estate transactions are complying with what the lender, Title Insurance Company, and laws ask you to do. They review and check to make sure they put all charges on the HUD statement so the lender can see all expenses that are being paid at the closing. For example, the following should appear in the closing statements: commissions, rehabilitation and renovation escrows, builders allowance, wholesaler’s fees, and assignment fees.
If the Title Insurance Company does not place an expense on the HUD or other closing documents, ask them to amend their closing statements. If they cannot do so and/or if the closing must proceed as scheduled, then make sure all parties to the transactions sign off and are advised of the changes. It goes without saying the mortgage company must be advised of the omissions by the Title Insurance Company.
Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, forms and E-books go to http://stores.ebay.com/Real-Estate-Investing-Guide
How Can Your Past Affect Your Investing?
April 4, 2009 By
By: Ralph Marcus (Mark) Maupin
I am writing this more as reminder to my self, but I know many who read this will be able to apply my thoughts and experiences to their own lives. Everyone has life experiences that they carry with them all their lives. Everyone’s experiences are different. Remember the first time you asked someone to dance and the answer was no, and now today 40 years later, you are still not going to ask someone to dance. You were asked to read in front of room in grade school and the other kids laughed at you, and that was the last time you would stand up in front of a group of people. I clearly see today, how some of the childhood events I have had are still affecting and shaping my real-estate career and life today.
My purpose in writing this is so you can consider looking into your own life and see how your past may be shaping your life today. When you look back into your past life, you will remember certain events and the decisions you made about those life experiences which are still operating and affecting your life today. Look back and check it out! Do you have to know all the facts before you make a choice? What was the event that had you decide that? How old were you when you decided that? Do you believe that you don’t matter or your opinion doesn’t matter? Look back and check it out! By noticing these things, you then have an opportunity to notice if they are helping you reach your goal or just a habitual way of being. Looking back gives you the opportunity to create new actions and thoughts that create new possibilities and unexpected results in your life.
My big event was when I was in kindergarten. I was given the honor of being the class Fire Marshall. If the fire alarm sounded, I was in charge of getting everyone out of the classroom safely. The alarm went off, and I went into action, getting everyone out of room. There was a retarded girl named Marsha, who happened to be going to bathroom at the time. I went in and pulled her off the toilet in effort to ensure everyone was out. There was a mess made, and the teacher screamed at me. At that time I made decision that I would be careful to not to be the one officially put in charge. I chose instead to be the one who would come in at the last moment and save the day. I would be the one who could fix the problem. As a result of this, I surrounded myself in business with people who knew less than I did about any subject. This allowed me to always be in control and have the answer that saved the day and to avoid looking bad. I use to say to myself “I am a natural born problem-solver.” How this showed up in real estate was like this: I took on going to every seminar I could attend. I wanted be the most knowledgeable real estate investor. I took on working in area of real estate where others were not. This allowed me to always be a good-looking “Fire Marshall” of real estate. So you see it only makes sense that I would be in the wholesale real estate business (not simple real estate) and I would help start Donate Real Estate, a company that represents charities to liquidate donated property (something not being done in the market yet). Donate Real Estate has raised over 1.5 million dollars for charities.
The good news is that I have a great level of knowledge of real estate. The bad news is that I have to guard against spending my time on artificially complicated deals, or making things more complicated than they need to be. I have to guard against putting a complicated deal together that only I can bring to closing. You might say I get to be the “Fire Marshall” of real estate deals. Most recently I see where my kindergarten experience has caused me to avoid situations where I wasn’t the most knowledgeable. It had me avoiding such crucial things in my life such as being there to raise my kids, attending church and growing spiritually, or any thing else that wasn’t in the world of work and real estate. Today, I can see that I have the opportunity to do things differently.
Lesson 1: For example, we found a great buy on a house in Southfield, Michigan. The home was in foreclosure. We had a buyer with great credit. I automatically tried to structure a deal where he could buy the house with a mortgage. The problem arose when we started looking at where he would get the money to rehab the house. Being the “Fire Marshal” of real estate, I passed over the simplest best solution, but the one we finally did use. Our buyer had a credit line, and he simply closed on the purchase of the home with a cash buy. As soon as the rehab is finished they are going to refinance it. What I noticed in the wholesale real estate business is that we were jumping in too quickly to try to solve the other person’s problem. So, we switched to “Here is a great buy, Mr. Customer. How are you going to buy it?” In this case they had the answer; I just had to stay out of the way.
Lesson 2: We currently have a foreclosed deal in Dearborn, Michigan where our buyer is taking out a home equity line on his personal home and buying the house. He is then going to refinance the newly purchased home. He has already been meeting with a good loan officer to set up the refinance with a mortgage company that does not have seasoning requirements (meaning you have to own the house 6-12 months before you can refinance it.)
As you can see, if you are focused on solving the problems of artificially complicated deals instead of looking for easier solutions it can be costly. See, if I set up a deal where I am the only one who understands it, then when the deal doesn’t work— who gets the blame? Where in your life are you doing something comparable? Where is the thing you do well that is keeping you from seeing a simpler solution? We make these decisions and then live like it is “THE TRUTH”. Are you solving other people’s problems instead of letting them handle it themselves? Are you specializing in problems or keeping things easy and simple? How much time and effort does it cost you? Sometimes we fool ourselves into thinking just a little more time and effort will make all the difference. Instead we should put balance in our lives which would give us the prospective we need in order to observe that we are making things more difficult than they need to be.
Out of seeing how driven one can be from a childhood decision, I created a game I call “The Great Give Away”. For the past two or three years I have been teaching seminars on real estate investing. I have also been involved in leading a mentoring program for investors. We make sure the investors are well informed and have tools necessary for developing a broad perspective that leads them to be open to new opportunities.
What I’ve noticed about myself is that I want to be a person who is causing people to discover the gifts they have to share in the world. To accomplish this I will have to focus on integrity, love, contribution, empowerment, and leadership that I am exhibiting in my life. If I do this it will allow me to make the difference I want to make for humanity and real estate investors. This will allow me to make a difference in the classes I teach in about real estate investing and the mentoring program I am involved in.
To get to the bottom line, and break up the childhood story, it requires a possibility so big in your life that it inspires and moves you in way that has you able to see the “Fire Marshall” stories of your life then move past them. It’s a possibility that you can spend a lifetime on and still not be complete. I have created the following purpose in my life with the possibility that moves me: My purpose in life is to have all humanity discover the gifts they have to share. The values that are at the heart of who I am are integrity, love, contribution, empowerment, and leadership. What I can be counted on for is to make a difference to humanity, to charities, and to real estate investors discovering their gifts and putting teams and systems in place to achieve my purpose at a global level.
The comments in Mark’s Corner are shared personal experiences. They are not intended to be legal or accounting advice nor a solution. You should always consult with the appropriate professional when making decisions.
Copyright. 2008 Ralph Marcus (Mark) Maupin, Jr.
Disclaimer
Real estate investing by nature is risky. You can win, lose, or break even. We cannot guarantee a profit or loss. We do not provide legal, accounting, or contracting advice.
Ralph Marcus Maupin (Mark) has over 25 years experience in the real estate business. Mark has bought and sold over 3,500 real estate properties, including residential homes, apartment buildings, commercial buildings, vacant lots and more. He has experience in a variety of exit strategies, including seller financing, land contracts (contract for deed), lease options, wholesaling, donating real estate to charity and much more. Visit http://donaterealestate.com
Is Big Better?
April 4, 2009 By
by: Ralph Marcus (Mark) Maupin, Jr.
At one time in my life I was buying 7-8 Houses a month, fixing them up and then reselling them. Then I got the bright Idea that if I can buy and sell 7-8 a month, I can buy and sell 80. This was a choice that eventually led me to Bankruptcy. This has not been that long ago. Twice in my life I have made a lot of money and then took on a large growth spurt and got a large learning experience in business failure. The last one resulted in bankruptcy.
It is hard when things are going well to not be seduced by more is better. When you have something working for you, it is easy to become overconfident and start to think of multiplying it. As with things in life, you want to be sure when you take on something, that you complete it. “Pumping up the volume” puts you at risk of not having the structures and being set up to deliver on what you are committed to. You naturally encounter problems that are not present on the smaller scale.
It is hard when things are going well to not be seduced by more is better. I had to learn personally that “Pride goeth before the fall”. The bottom line is that there are always good deals in Real Estate! I say measure your success one house at a time. Buy investor property—fix it up, resell it, rent, do a lease-option, but do it one house at a time.
Multiple Purchases?
One of the most common mistakes I see in business is where investors come into the business and think they need to do multiple houses at a time. Try this on: Try doubling the cost you think it will take to fix the property, doubling the time you think it will take to rehab the property and figure your holding costs doubled (insurance, mortgage payments, taxes, lights, gas, rehab cost).
Great deals in Real Estate don’t come in houses fixed and ready to sell. The great buys come from houses that need work. If you are just getting started, stick to cosmetic rehabs (paint and carpet), Don’t take on major rehabs. It will take time to develop rehab crew. The most successful people I see in Real Estate take on doing houses one house at a time. Failures are great if you look at them and ask what action was missing would have made a difference.
Hard money lenders?
Pitfalls are using very expensive money. For years I ran a business financed on money from Real Estate Investors who are called “Hard money lenders” who look at collateral and loan money based on that interest can be 18% higher when you figure in the closing costs. When you get multiple properties in this condition you are going to have interest payments that are going to be double—triple what conventional financing is in Real Estate.
Combine that with the common lie we tell ourselves that we can repair the house and put it back on the market for sale or rent in a short time. Your overhead would rise because you would need a staff to manage and rehab everything. Can you see this is a recipe for upset for everyone? Now if you are doing one house at a time—your overhead will probably stay very low, very little staff, you have limited you expenditure of time, money, and aggravation.
At one time my overhead was + $50,000.00 per month. I had to depend on other people to do everything, including checking the work. The sale I was making was going 100% to payments and I kept telling myself I will turn it around tomorrow. Now I had a house not finished, and houses being lost in foreclosure and for taxes. Now I am a motivated seller and bankruptcy was looming large. My overhead was still there, I attempted to wholesale deals, so I decided I would no longer do find, repair, and resell homes. I will find great buys and sell them to other investors.
Starting Over
Basically I started my business over. It takes a great amount of time to get list of investment deals. This business is built on the concept you can borrow you way out of debt. It does not work. You have family, friends, business associates that get hurt and destroyed. I’m not saying this to tell you a sad story, but rather in the hopes out of sharing it, some one else can avoid the pain of my mistakes. To see what you can learn for yourself. I am 53 years old and starting over. I have the knowledge to build a business with the proper foundation. I teach Real Estate investing class now looking at pitfalls and what is needed to do one deal at a time.
My advice to you on handling real estate transactions is:
Use Title companies
What can happen to you when you fail to get title insurance? We had a participant in one of our seminars. He purchased a house to fix it up. He invested over $40,000 into the home in both repairs and purchase price. When he went to refinance he found out the person he purchased the house from was not in the chain of title. In other words, he did not have a clear title. Whenever you purchase a home, always close through a title company, with title insurance on the property. Title insurance is insurance insuring the borrower or lender that they get the property with marketable title. The will only insure the property for the purchase price or for the amount of the mortgage.
Use a Lender that makes good common sense.
Interview lenders. Go to Real Estate Investor Clubs to find out from other investors to learn who is doing the best job. Is there risk when you use a lender that wants to cross collateralize loans or wants personal guarantees? One lender I know will get one-two year mortgages and demand a right to lean all the properties you own on the loan you are getting. Just beware if you are buying the property to fix up and resell there are things that you don’t always plan on like: twice as much rehab cost as you planned for, longer marketing time than you initially thought resulting in added holding costs, or maybe the market moves the wrong direction and you can’t sell so you rent it.
Now one of your other properties or even your personal residence needs to be refinance. You now have lien showing against the property. Now what do you do? Think before you jump. If you have purchased the property right, you should be able to borrow money based on the equity of that property—not your home and other properties.
This same lender will ask for a personal guarantee signed by you, your wife, and your partner. This personal guarantee allows his mortgage company to lean anything the partner and wife own. Not only that, but this particular lender demands that you use a Title Company he owns. Now when you want to sell another one of your houses and this same cross collateral loan will show up on any property you are selling. Now you are faced to use his title company and he won’t release his loan. Beware of putting yourself in a situation where you are using a person who controls the lending, title work, the appraiser, and Real Estate Company.
Do you think if you had your title work placed with a company the Lender had ownership in you might run into a problem getting the documents released or have a clean closing at the same title company. Why risk letting human emotions drives a stake into your deals. Keep an arms length distance inside your dealings. If you are selling homes or wholesaling property, let the buyer find his own lender and make sure you get an independent title company. Make sure there is not a conflict of interest in the Title Company, Mortgage Company, and Real Estate Company. Keep the integrity in the deal. I am sure there are title companies, real estate companies, and mortgage companies, where there is common ownership that run very good businesses and can separate the conflicts of interests and profit centers. Make sure you receive proper disclosure of the common ownership. You can always look at the volume of business they are doing in each business and check with the state of Michigan Licensing Dept. for any complaints against the firm. The web-site is www.michigan.gov.
Ralph Marcus Maupin (Mark) is an experienced real estate investor and a college instructor. He is also the founder of the National Real Estate Network, a REIA group in Detroit, Michigan. For a wealth of resources and education on real estate investing, exit strategies, seller financing, lease options and more, visit http://mrleaseoption.com
Lead Base Paint Disclosure
April 4, 2009 By
By Ralph Marcus (Mark) Maupin, Jr.
What can happen when you don’t get a signed lead base paint disclosure? We purchased a 2-unit apartment building about a year and half ago from a seller who was being sued by his tenant for lead base paint problems. He had no knowledge of lead base paint. When we resold the property a short time later, we disclosed the same, as we had no knowledge of the lawsuit of the problem. Since we had disclosures signed by the seller, we avoided a lawsuit from our buyer. Take the time to get lead base disclosures on every sale. Have the seller fill them out. We have forms you can use in our free forms section.
The comments in Mark’s Corner are shared personal experiences. They are not intended to be legal or accounting advice nor solutions. You should always consult with the appropriate professional when making decisions.
Disclaimer
Real estate investing by nature is risky. You can win, lose, or break even. We cannot guarantee a profit or loss. We do not provide legal, accounting, or contracting advice.
Ralph Marcus Maupin (Mark) is a real estate developer and college instructor in the Metro-Detroit area. He is also the founder of the National Real Estate Network, Michigan’s Best REIA (Real Estate Investors’ Association). Mark’s secret to success is to surround yourself by others who are successful and to model your program after them. To learn more about the real estate club and to find out about upcoming seminars and workshops visit http://www.megaeveningevent.com
Lessons Learned about Buying Foreclosures and Selling on Land Contract
April 4, 2009 By
By: Ralph Marcus (Mark) Maupin
Today’s questions are several. Can you buy a house in foreclosure and resell it on a land contract (Contract for Deed) or lease option to the person losing it? Can you buy a home on a new mortgage and resell it on a land contract?
It is very common for someone in foreclosure to ask someone to buy their home out of foreclosure and resell it to them on a land contract or lease option. Does it seem ok to buy a house out of foreclosure for $100,000 and then give the person who was foreclosed on a one year lease option for $130,000?? In my world, the answer is no! If you are in front of a judge, if it looks like a duck, walks like a duck, and acts like a duck, it is a duck. The interest earned on this transaction is 30%. If this is declared an equity loan, the optionee can use usury as a defense against you. The result could be high legal fees, and a loan re-computed to zero interest. You are also subject to penalties by law. A better solution to the above situation would be to do a lease option for this person on a different property if you feel that he is credit worthy.
What is the proper way to resell a house in which you have purchased on a new mortgage? It has been a very common practice to sell the house on a land contract. The new owner then continues to make payments on the mortgage without the mortgage company knowing that there as been a land contract sale. I recently attended a Continuing Education class for realtors and learned that this is in violation of Federal law. Rather then sell the property on a land contract you might consider doing a lease option on the home thus not being in violation of any law. You should be aware that mortgages generally have acceleration clauses that allow them the discretion to declare the mortgage balance due if you violate their prohibitions against re-selling or doing conveyances that look like a sale.
Disclaimer: Real estate investing by nature is risky. You can win, lose or break even. We cannot guarantee a profit or loss. We do not provide legal, accounting or contracting advice.
Ralph Marcus Maupin (Mark), aka Mr. Lease Option, is an expert in the Real Estate industry. Mark has purchased and sold over 3,500 homes, commercial buildings and vacant lots in Michigan, using a variety of exit strategies including conventional mortgages, lease options, land contracts (contract for deed), seller financing, wholesaling and more. For the greatest resources on real estate education, visit http://mrleaseoption.com
Lessons Learned About Mortgage Companies
April 4, 2009 By
By: Ralph Marcus (Mark) Maupin, Jr.
Over the years I have learned that almost all investors want mortgages that will give them loans that include dollars for rehabilitation and renovation of investment properties.
There are many investor programs offered by thousands of mortgage companies. Some Mortgage Companies have programs that will loan funds as part of the loan package money for rehab and renovation. Some have programs where they set up escrows for rehabilitation and renovations and have inspections on the work in process in order to get the next draw.
Due to the vast number of rules and with lenders all having different policies we are now adding disclosures in all of our real estate purchase agreements and related forms to assure buyers are using lenders that have programs that work for borrower (buyer), seller, realtor, wholesaler and lender.
We now use the following disclosure language in our purchase agreements, addendums, assignments, and buyer broker agreements:
Lender and Title Company Restrictions. The buyer (s) and seller (s) agree that buyer (s) will disclose to buyer’s lender all relevant considerations regarding the purchase of this property. Due to the nature of this transaction, buyer (s) will only use a lender that allows buyer to receive funds from the seller to cover allowable closing costs, permissible allowances and expenses of rehabilitation and renovation. This purchase agreement is void if buyers (s) and/or their choice of lender knowingly violate state or federal laws that govern this transaction. If found to be in violation of applicable law, buyer agrees to forfeit their good faith deposit.
Title Insurance Companies, as part of the services they perform, carry out the terms and conditions of the purchase agreement and any other relevant sales documents. They make sure that the purchase agreement and other documents you use in your real estate transactions are complying with what the lender, Title Insurance Company, and laws ask you to do. They review and check to make sure they put all charges on the HUD statement so the lender can see all expenses that are being paid at the closing. For example, the following should appear in the closing statements: commissions, rehabilitation and renovation escrows, builders allowance, wholesaler’s fees, and assignment fees.
If the Title Insurance Company does not place an expense on the HUD or other closing documents, ask them to amend their closing statements. If they cannot do so and/or if the closing must proceed as scheduled, then make sure all parties to the transactions sign off and are advised of the changes. It goes without saying the mortgage company must be advised of the omissions by the Title Insurance Company.
Ralph Markus Maupin (Mark) is an experienced Real Estate Investor and College Instructor. Mark is also the founder of the National Real Estate Network which is known as Michigan’s best REIA. To learn more about this networking group of real estate investors, agents, mortgage brokers, title companies and a wealth of resources for real estate developers, visit http://www.megaeveningevent.com