Real estate loan is what a lot of people use to buy their home. Real estate loans have been instrumental in bringing joy to people by making that unaffordable house affordable. Some real estate investors too make use of real estate loans for buying properties. However, real estate loan is not free money and anyone who buys real estate or plans to buy real estate using real estate loan must understand the concept of real estate loan very clearly.
Real estate loan (also known as mortgage) is the money that you borrow from someone (a financial institution i.e. a mortgage lender) for the purpose of buying a property. The real estate loan generally covers a part of your purchase price and the remaining portion has to be paid by you upfront i.e. as down payment. The amount (i.e. the percentage of total purchase price) that you have to pay as down payment is dependent on a number of factors and you can generally reduce it to even 5% by going for mortgage insurance.
Whatever you borrow from the mortgage lender as real estate loan needs to be paid back to the mortgage lender over a period of time (and, of course, you will also need to pay appropriate interest on that real estate loan). The tenure of your real estate loan and the prevailing market rate will determine the amount of interest you pay for your real estate loan.
Generally, you are required to pay back the real estate loan in the form of monthly instalments which are composed of both interest and principal portions of your real estate loan. Also, there are various types of real estate loans e.g. fixed interest rate loans and adjustable interest rate loans. So depending on what type of real estate loan you have gone for, your monthly payments might either remain constant (fixed rate) for the full tenure of the loan or keep getting adjusted periodically (adjustable rate) on the basis of a financial index. Besides that, some other costs are also associated with real estate loans e.g. there are closing costs, inspection costs, attorney fee etc.
Also, in case the property needs some repairs, there will be costs associated with that too. Again, there is stamp duty and other taxes that you need to pay.
So, really, you need to understand the concept of real estate loans and the related costs clearly before you actually go for the real estate loan. And understanding these concepts is really not that tough.
Tuesday, September 9, 2008
How to Make Money in Foreclosures
The American real estate market has witnessed a dramatic rise in foreclosures in the recent years. The foreclosure is not a happy incident letting go of one’s house never is. The basics of the foreclosure vary from state to state; everyone loses money except the person investing in the real estate.
When a loan is made in favor of buying a piece of property, the loan is made under a mortgage agreement. The mortgage means that the owner of the property must pay up on a regular basis to the lender which in most cases is the bank or risk losing the property for good. When the borrower turns into a defaulter and fails to pay a certain number of monthly installments then acceleration occurs and the entire balance of the loan is due.
In such a case the home owner is left with no other choice, but to vacate the house and wait for its auction. If you are a real estate investor here comes the part that will interest you the most, the banks want to retrieve their money from the market in the fastest possible way. So they make the repair work and patch up the house, which is usually in tattered conditions, and then put it up for sale in a discounted price.
Most often the price quoted by the bank is lower than the ongoing market price of the property, this makes up for really good real estate investment. Most if the times the owner does not want a foreclosure to show on their credit reports so they short sell their houses at lower rates. So although their dues will be shown as paid in the credit reports but it will also be stated that they settled their loans with a sum of money lesser than the actual loan amount.
Some times the owners may not derive any profit from pre foreclosure sale but the relieving of the financial burden is enough, so you can expect to make good bargains with such sellers.
After the property has been acquired, the real estate investor will need to repair the property, as the house will most definitely need some repair work to be done. Now before buying the house you must ascertain the amount of repair work you need to perform so that the house can be made livable and listed once more.
After the repairs have been completed a real estate investor can either sell of the property at a higher price, to other prospective buyers, thereby making a huge margin of profit. Some investors prefer to keep the houses in the market so that the prices soar but they do not sell it because they want to keep it for the future.
Or else they can keep the house as an asset and give it up on lease so that they can receive a permanent source of cash from the house. So as we see it the future of the real estate foreclosure business is very bright indeed and there is no reason why you should not invest in it if you have sufficient capital.
When a loan is made in favor of buying a piece of property, the loan is made under a mortgage agreement. The mortgage means that the owner of the property must pay up on a regular basis to the lender which in most cases is the bank or risk losing the property for good. When the borrower turns into a defaulter and fails to pay a certain number of monthly installments then acceleration occurs and the entire balance of the loan is due.
In such a case the home owner is left with no other choice, but to vacate the house and wait for its auction. If you are a real estate investor here comes the part that will interest you the most, the banks want to retrieve their money from the market in the fastest possible way. So they make the repair work and patch up the house, which is usually in tattered conditions, and then put it up for sale in a discounted price.
Most often the price quoted by the bank is lower than the ongoing market price of the property, this makes up for really good real estate investment. Most if the times the owner does not want a foreclosure to show on their credit reports so they short sell their houses at lower rates. So although their dues will be shown as paid in the credit reports but it will also be stated that they settled their loans with a sum of money lesser than the actual loan amount.
Some times the owners may not derive any profit from pre foreclosure sale but the relieving of the financial burden is enough, so you can expect to make good bargains with such sellers.
After the property has been acquired, the real estate investor will need to repair the property, as the house will most definitely need some repair work to be done. Now before buying the house you must ascertain the amount of repair work you need to perform so that the house can be made livable and listed once more.
After the repairs have been completed a real estate investor can either sell of the property at a higher price, to other prospective buyers, thereby making a huge margin of profit. Some investors prefer to keep the houses in the market so that the prices soar but they do not sell it because they want to keep it for the future.
Or else they can keep the house as an asset and give it up on lease so that they can receive a permanent source of cash from the house. So as we see it the future of the real estate foreclosure business is very bright indeed and there is no reason why you should not invest in it if you have sufficient capital.
4 Ways of Creating Multiple Income Streams With Real Estate
"Choose life. Choose a job. Choose a career. Choose a family." These words were spoken in the 1996 movie "Trainspotting". It was the beginning of a monologue outlining the average person's walk through life, with the idea that you get a job and work at it until retirement age, then retire to spend the rest of your life doing whatever you think retirees should do.
Multiple income streams can change that. You can start out modestly, but your returns over time for a relatively modest investment can mean quite a lot. You might even see your returns pay for your bills, leaving you free to take or leave actual jobs. Even if you don't make quite that much, chances are that your returns will leave you in a much better financial position than otherwise.
Real estate has always led the pack when it comes to income. Many wealthy people got that way by quietly investing in real estate. Real estate investment isn't the only way you can create alternative income, though. Here is a list of possible income generators involving real estate.
1. Investment rental properties
Always the favourite of people who want to quietly amass wealth, investment real estate is one of the most reliable investments you can make. If you can get an investment property for no money down and rent it out, even for just enough to pay the mortgage, you're laughing all the way to the bank. If you build equity while someone else is paying your mortgage, you can end up selling for thousands more than you owe, leaving you with a nice chunk of change in the bank. If you are getting more in rent than the property costs you each month, then you've got a stream of income that you don't have to get up and work for.
Cons are property upkeep and not being able to find reliable, responsible renters. You also need to set aside money for property maintenance and any fees not taken care of with your monthly payment. Know your renter market and buy to suit what people are looking for in a rental property.
2. Write about real estate
If you're passionate about real estate, write! There are newspapers, magazines, websites and books waiting to hear from you! E-books are another income generator that you could explore. It helps if you can string a sentence together well and have a wholesome respect for spelling. If you have a talent for getting other people excited about real estate via the written word, you could set yourself up for a nice little income stream that can be generated in your spare hours.
Cons are that not everybody has the ability to transfer their knowledge into engaging prose. Good writing requires a significant outlay of time and effort that some people are just not able to invest. The market for writing, even good writing, can fluctuate and it may take some time to establish yourself as a good, reliable writer.
3. Invest in P2P lending
P2P, or person-to-person, lending is taking off with a plethora of companies setting up websites that allow people to request and invest in loans. The most popular in the US is Prosper.com. Basically, if you invest in a loan, you can name your interest. If you are accepted as a lender, you can get a return of 10-50% of your loan over a period of several years.
Cons are that, despite the stringent requirements of many P2P lending companies, your borrower might take your money and run. Or be late with payments. Or start out well and then stop paying... this is a very new investment item and, despite it's seeming simplicity, requires some critical thought before investment.
4. The wonderful, wonderful Web
This kind of goes back to #2... if you've got valuable information, think about disseminating it via a webpage and selling adspace. Blogs are all the rage now - if you get a reader base, it all means money for ad clicks. Consider Google Adsense for a starter ad, but there are a lot of companies who are willing to pay per click.
Cons are the knowledge of writing mentioned in #2 and the need for a modicum of knowledge of how the Web works and how to create and market a website without being written off as spam.
Multiple income streams can change that. You can start out modestly, but your returns over time for a relatively modest investment can mean quite a lot. You might even see your returns pay for your bills, leaving you free to take or leave actual jobs. Even if you don't make quite that much, chances are that your returns will leave you in a much better financial position than otherwise.
Real estate has always led the pack when it comes to income. Many wealthy people got that way by quietly investing in real estate. Real estate investment isn't the only way you can create alternative income, though. Here is a list of possible income generators involving real estate.
1. Investment rental properties
Always the favourite of people who want to quietly amass wealth, investment real estate is one of the most reliable investments you can make. If you can get an investment property for no money down and rent it out, even for just enough to pay the mortgage, you're laughing all the way to the bank. If you build equity while someone else is paying your mortgage, you can end up selling for thousands more than you owe, leaving you with a nice chunk of change in the bank. If you are getting more in rent than the property costs you each month, then you've got a stream of income that you don't have to get up and work for.
Cons are property upkeep and not being able to find reliable, responsible renters. You also need to set aside money for property maintenance and any fees not taken care of with your monthly payment. Know your renter market and buy to suit what people are looking for in a rental property.
2. Write about real estate
If you're passionate about real estate, write! There are newspapers, magazines, websites and books waiting to hear from you! E-books are another income generator that you could explore. It helps if you can string a sentence together well and have a wholesome respect for spelling. If you have a talent for getting other people excited about real estate via the written word, you could set yourself up for a nice little income stream that can be generated in your spare hours.
Cons are that not everybody has the ability to transfer their knowledge into engaging prose. Good writing requires a significant outlay of time and effort that some people are just not able to invest. The market for writing, even good writing, can fluctuate and it may take some time to establish yourself as a good, reliable writer.
3. Invest in P2P lending
P2P, or person-to-person, lending is taking off with a plethora of companies setting up websites that allow people to request and invest in loans. The most popular in the US is Prosper.com. Basically, if you invest in a loan, you can name your interest. If you are accepted as a lender, you can get a return of 10-50% of your loan over a period of several years.
Cons are that, despite the stringent requirements of many P2P lending companies, your borrower might take your money and run. Or be late with payments. Or start out well and then stop paying... this is a very new investment item and, despite it's seeming simplicity, requires some critical thought before investment.
4. The wonderful, wonderful Web
This kind of goes back to #2... if you've got valuable information, think about disseminating it via a webpage and selling adspace. Blogs are all the rage now - if you get a reader base, it all means money for ad clicks. Consider Google Adsense for a starter ad, but there are a lot of companies who are willing to pay per click.
Cons are the knowledge of writing mentioned in #2 and the need for a modicum of knowledge of how the Web works and how to create and market a website without being written off as spam.
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