Once upon a time you could walk into a bank and get a loan on a handshake and your honor. This was when you actually dealt with a person and were seen as more than a number on a spread sheet. Now it?s all about your FICO score.
Several credit models can be used for this article, however we are going to focus on the Fair, Isaac Company model. Better known as FICO.
Your FICO score is the method used to determine the interest rate as well as how much credit a bank or lender is willing to give you. the cleaner the credit…the lower your rate and larger the sum you qualify for.
Preserving your FICO score, and improving it, is not difficult, but it may take time. Here are some tips to maintain and improve your score, based on three credit situations.
FIRST: Get a copy of your Credit History
There are many reasons you may have no credit history. Maybe you’re just starting out, maybe you pay cash for everything and have never needed a loan. In any case, if you have no credit history, your FICO score is likely to be low.
An easy way to improve your credit history is to get a loan and pay it off onetime. A loan such as a car loan (also known as an installment loan) is generally looked at as more important, and given more value, then a credit card loan.
Another way to acquire a better credit history is to take $1000 and open a 6 month CD account at a financial institution. Now, get an installment loan for $1000, using that CD as collateral. Now, here’s the trick. Take the $1000 loan, and open another 6 month CD account at another institution. Take another loan for the $1000 at the second institution. Do this one more time.
Now what you have is 3 loans. Pay the minimum payment for 6 months. In the last month, cash out your CDs and pay the loans off. You now have a credit history, and did not go into long term debt to get it.
SECOND: Keeping your history in good standing.
Ok…now you have a good history. No major debt…now to keep the FICO as high as you can.
Make sure you don’t close your old accounts. (Unless of course they charge you a fee of some sort to keep it open.) Part of your credit score is based on the amount of credit available vs. amount used. If you close old accounts you may impact this part of your credit.
Another thing to be aware of is how you manage your money. Here?s the scenario: you have a $2000 credit card. Every month, you charge about $1800 to that card. And, every month you pay it off. But here’s what happens - your credit card company reports your credit information monthly to FICO. However if they report it on the day before you pay it off…the credit agency sees you carry a balance every month. If you can try changing the days you pay off your credit card.
THIRD: Repair poor credit
At some point there is a very good chance you will have something that causes your credit rating to drop. Don’t panic…poor credit can be fixed. Understand however that the process takes time. In some cases you may need to talk to a credit counselor to assure you address the reasons for the drop as well as remove any future habits that may cause it to drop again.
The most heavily weighted part of your score is based on your payment history. The first thing to do to start repairing your credit history is to pay your bills on time. The mortgage is the most important, followed by installment loans, and finally credit cards.
The next largest portion of your FICO score is based on how you use credit. The fastest way to improve this is to pay down your credit cards.
One final thing to look for is errors in your credit report. Get a copy of your credit report from all three primary agencies, and look at all the entries. You can find the agencies here: experian.com, equifax.com, and transunion.com. If there are any errors, start the process to have them removed. Call your creditors - sometimes they will remove negative information.
A strong, healthy, and clean credit score is a major part of your financial world. Keep it clean and don?t risk it. A good score can factor into things you can’t imagine. Don?t damage your score if you can help it.
One of the best and rapidly growing investment options is real estate investment. If you wish to put your extra wealth into a venture which is bound to appreciate with time, then the housing sector is the best choice. Real estate is an investment dream which if it comes true, the returns are very attractive. As a result of this, many companies have cropped up with real estate investment guide, some of which are not effective. Below however is an insight that will assist you a great deal if you choose to become a real estate investor.
Cheap purchasing price A property that is good to invest in will be sold at a price that is lower than the one being offered in the market currently. There are many reasons why sellers will opt to sell at a lower price including emergencies, diseases, the urgent need for cash and even divorce. If the property that you want is at a high price, you may need to wait for a longer period of time before you get any returns. Those that come at a lower price may need furnishing therefore you should take this into consideration when you are buying it.
Short term investment This occurs when a person buys a house and immediately sells it off to make a profit. The advantage of this venture is that profits are almost guaranteed. Also compared to long term investments the period of waiting and speculating is short. Extra hidden costs may apply here, therefore, you should be careful. If you end up investing in a house that will need substantial upgrading and repair, you may overstretch your budget and therefore increase the selling price to a level you did not anticipate. It is advisable to value the property properly before purchasing it.
Long term investment This involves the buying property that is anticipated to appreciate with time therefore helping you to receive good returns. Because you will have to wait for a long period for your returns to come due, long term commitment and patience is necessary. However, the returns that you will receive are bound to be substantial that may stretch for many years. However, there are laws and regulations that have to be adhered to in this type of investment. These involve contracts, payments, taxes and tenant rights.
Whichever real estate investment you may choose, be sure to seek for advice before you get into a deal else it will frustrate you.
One of the fastest growing industries in the world today is real estate investing. Although the current economic recession has had an effect on the industry, its future still looks bright and therefore substantial gains are still in store for a real estate investor in the long term. After all, the wise do state that opportunities lie in the midst of crisis. The current economic downturn has seen many homeowners loose their homes and they are being sold at throw away prices. Foreclosures have become the order of the day, and you as an investor in this industry might want to take advantage of the situation and begin to grow your investments and smile all the way to the bank. As they say; one man’s poison is another man’s meat.
In truth, real estate as an investment choice is a complex enterprise and is definitely not for the fainthearted. For one, you need to understand how the whole system works so that you can be able to maximize the potential returns on your investments. And someone said information is power. That’s the starting point. Seek out all the information that you can find. There are numerous sources of information. With the growth and development of the internet, an electronic real estate investment guide will pop up on your screen at the click of the mouse if you know where to look. And good old magazines are also available with insightful tips on how to make it in real estate investing.
Now that iron sharpens iron, you also need to interact with other real estate investors and learn their tricks of success. This is because once you understand fully the workings of the business; a world of opportunities is wide open before you. For example you need to know the best time to buy property and the ideal time to sell so as to make the most out of it. And always network well with other market players in the industry to ensure a steady supply of business. It is more prudent to deal with property on a wholesale basis other than on single units, as this way you make more in a short time.
You may also want to specialize in one particular type of property in a bid to create a niche market for your business and thereby tailor your deals towards a given target. Be wide in your thinking and be within the legal limits on your way to seizing the opportunities brought about by recession.
Real estate investing is one of the most reliable avenues for achieving wealth. However, as the economic crisis has taught us, blindly investing in real estate is not fundamentally wise. Judgment, prudence and wisdom are still required for real estate to be the source of great profits.
The first thing to be done is to specify your goals. What matters more to you - present-day cash flow, or wealth for the future? Are tax advantages important to you? Is money available in large supplies? Can you get access to credit easily? How do you feel about having legal liability?
The simple fact of the matter is that real estate is an incredibly flexible investment medium. If you have excellent credit, you can certainly use it to your advantage. But for those whose credit history has more delinquency than it has ‘paid-as-agreed’, you’ll get to rely on some of the more untraditional buying strategies.
Much like good credit, large amounts of investment capital can be a great benefit to you. But many people have become real estate millionaires without using a single penny of their own cash.
A few subjects will be important for your real estate investment experience:
* Creative Real Estate Investing - how to take over a mortgage without qualifying
* Private Funding Sources - where to get money to fund your deals without relying on mortgage companies
* Property Inspections - how to know if your property is in the condition you expect
* Rent Your Properties Quickly - find great renters for your properties very quickly
* Protect Your Assets - use land trusts, corporations and LLCs to protect your financial assets
* How To Reduce Your Taxes - real estate profits are great, but taxes aren’t, so learn to reduce them legally
These are just a few of the subject matters that you’ll want to study as a serious real estate investor.
I am always being asked. “Doc what advice can you give me that will help me with investing. What tricks of the trade or inside tidbits can you share with me?? The best answer is you need to develop a “toolbox”.
OK…Hey Doc..what do you mean “Tool Box”. Okay…let me explain it ad tell you the 3 important areas that make it up.
1)In your head tool box: This is all about how your thinking process works when it comes to investing, and more importantly how open minded you are about investing information. Are you willing to think outside the box in order to look at investment opportunities or must the investment fall within a cookie cutter method you having? In your head means you need to read books, articles, partake in discussions, and basically interact with that big grey hunk of goo that is in your skull.
It is about gathering all the info you can in order to be able to think about investing and where it can lead you.
IMPORTANT FACT: Any bookstore you go into has a billion books on Real estate investing. Buy them all…ok not all but you should have a EXTENSIVE collection of them. Why you ask??? Simply put…if you have a understanding of the information and tactics that are being read by other investors…you will actually understand the factors that they are using to buy/sell/screen potential investments. Knowing what information someone is useing to make a decision gives you and advantage.
2) Online tool box: This is one of the most over looked elements…when I say over looked I am not referring to being not utilized…but more to the fact it is not utilized to its overall potential. For example do you have one site you go to more often than not for investment information? If so why? Your answer is most likely because they have the best info I can use. This maybe the answer however, a little side note to this. Most of us get some sort of tunnel vision thinking that one or even a few sites will cover us for all the info we want…but in all honesty we normally close down other avenues of “information input” when we do this. How do we get around the “Info input” shut down???
How do you avoid the INFO SHUT DOWN…easy…open your tool box to get more tools/ info.
Just go to the free email server of your choice…create a new email address that you will use to collect email updates/newsletters from various websites. then go thru them at your leasure.
Once you join an email list..no matter what stay with it for at least 6 months. (Not all great investment tidbits are sent out at first.) Email lists to get on are for: investment clubs, investment blogs, investment reference sites, etc, etc.
I ,myself, avoid most ad based emailing lists. however, that doesnt mean that all of them are a waste of time. review a few and decide for yourself if they are worth keeping.
Other online Tool box sites are certain “E tools”. These go way beyond having a mortgage calculator online. We are talking about tools that you are almost chomping at the bit to try. (I have to admit I have a few of these in my Tool box?I use them every day) When you find these tools you will just know it, find them and BOOKMARK them!
3) And last but not least… actual physical, hold in your hand, tools. It can be a great “go by list”. A solid flash light. anything that makes the time in the field looking at investments easier.
Build your tool box and USE IT.
Have you heard these “bits of advice”????This is not a good time to look at property investment? Now is not a good time to invest in the stock market? Now is not a good time to buy oil futures? We have heard this from every “GURU” on the nightly news. The fact that this is a common belief does not make it true. Now is the time to go against the flow of popular opinion and buy an investment. The risk must, however, be a reasoned one and never spend the rent money on risky things.
If you are willing to move against the flow you must seek out deals and only buy bargains. Property investment is great because you can feel the permanence of your investment and over time real estate has proved itself to be a solid money maker. Contrary to all the latter day negative gearing you need to make sure of a positive cash flow. Rents must give a return on investment. Simply put…. you do not buy at silly prices you buy only when the figures give you a return. You don’t have to love the investment…just enjoy the cash flow it brings in.
With the current feeling of uncertainty, buying bargains is not difficult. Foreclosures are not nice for anyone to deal with and being a buyer at a foreclosure or mortgagee sale can make you feel very uncomfortable and even intimidated. These properties do have to be sold though and foreclosures will work to an investor’s advantage. Its just bargain shopping on a bigger scale.
You don’t have to work with just foreclosures. Many people got into the property investment business over the last few years with the promise of easy profits and now feel worried and insecure with mortgages over their family homes or repayment bills that will not lessen in the near future. They just want to quit the game no matter what and will take a loss to set themselves out. Just do not make the same mistake they made. Do the math!! Get a return on your investment. Lastly have the right mind set which is to buy for the long term. Property investment is a long term game and very lucrative over a long period. Just make certain that you are happy and secure with a long term investment and you will really cash in when the next real estate price surge hits. Whenever that might be.
In a down real estate market, finding foreclosed homes is easy. To make your search easier, here is the list of the places where you can find foreclosures.
Auctions
Auction companies hold a large inventory of properties, sometimes selling as much as 100 homes or more in just 1 day. Since the bidding is relatively quick and houses can be sold in a matter of seconds, prices of real estate can go over the board but you can find really good properties in their inventory.
Bank Web sites
Major banks maintain a good list of foreclosed properties. Visit bank web sites and check out the foreclosed properties listing.
Online foreclosure companies
There are a few companies online that specialize in selling foreclosed homes. A small,one-time membership fee is charged to anyone who wishes to access the list of foreclosed properties. Once you join you will normally have access to a list of property from across the nation. This is very helpful if you have a part of the country you prefer to invest in.
Real estate agents
These agents are either maintaining personal web sites or are under real estate companies that sell foreclosed properties. You can search them online or browse through yellow page listings. Major cities have real estate offices where you can inquire into possibility of acquiring foreclosures.
Real Estate Signs
You don’t need to look anywhere else because you can find foreclosure signs around your neighborhood.These signs contain address and contact information of the agents you can visit or call. The best thing about considering homes with real estate signs is that you can actually check the condition of the house on-site. And with one phone call, you can arrange with the agent the date when you want to see the interior of the house.
Government Agencies
Department of the Treasury and other government agencies have a list of real estate properties for sale. Usually, when buying a house from these agencies, you are required to acquire the services of a real estate broker or personally submit an offer. Go to any of the government agencies web sites for more information.
Distressed real estate is a the diamond in the rough that all RE investors are seeking. HOWEVER, with out doing your research you may lose far more then you will gain.
Use a step by step mind set. “Go by the numbers” when reviewing all the areas of the investment that you want to focus on here are a few things to think about and add to your list.
Keep in mind…this isnt listed in any particular order. Its just things to keep in mind The target real estate should meet at least one of the criteria, but not be too heavy in any other areas.
Doc’s List:
KNOW WHY ON PRICE
Price is the first thing an investors sees.
We are all looking for below market value. Buy for a little, sell for a lot. But why are they selling so low? Is it to solve one of the “3 D’s”. (Debt, Death, Divorce)
Are there problems with the property that will cost a small fortune to fix? Out dated plumbing??? Poor electircal wiring? in older houses these problems are VERY common. Dont forget to consider holding costs.
In my opinion the most common over looked profit drainer is underestimating the liquidation costs of holding and selling the property. Things to keep in mind and budget into your holding costs are: commission payments to real estate agents, closing costs, mortgage payments, taxes, plus repair and maintenance costs. Also electric and water.
If your not up on the market your shopping in…your going to loose money.
Check out other property near the one your looking at investing in. what prices are they pulling in? Are they the same size? Lot size close to the one your looking at? Same style of structure?
PAY ATTENTON TO TERMS AND CONDITIONS
What areas can you leverage besides price and location. Financing?
In some cases a full price purchase can allow you to leverage the terms to mean a lower intrest rate or smaller down payment.
KNOW THE LOCAL MARKET
Good investors get in the habit of understanding the lay of the land. What is the local community like? where are the closest fire/police/EMS services? How good are the local schools? Dont rule out these questions. Make sure to look in to the last houses sold in the area as well as any selling trends you can find.
As the man said…it is all about location.
If your shooting for a long term tenet or residence then location is the second most critical thing to look at…however if you have a chance to turn a good profit for a ugly house in a less then 4 star area…that profit might out shine a nice little bungalow on the beach.
FIX AND FLIP AND FORCLOSURES
In the case of a fix andflip and some times a foreclosure. It is the job of the investor to facotr in the repair costs. A keen eye can save you lots of money in a very short time. (Not to mention a good understanding of home repair work)
With small repairs such as painting, minor landscape, and basic flooring, profits may be available but not really worth the risk. More significant profits are found with extremely distressed properties. Plumbing is corroded, the roof needs replacing, and the interior needs to be gutted and remodeled, but the seller is asking 50% of the market value and you can repair it for much less. Always factor in the amount of work that you are looking at?once you have a rough idea of the cost of the expense?add on another 5% as a buffer.
Understand the ZONE
Make sure you research the zoning for the property BEFORE you buy it. If you are thiking of adding a second floor or a granny flat…is the zoning available? Make sure you know before you commit to doing anything that will add or change the SQ footage of the property.
Understand that a single use zoned proerty is always cheaper then a multi use.
Classic zoning “no-no’s” are garages converted to bedrooms. Non-permitted granny flats and detached garages.
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Are you worried about investing your money in real estate? With the general knowledge media spurs that the market is in the tank, who would not feel the same?
Smart investors put a premium on complete and accurate information. Start questioning anybody’s credibility who claims that an investment is 100 percent secure or wise because whatever you do with your money certainly involves some form of threat. In this sense, it is advisable to KNOW what you must know in the business. Let us say your apprehension leads you to decide to do “nothing” with your money but instead keep it in the safety of your home. It still would not guarantee defense against other forms of destruction like fire, flood, even theft.
Here is another scenario: what if you opted to put your money in a bank safety deposit box? Would it be safer that way? Probably yes but only concerning its physical property. Remember that its buying power changes over time and that the bills you have are only worth the currency’s present value.
In the US, the annual rate of inflation is about 3 percent that translates to commodities increasing by almost 3 percent every year. In other words, your money is worth 3 percent less if it is being kept inside a safety box. Would you still perceive of it as “saving” when obviously your money’s purchasing power is gradually vanishing?
What about a savings account? These accounts are almost always protected by the FDIC (Federal Deposit Insurance Corporation) so there’s not much risk of your bank going under and you losing your money, but again you’re swimming upstream against the current of inflation. Even the best savings accounts out there barely give you enough interest to counteract inflation and often times inflation is outpacing your savings account interest earnings; but at least you’re not losing AS much!
How about stocks? I like to think of investing in stocks as investing in an “idea”. You don’t hold claim to any tangible item. You only “own” the fact that you have contributed funds to the “idea” that the entity you contributed your money to will somehow add value to itself and subsequently add a gain to the money you started out with.
The danger here is that you wouldn’t surely know how much control you have over such an “idea”. In real sense, you actually have almost none. Most people remedy this by doing extensive research on the company or entity’s track record as well as the people around it (to predict if the “idea” will work for all of you). Unfortunately, it’s hard to tell especially if you are unaware of all the factors involved. Unless you have the desired technical preparation (i.e. its your profession, or you devote your time on research), investing in stocks would save you from much greater risk. This leads us now to the best possible option, the real estate.
What primarily distinguishes real estate from the ones mentioned above is its being “tangible” (this presupposes that you can experience it with all your senses: you can see it, touch it, and even improve it.) Likewise, the risk involved as far as losing the physical asset is concerned seemed distant. If it does, there’s a wonderful thing called insurance! Can you apply the same in the case of stocks? Your property’s value also grows with inflation unlike paper currency so you do not have to worry about your investment losing its purchasing power every year.
Finally, the best thing in real estate is that the return of your investment is intensified! To name a few, you get huge tax breaks, gained equity through renter-paid debt reduction, equity gained through improvements, and many other surprising benefits. Can real estate investment protect your money? While it is true that no investment is a hundred percent safe, with forethought, I can definitely assure you that this is where you’ll find the security you’re looking for.