I recently found myself talking to a number of people who came to this country and became successful.

I’ve also spent some time with people who were born in America and who tell me that they can’t make it because there are no opportunities here anymore.

I find that hard to believe because I truly know in my heart that America is the only country where opportunities abound. The question you need to ask yourself is how willing are you to work for them.

Recently I was in Baltimore, Maryland. The driver who took us to our motel and a few other places is here from Ethiopia. He was telling us that he came to America seven years ago because he wanted a better life for himself and his family. He mentioned he was from a village where there were no cars. Villagers walk everywhere; the closest phone was 27 miles away. He laughed when he told us he had never even heard a car engine in his village.

He said he was one of the lucky ones because he got a visa, via lottery, to come to this country. He came by himself, left his family behind, not knowing the language, not knowing anything about America other than what he’d been told. Now here’s the most important part: seven years later he now owns the fleet of vehicles that runs 24/7, driving people around Baltimore, Washington and New York. I don’t want you to think he’s living in a hovel and eating beans at every meal to do this. I’ve noticed his thousand dollar suits! He says the best thing that’s ever happened to him was coming to America. He’s still concerned with his language (which is nearly perfect); he takes classes nightly at the local college to learn to read and write English. I just have to ask: if this gentleman can come to this country with no language skills, no driving ability at all, and within seven years own a fleet of automobiles and employ seven full-time drivers, how on God’s green earth can someone born in this country with all its advantages have  the audacity to say they can’t make it in America?!  America is not the place for the future? Says who??

I believe too many Americans have convinced themselves that they are victims and that someone owes them something. Too many people believe they’ve been wronged (somehow). The Government has helped propagate this fallacy by putting more and more people on government programs and telling them “your lot in life is not your fault, you’re not responsible, somebody else did this to you and we’re here to help you get them back”.

It’s not only people on the government dole who think this way. Just recently I was speaking to a friend of mine who commented that the American dream is over; we will be no better than a third world country within one generation. When I asked him why he felt that, his answer was amazing. He said there are no opportunities left in America between the government taxes and greedy corporations. The average man or woman doesn’t stand a chance and your best bet in life is to hope that you can have a place to live, a few dollars in your pocket and food on the table and wait for the government to help you when you need it. I was absolutely amazed with this defeatist attitude. I asked him why he felt he was such a victim and that his life was so miserable, (while we sat out on his back porch looking at the pool, drinking a cold one and looking at brochures of places he was thinking about for his family vacation.) He said he didn’t see his business going on for much longer and didn’t see America going on for much longer because too many people are depending on the government and the government is taking too many liberties when it comes to taxes and government regulation.

My friend sees America moving into second world status, like Europe, where people have a job, a little house, and depend on the government for everything ‘from the womb to the tomb’. Well, one thing for sure is that America was not born on government mentality, and government is not what has made this the greatest country in the world. America is not a victim country; America is the country where anyone can have a good life, money and freedom.

If you just look at these two examples, you can see where the problem lies. On the one hand are people who know they need to work to be successful, and who look for any opportunity. And on the other are people who believe the myth that they are victims of the economy, the corporate giants, Wall Street or whomever, and that only the government can help them now. Our founding fathers would be disgusted to hear these people call themselves Americans. Until people start taking responsibility for their own actions, for their own lives and for their own circumstances in life, this country will continue to have uncontrolled budget deficits, 10%+ unemployment, jobs going overseas, government spending with no results, and more and more people feeling that they cannot make it. Wake up, America!

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com                                                      paul@pauljdacosta.com

Everybody knows about the lack of financing and shadow bank inventories. But one major issue nobody is talking about is the crime rate on vacant properties.

How many times you have heard a realtor or investor say “My house on 123 Smith Way was broken into, they took all the copper, wire and air conditioners”.  When you talk to the police they say sure, it’s a major problem and they know not all the crimes are being reported. When you do report it you’re told to just report it to your insurance company they will pay. Sure, after the deductible. Then they raise your premiums or cancel you altogether. Also, the area gets a bad rap and their premiums as a whole go up and everybody complains. If you talk to people who buy copper, wire and used A/C units they know the stuff is stolen and don’t care. The one person I spoke to thinks the stuff may be stolen, but isn’t really sure, and anyway that’s not his problem. OK, so the same guy coming to you with A/C units of all sizes and ages week after week and you’re not sure? Come on man cut the BS. His response: Insurance is paying for it so who cares?

Just think how many times a day this happens all over the country. When a guy in a pickup truck has the bed filled with copper tubing all ages and sizes, I’m willing to bet it’s stolen.

In the past few weeks, I’ve had 3 houses broken into. The thieves took 2 air conditioners, copper pipes throughout all the houses, and in one house all the wiring was taken out of the wall as well! That one house alone now has over 10K damage. The police office said this happens all the time, just bill your insurance. The adjuster said hand over the check for your deductible and we’ll see about the rest. And yep, this is a big issue and there is nothing that can be done.

I disagree! This could be brought under control if the buyers of all these A/C units and copper wiring and all the rest of the stuff knew they would be held responsible for buying stolen goods with big fines and jail. They would stop buying stolen property, just need one good test case.

Buyers should be required to have the seller give driver’s license, Social Security, address and be required to give a 1099 and sign an affidavit that the product was not stolen. I understand some areas have laws on the books but they are not enforced so the buyers just don’t care because they know that nobody’s watching.  And if a buyer is caught not following the rules make it an automatic $ 50,000.00 fine and a 6 month jail sentence for him and the same for the seller. That would help fill the state coffers!

Yes this may be tough, but the cost to the local community is great. And in this economy to someone it might mean the difference between being able to get into a rental and having to live at the local Salvation Army for another month while the place they were going to move into gets repaired. As it stands now the thieves know it’s a free for all and the law is basically nonexistent. And the buyers of these stolen goods don’t care because it’s a quick profit with no repercussions. They must laugh out loud when a guy in pick up shows up with a bed full of A/C units.

I talked with my A/C guy, and the least expensive units for my houses are $2,300 each. But even he said I can get you a used one from I guy I know for around $400.00 each!!!! But they are more than likely stolen…I said how do they sell them? He said there are warehouses full of them in town and a few other dealers sell them as well. It’s the system, don’t fight it! And you want to know why your insurance is so high. So of course I’m getting the new ones since that is what I paid for in the first place. And the adjuster and I can go round and round because he won’t pay me that much for them. Life as a investor in the big world.

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com                                                      paul@pauljdacosta.com

This weekend I held another “Real Estate For The Next Decade” education day in Atlanta. We had a packed house of Realtors and investors. Guest speakers included experts in Real Estate Law, Taxation, and using self directed IRA’s in Real Estate. We also heard from a mortgage specialist from Bank Of America talking about the FHA Rehab loan. I spent time on exit strategies and my Three Tier System on property location, as well as on marketing.

All the attendees agreed that the information definitely pertained to their business, and said they really wanted to start using it. But the overriding complaint from the members was, “I’m so tired now and don’t have time to do things I need to do, how on earth can I do this stuff as well??” After hearing about 10 people say the same thing I knew too many of them were working in their business and not on it.

So I started asking the group some questions and we (speakers) were all were surprised at how many of these people were doing everything in their business. To give you an example: out of 32 Real Estate investors only 2 were using a property management company. The biggest concern for the rest was the cost of using a company, and of having someone other than themselves or their own people handle the repairs. I explained to the group that those costs were minimal if you just consider the costs involved in answering all those phone calls about exploding toilets or broken windows, then doing the repair job yourself. This is working in your business. I asked how many people needed money to buy more homes. They all raised their hands. Well, you can’t raise money if you’re fixing toilets. Raising money is working on your business.

Let’s handle the issues of cost.  All said the property managers’ fees were too high. Most property managers charge 8% of the rent so if you have a rent at $ 650 their fee is $ 52.00. This is nothing in the big picture of your business. They handle all the calls and the issues with tenants who don’t pay. You can negotiate that they also handle all evictions at their cost, and I do this. If you’re doing it, how much does it cost you in hard cash, not to mention your time and that’s worth a lot. And in most states you have to go in front of a judge. They look at property managers as just doing their job but an investor is seen as just a greedy slumlord trying to throw this poor person out just because they did not pay rent. Some get all self righteous and benevolent, and tell the tenant they can have 60 days to move out and there’s nothing you as the corrupt landlord can do about it. Yep, they do it and you know it’s true. So now did you save yourself any money?  Nope, just gave yourself more aggravation. And how can you take time to go to court if you have to answer the phone all the time?

Most of the investors thought you must use the property management fee schedule or else. I explained that’s not true and you can set your fees by the number of properties they handle for you. Also if you use a handy man you can have the property manager call that person first. In case of emergencies if your guy doesn’t answer then they can call their guy.

Some of the Realtors felt they could not work any harder and adding more would send them over the top. Their biggest hurdle was paperwork. They said they spent hours for each listing and sale. I then asked if they had someone in their office whom they could pay to handle that for them. Most said yes but did not want to pay the $ 295.00 fee. I asked them how much was their time worth per hour and what the value of a customer was. None could answer these questions. I also asked them if they had to pay the person up front or when the property sells? They all said when it sells. With this information we figured out an option where they might work a deal with the person for a professional discount, if they gave this person all their business. And if they don’t have to pay until the property closes it won’t affect the cash flow now. How many more listings or sales could they get if they were working on their business not in it?

And the last thing that was a complete surprise to me: most do their own taxes! I was stunned! One investor had 30 houses and does his own taxes because he said his accountant charges $ 1000.00 to do them and he thought that was outrageous. I was laughing because I thought he was too cheap! Imagine having 30 rentals with all those deductions and IRS tax laws and loopholes. He’s complaining about a $ 1000.00:  GOD help him if he gets audited!  Folks, there are many things you can skimp on. But for your business to be successful you have to do what you do best- work ON it, not IN it. There are many people who can handle paperwork, reception duties, repair duties, taxes. But only YOU know what it takes to make YOUR business go where you want it.

  1181 South Sumter Blvd Suite 301                       695 Mansell Road – Suite 120

                North Port, Florida 34287                                                           Roswell, GA  30076

                 941-716-2597                                                                             678-287-4800

 Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com

Last week at both of my REIA meetings members were asking how to figure the value of a piece of property when the comps are all over the place. And how to advertise in this market; just putting signs out is not working like it used to.

Since this is really two different questions let’s tackle them one at a time.

Let’s start with marketing your properties first. Some cities and counties have made it their life’s work to take down our signs as soon as we put them up. In my areas the ‘sign police’ have full time people trying to catch you in the act so they can ask you for a donation to the city bank account.

I’ve come up with something that works for me. I go to private property owners and ask if I can place my signs on their property. I offer to pay them with a $5.00 Starbucks gift certificate if they let me put my sign up. This way I avoid the sign police and I get traffic to my houses. I have other ideas but that will be for another post. Now the big issue: COMPS

Well this is the million dollar question. If I could be right on this one 100% of the time I would be on the Forbes 400 list. The biggest problem is that with all the foreclosed properties you can’t figure out what the real value is. Here’s how I handle it.

First, I look at all the foreclosed properties and figure out which ones need repairs and which ones are in good shape. I get this from the MLS or Realtor .com site. This helps me separate fact from fiction and I get a good idea as to what’s happing in my area. Next, I see how many of those homes are back on the market, under repair or being rented out. Then I get the Sold’s in that area that were not distressed. (Sometimes none were sold that were not distressed). I also try to get rental comps as well; this will help me determine price to some extent. I then get a full appraisal done because this will help get a better picture of value from a third party. All these little things help to put a value on your property, and give you credibility when someone from the lender’s office or tax office asks where you got your numbers. But remember, in the end the value of your property is only what someone is willing to pay for it.

Paul J Da Costa

Has been a Real estate Investor for many years. He is a licensed Realtor in Georgia with Keller Williams Realty Consultants.

Paul can be reached by E-Mail  at paul@pauljdacosta.com

(Secure and Fair Enforcement for Mortgage Licensing Act of 2008)

According to the HUD interpretation of the SAFE Act anyone who sells any single family house or 1-4 units and does not live in it as their primary residence, and who wants to offer the buyers the benefits of a seller carryback note is a potential criminal who needs to be watched, regulated, licensed and taxed. This despite the fact that “seller financing,” “seller carrybacks,” “seller-held notes” or any other synonym doesn’t appear anywhere in the Act — Source the paper source

These property sellers have to have government approval via licensing before they hold a note or even discuss terms of a note with a buyer who is not a member of their immediate family.  If they are not licensed they will be fined.  If they don’t pay they will go to jail. Source the paper source

Ok, now that I have your attention we can move forward.

We investors and realtors must pay attention to all the laws that are changing in our business daily and the SAFE Act is a great example of this. I have scoured the internet and have spent time with both of my lawyers to make sure I am following the rules.

You need to know that it’s not as bad as it looks. Some people are making it sound like the end of seller carrybacks or seller held notes.  But only the rules have changed and you need to adjust to them, period.

You can find copies of the SAFE Act on the ‘net so I’m not going to talk in detail about it here. Basically the Act is designed to protect consumers from getting loans they can never pay back or from not understanding what they are signing. So the feds have come up with this Act which requires testing and designates who can talk about mortgages and who can discuss terms of the loans. This is where seller carrybacks or seller financing comes into effect.

I want to look at this as an investor first and then as a realtor. As an investor who has used owner financing, I find it’s a good way to sell property and to improve your bottom line. There are a couple ways this could be done. The first is investors loaning money to other investors so they can buy property and the second is investors holding seller carry backs to the end user.

Investors loaning money to investors, according to both my attorneys, is not as a big of a problem as loaning to an end user. But they made the point of saying the investor lender must have on file all the requirements for a standard 30 year fixed mortgage. Yes, that means you need an up to date credit report, a complete mortgage application with documentation and proof of income, and proof the buyers can pay the loan back. And you need to be careful of interest and points charged as well. You must supply a good faith HUD and all required disclosures.  If you use these tools and consult an attorney, follow all the laws and use proper disclosure you should be ok.

Now if you are an investor selling to an end user you have a different set of requirements and you need to take heed. You are the one who has a “BIG TARGET ON YOUR BACK” if you continue to offer owner financing like in the past. At that time some investors just took their buyers’ deposit, gave them a loan with a high interest rate and waited for them to default on payments. Then they would take the house back and sell it again and again with the same deals. I think you’ll agree with me that those days are over, and good riddance.

The law states that you must be a licensed mortgage broker to offer and discuss terms of a mortgage. It doesn’t say you can’t offer owner financing, it says you must have a mortgage license and they (Buyer) must be able to pay for the loan.

So you need to hook up with a local mortgage broker who will handle all the requirements to meet the law. They will need to do a complete mortgage application, as already mentioned. Debt to income ratios need to be in line with standard FHA guidelines. Loan to value ratios should be the same as FHA.  In my opinion it’s going to be hard for the government to say you misrepresented your loan or cheated someone if you used all the same guidelines as FHA. And the loan should be a fixed 30 year with no points or pre-payment penalties. Very important that you own the property free and clear or pay it off when you offer the loan to the new buyer. None of this ‘wrap-around mortgage’ or ‘subject to’ stuff. If you do business that way, then you default and the end user ends up losing the home you’re going to jail quick, fast and in a hurry. Bottom line is that Congress and the banking industry think of us as parasites taking advantage of people and needing to be watched carefully. They’re more than ready to make an example of someone so use your brain.

As Realtors we have special issues to deal with relating to this law and we need to be careful we know all the facts. A good many realtors are unaware of the law or have not taken the time to look it up. Each state has different views and different interpretations. So first thing is to call your local board and get the most up to date information they have. Spend some time on BING and GOOGLE. As a realtor you cannot negotiate a mortgage without a mortgage license. This causes us a potential problem when we are helping our seller and buyer to negotiate a contract and the seller wants to offer financing. The issue here: is this their primary residence (and how long have they lived there -Check for IRS rules here) or are they an investor. Every state will be a little different here but you must know the Federal Law states that a Licensed Mortgage Broker can discuss terms.

My Real Estate attorney says that if he had a Real Estate license the first thing he would do is double the E and O insurance and triple the malpractice insurance.

We Realtors must make sure we do a good job for our clients and steer clear of any part of the seller financing option if there is one. I also think that each broker office needs a disclaimer form that states the law and how they need to proceed with owner financing. I would interview at least 3 mortgage brokers/lenders and find out if they will be offering loan services for owner financing. I would also look up private lenders and get their information so you can offer them to your sellers and buyers.

To summarize: New financing laws and regulations are being put in place frequently and rapidly. We must keep up with them, pay attention to those that affect our clients and our business and make sure we are doing the right thing and also protecting our selves and offices.

Over time the heavy hand of the government will loosen its grip and we will get a clearer understanding of what we can and cannot do. But in the mean time you need to be very careful how you operate your business.

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at

941-716-2597

                                 paul@pauljdacosta.com

Real Estate investor

Ok, now that I have your attention we can move forward.

??      

Since the housing crash there have been a number of articles and talking heads lamenting homeownership. The opinion is that it’s just not a good investment anymore and for some people homeownership is just not in their best interests.

Let’s look at this from a long term prospective. Owning a home adds pride for the home owner as well as the neighborhood. You can drive down most streets in most any neighborhood and tell which homes are rented and which are owned by the people living there. Home ownership adds stability to the community and to the tax base. Crime is always less in communities where the majority of homes are owned instead of rented. And let’s not forget about a home’s value. Pride in ownership translates into taking care of the property, adding stability and possibly even increasing its value. Think back to your grandparents or another family member. They bought homes, worked in the community and stayed there till they passed on. Either the surviving spouse or the heirs sold the house and in almost all cases they made a large profit. My own grandparents bought a house, lived there for 35 years and then sold when my grandmother moved to Florida with us. My grandmother was shocked when the house sold for $75,000; they bought it for $ 6,500.00.  

I know you’re going to say times are different; people don’t stay in one place anymore. Yep, you’re right, but in most case they still are better off owning instead of renting.

Some ‘experts’ have the opinion that homeownership is dead. Housing values have plunged and people are losing their shirts. Yes people did buy in the heat of the market. And now the crash has caused their values to plummet. I know you’ve heard this over and over, but it happens to be the brutal truth: for a large number of those deals the people should have never have been allowed to buy the homes, and ‘creative financing’ should have been suspect. No money down deals, loans such as pay option ARM’s  (where you paid a smaller payment with the interest charges adding to the balance on the back end) seemed too good to be true. No one listened.  Even worse, people making 100K were buying a house that cost 700K with no money down with loans that guaranteed failure. ‘No document’ loans were really popular (where buyers were saying they made twice as much as they did and agreeing to 5K a month in payments plus taxes and insurance). And let’s not forget investors who bought homes that they never saw in towns they couldn’t even find on a map. In my town of North Port, Florida I have talked to people who did not even know where North Port was when they bought 2 or 3 houses no money down  and thought they were going to make killing on each one. Well, they know where the city is today, that’s for sure.

How about the people who bought their homes in the late 90’s or early 2000’s and saw the value of the homes double? They went from a low 30 year fixed mortgage to a higher rate 2 year ARM with cash out so they could buy that new truck or a couple of vacations.  That low 2 year mortgage payment doubled when the loan readjusted and now they could not make the new payments.  Add that to the poor economy, job losses, property tax increases, insurance costs increasing and you have the real estate disaster we see. But does all this really justify not owning a home?

In my opinion the cynics are wrong, wrong, WRONG! Not in my lifetime have people been able to buy a home at such great prices and at such low interest rates. If the banks would loosen up the financing to people who could actual afford the home purchase and FHA would stop putting silly requirements (such as the 20% 90 day rule) and banks stop adding their own inane rules we could actually work our way out of this mess.

In my home market here in North Port, and on my own street you can buy a 3 bedroom 2 bath 1780 square foot home for about $100,000. If a buyer were to put 10% down ($10,000) and borrow $90K at 4.75% (30 year fixed mortgage) the payment would be $ 469.48 plus taxes and insurances. The couple next door to me rents this exact house and pays $925.00/ month. Even if taxes and insurance are $350.00/ month it’s still better to own than rent. We will eventually have equity increases when our market gets back on its feet. The interest and property taxes are a write off as well. (But I’m not an accountant so check with your CPA as to your taxes).

In some markets you can buy houses in the mid $50’s to high $70’s and if they qualify for FHA with 3% down the payment would be less than rents in that same market. Let’s look at the payment: $ 70,000 loan amount 5.0% interest 30 years payment=$375.78 plus taxes and insurances.  

What needs to happen is a rational discussion about homeownership and the responsibilities that come with it. People need to understand that when they buy a home they hold its future value in their hands. If they let the place go or keep it up, they control the results. Also people who buy a home must feel secure about their jobs and life in that community. But all we hear is America’s best days are behind her and we are all doomed. This sells news stories (like any bad news) but it just adds to the angst of buyers and they become afraid to make the decision. If the market is going to improve buyers and sellers must realize home prices have changed and it’s one of the best times to buy. Or if you’re a seller and you’re holding out for a better offer you need to really look at the deal you have and how much it is going to cost you to hold on to the house until ‘better’ deals come your way.

The bottom line: for most people owning a home is better than renting in the long run. You must have the courage to look past the cynics and gloom and doom people. You must have the patience and the faith to know that the market will recover. Make the decision for yourself not letting someone else make that decision for you.

          Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com                                                      paul@pauljdacosta.com