Naturally you should be careful when you get started in commercial real estate investing.  Your education will bear some wise investment.  This type of real estate is very similar in some ways to residential real estate.  You will find that in other ways they are fundamentally different.  You cannot count on your experience in one area to help you succeed in the other.

Here are some things you should know to get started learning about commercial real estate investing:

• Be sure to factor in local market conditions. – The commercial market is not the same as the residential market.  You will still take a loss if you have a great property but no market for it.  This means you must check  the conditions.  Always make sure you can use the commercial property.
• Zoning issues are important – Commercial property can only be used in accordance with zoning laws.  Be sure that your intentions work within these bounds.
• Always do due diligence – The requirements for commercial property conditions may be more stringent than for residential properties.  Make sure that your property meets all guidelines.  You need to be clear on environmental, building system and structural guidelines.  Be sure that you also check on zoning, land-use, title and survey regulations.
• Make sure that you have real operating numbers – You need to know exactly what this building actually costs.  The net operating income will ultimately determine the value.  Take a building that costs 1.99 million to run and brings in 2 million.  You will not have much real value there.
• Establish exit strategies – Make sure you have an opening to get out if things go wrong.  You also should be prepared for things to go right.

Clearly, commercial real estate investing is not like residential.  Of course, both have wealth creation in common.  Knowing these basics can help you really get going on commercial real estate investing.

When getting started with commercial real estate investing you should, of course, take care.  Your education will bear some wise investment.  Residential real estate and this type of real estate are, in some ways, very similar.  In other ways, it is fundamentally different.  Experience in one does not mean that you will be successful in the other.

Check out some commercial real estate investing basics:

• Factor in local market conditions – The state of the commercial market can be quite different from the state of the residential market.  You will still take a loss if you have a great property but no market for it.  You must check out the conditions carefully.  Always make sure you can use the commercial property.
• Be aware of the zoning – All commercial property use will be restricted by zoning laws.  Make sure your intentions match up with these laws.
• Be thorough with due diligence. – Zoning on commercial property is often more stringent than residential.  Make sure that your property meets all guidelines.  You must be certain of environmental, building system and structural requirements.  Zoning, land-use, title and survey regulations are also important.
• Make sure that you have real operating numbers – Your numbers on the cost of the building must be precise.  The net operating income determines the value.  What if there was a building that cost 1.99 million to run but brought in 2 million?  There is not much actual value there.
• Check your exit strategies – Be able to get out if things go wrong.  Also, be sure you can maximize your rewards when things go right.

You should see now that commercial real estate investing is highly unlike residential.  Of course, wealth creation is common for both of them.  These basics can help you really get started in commercial real estate investing.

You must be diligent, of course, when getting started in commercial real estate investing.  Your education will bear some wise investment.  Residential and commercial real estate are, in some ways, quite similar.  However, they will be fundamentally different in other ways.  You cannot count on your experience in one area to help you succeed in the other.

Here are some things you should know to get started learning about commercial real estate investing:

• Be sure to factor in the local market – The commercial market is not the same as the residential market.  If you have a great property but no market, you lose.  You must check out the conditions carefully.  Make sure that you will be able to use the commercial property.
• Know about zoning – You have to use commercial property in accordance with zoning laws.  Be sure that your intentions work within these bounds
• Do due diligence – Commercial property zoning is often more stringent than residential.  Make sure that your property meets all guidelines.  You must be certain of environmental, building system and structural requirements.  It is also important to check zoning, land-use, title and survey regulations.
• You must have the right operating numbers – Your numbers on the cost of the building must be precise.  Value is dependent on net operating income.  What if there was a building that cost 1.99 million to run but brought in 2 million?  You will not find much real value.
• Always have exit strategies – Make sure you have an opening to get out if things go wrong.  Also, be sure you can maximize your rewards when things go right.

Clearly, commercial real estate investing is not like residential.  Of course, wealth creation is an option in both of them.  Knowing these basics can help you really get going on commercial real estate investing.

Home Wealth University.com is the World’s First and Only Double Acceleration Matrix. This new Internet stay at home business opportunity is perfect for the “Internet Newbie.” Most people starting their first home business do not have a lot of working capital, but this opportunity makes it affordable for everyone according to Robert Allen.

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There is a great deal to know about real estate investing.  To get the most out of real estate investing education, be familiar with basic information ahead of time.  No matter whether you are interested in short sales, bulk reo sales, virtual real estate or just enhancing your knowledge as a real estate investor, knowing some real estate investing basics will help you succeed.  You should review these three real estate investing basics to learn things e

• You always will get a positive result from investing in real estate investing education. You can create thousands of dollars in potential wealth with each real estate deal.  Knowing how to get that wealth is the key to success.  Learning as much as possible about real estate will increase your odds of success whenever you do a real estate deal.  A small investment in education has the ability to yield big results when it is implemented.
• Any economy allows for success in real estate investing. Often people think that you can only be a success in real estate when the economy is good.  In reality, a bad economic situation is not bad for real estate investors.  Likely you will be able to find properties at deep discounts.  Also, you might find deals that simply could not exist in a booming economy.  Real estate investing often is what turns the tide for poor economies.  When the economy is not so good, short sales, bulk reo sales and virtual real estate are great.  Knowing how to do these deals can create wealth for you and save others from major financial difficulties.
• You do not need to have a great deal of money if you want to be a successful real estate investor. You can make real estate investing a success regardless of how much money you have.  There are many deals that will let you use other people’s money to do them.  Private lenders will lend you their money if they think you are a good investment.  The best way to look like a solid investment is to have an in-depth knowledge of real estate investing.  This will enable you to show people who have money for real estate investing but may not know how to use it that you are a good investment.

Real estate investing is a great way to generate wealth.  You will be able to create an income no matter what the economy.  By using a base of knowledge of real estate investing, short sales, bulk reo sales and virtual real estate you can create success for yourself.  Knowing the basics of real estate investing will help you succeed as a real estate investor.

Real estate investing makes people think of money.  You will see a lot of good reasons for this.  Real estate is something that is only available in limited quantities.  After all, manufacturing more land is impossible.  As a result, real estate is nearly universally thou

However, it must be acknowledged that conventional views on real estate are changing.  This certainly has something to do with the economy.  It is not uncommon to find people who are afraid of real estate investing.  They think there is no money there anymore.  They may also believe that they cannot succeed without investing large sums of their personal money.  Both of these beliefs are dead wrong.

Real estate investing is an ideal way to create wealth regardless of the market.  “Down” markets may actually be the rifest with opportunity.  If you are able to think creatively then real estate investing will be for you.

Here are some basic principles that you need to understand in order to succeed in real estate investing:

• Stay creative – The best real estate investors can see potential profits everywhere.  Particularly when it comes to today’s market, the ability to see creative financing is key.
• Always know every one of your options. - Real estate investing is by nature a high stakes game.  Never make investments that you don’t really understand.  Knowing what you are doing is vital to your success.
• You can get better returns by investing in your education. – It is common for real estate investors to put money in properties that yield many times that investment.  Think of your education in this way also.  The ability to use a strategy correctly can yield serious returns.  Of course, if you do not use important resources you may experience loss.

Real estate investing represents a perennial opportunity.  However, the faces of real estate investing can be very different depending on the state of the economy and the real estate market.  As a real estate investor, you must be aware of every opportunity.  Keeping an open mind in real estate investing is vital to your success.

I have noticed a lot of comments about the possibility of a deficiency balance after a short sale.  I have also received numerous email questions and telephone calls from real estate investing agents asking about what to do if the bank release does not specifically state that the short sale is in full satisfaction of the debt.

It used to be that the SMIs would state specifically in the bank release documents various wording that would indicate that the short payoff is a forgiveness of any deficiency balance, or that it is in full satisfaction of the debt.

However, this past fall, we’ve noticed a gradual change in the wording, first they would not specifically state that it is in full satisfaction of the debt, but the SMIs would generally not permit the servicing lenders to go after the deficiency balance.  Now more of the release documents state specifically that it is not in full satisfaction and they specifically leave open the possibility of seeking the deficiency balance even though in fact they do not pursue it.

Historically, short sales and foreclosures generally did not involve a deficiency balance in real estate investing because most properties in the past appreciated so fast that a resultant sale would bring in more than the balance on the loan plus all costs.  Indeed many REOs if kept long enough would often appreciate so fast that all a lender needed to do was keep it for a while and they could get their money out of it. There were many exceptions of course, but it was not uncommon in certain parts of the country.

Pursuing the deficiency

The policy whether the servicing lender could or would go after the deficiency balance first starts with the servicing agreement between them and the SMI who owns the loan.  I have seen a number of different terms, with no clear policy, leaving the decision either with the SMI or the servicing lender or the servicing lender must consult with the SMI.

Next, the policy decision goes through a public relations and political analysis.  With the federal government so actively involved in the explosion of foreclosures, bailout programs, and attempts to reduce foreclosures, there is presently negative pressure on lenders to not pursue deficiency balances.  There were more than 70 bank failures this year and many banks are still on the edge, so they are experiencing contradictory pressures to pursue deficiencies and to leave them alone.  This pressure will help determine whether to go after only the most egregious cases or to expand the criteria.

Finally, the decision for pursuing a deficiency balance involves the nexus between the capacity of their legal, bankruptcy, and collections departments and the facts of each case.  A certain predictable percentage of their customers will file bankruptcies, so these entities will determine how many and which customers to pursue for the deficiency.

The customers they are likely to pursue are customers against whom the lenders believe they may be able to collect.  If the servicing lender owns the note, they may be more aggressive.  I recently had a case in which the second mortgage holder, who also owned the note, refused to permit a release of lien for a widowed man in his late 60’s, medically retired and dying from asbestos related cancer, with no assets beyond his exemptions, and living off of exempt medical retirement income.  He is judgment proof and therefore uncollectible, but they pursued him merely because they did not like this debtor.

Normally, though, the decision to pursue is based upon the collectibility of the debtor.  A medical doctor in his 40’s, with a good income who ended up in financial trouble when he lost business because of mismanagement of the clinic for whom he worked, who has now moved to a new area and set up practice, can be rehabilitated in a relative short period of time.  The deficiency is large, so they will likely pursue this customer.However, a factory worker and spouse, one of whom is suffering from a deteriorating medical condition, who live from payday to payday with a deficiency balance of $30,000 may likely be left alone.  Don’t get hung up on the dollar amount quoted, because each entity will establish their cutoffs.

How to know when the borrower is in the clear

The current common practice to leave open the possibility of pursing the deficiency balance does not leave the borrowers hanging out there forever in fear of a lawsuit any moment for the balance.  Each state has laws called “Statutes of Limitations” or “Limitations on Actions”.  These are laws that place a time limit after which the creditor can no longer sue a debtor for a debt.  One state has a statute of limitation for contracts of 6 years.  Other states have shorter or longer periods of time.  Even the IRS does not collect tax debts after 10 years, with exceptions.However, you will say, 6 years is a very long time.  This is true, but there are some ways to know sooner.

First, if the lender required a Promissory Note for part of the deficiency, it is highly unlikely that they will seek more.  Indeed, if they did, the lender may face some legal trouble, for which they are fully aware.

Secondly, if a lender is going to seek a deficiency, it most likely will occur within the first year.  Each year, in January, the lenders must issue their 1099s.  A 1099 is the form they use to report to the IRS the amount that has been forgiven in a short sale or foreclosure.  So, if the borrowers receive a 1099 for the deficiency balance, the lender may be “estopped” thereafter from pursuing the debtors.  The lender receives a tax benefit from the forgiveness, and the borrower may incur a taxable event as a result, so the lender may be estopped from further action.  For most borrowers, that taxable event is not real, but only potential because the lender does not know if it is or not.

Third, the current practice is to request a promissory note for part of the deficiency.  So it is currently safe to assume, in most cases (there are exceptions), that if there is no promissory note demanded as a condition to approval, there will not be a deficiency balance sought.

This is only a guide, and in no event should be relied upon, because there are differences around the country and with specific lenders and SMIs.  I am not providing legal advice, only general, very general information.Please note: I have endeavored to provide general guidelines.  Because there are a lot of  SMIs, and even greater numbers of servicing lenders, many thousands of varying loan products, and often different procedures in different states or regions, many of you may find cases that deviate from the above discussion.  Please keep this in mind.

There have been some interesting developments related to real estate investing loan modifications and the Obama administration’s response to the less-than-successful policy of pushing loan mods as a solution to the foreclosure crisis.  Here are a few recent articles I thought to be interesting:

Barrack Obama uses his decreasing political power to exert pressure on top mortgage companies to modify more loans – see article from CNBC

Apparently, the Obama administration doesn’t understand that lenders frequently have more financial incentive to foreclose rather than modify a loan – see article from NY Times

The mortgage industry realizes the politically negative ramifications of being perceived as foreclosure-mongers and respond to the NY Times article – see the CNBC article

So if you wonder why your loan modification that seems to be a “no-brainer” isn’t being approved, it may be because your lender expects to make more money in junk fees and other charges than they could by modifying your loan.  Of course, I’m no insider in the mortgage business.  If you are, I welcome your comments about this – please use the comments area below.

Thank you for reading real estate investing articles… have a great day!

A big sticking point for many people in real estate investing world who like to use the Subject To strategy for property acquisition is: How do I handle property insurance? The issue isn’t as simple as you think, because:

Home owner’s insurance is always required by every mortgage – it is not optional, so you can’t merely cancel the former owner’s policy without risking the mortgage lender placing a (very expensive) forced coverage policy on the property

It may be unwise to simply rely on the former owner’s policy for coverage, because in the event of a claim, the former owner would no longer have an insurable interest in the property due to their transfer of ownership to you. Making yourself the beneficiary on the former owner’s policy might work, but it’s also probable that such a change will give rise to scrutiny from the mortgage lender, and the more scrutiny your deal receives, the more likely it becomes that the lender may exercise their Due-on-Sale clause rights

Before I give you my thoughts on this, I’d like to point out that you must speak with your own attorney and insurance professional about this issue. Even after years of Subject-To real estate investing transactions being done on a daily basis, there’s still controversy about this issue, so seek out professional counsel to assist you.

I know of 3 different approaches to handling the issue of home owner’s insurance with subject-to transactions:

Leave the existing policy in place, and get an entirely separate policy that fully protects you and is not associated with the mortgage. This option is by far the most conservative and arguably most reliable. Simply leave the former owner’s policy in place and continue to pay for it so as not to attract the attention of the mortgage lender (the lender is notified every time there is any change to the former owner’s policy). The only down side to this approach is that it’s expensive: You’ll effectively be paying for 2 separate home owner’s policies at all time.

Add yourself as a co-beneficiary or a “named insured” party on the existing policy. This can give you some right to claim benefits under the old policy if a claim is necessaryIf you placed the property in a land trust, change the beneficiary/named insured to the land trust itself. The notion of using a land trust to “hide” the transaction from the mortgage lender has some basis in law, as the Garn-St. Germain Act made it a federal law that a home owner can place their own property in certain types of trusts without concern for a lender using the Due-on-Sale clause against him, but lenders have also begun to scrutinize some land trust transactions to make sure that all of the requirements of the Garn-St. Germain act are being met – and in the case of most Subject-To transactions, those requirements certainly are not being fulfilled.

To reiterate, option #1 (purchase of an entirely separate policy) seems the most conservative and reliable. But confer with your attorney and insurance professional before you decide.

Thanks for reading http://realestate.BryanEllis.com!

I have noticed a lot of comments about the possibility of a deficiency balance after a short sale.  I have also received numerous email questions and telephone calls from agents of real estate investing asking about what to do if the bank release does not specifically state that the short sale is in full satisfaction of the debt.

It used to be that the SMIs would state specifically in the bank release documents various wording that would indicate that the short payoff is a forgiveness of any deficiency balance, or that it is in full satisfaction of the debt.However, this past fall, we’ve noticed a gradual change in the wording, first they would not specifically state that it is in full satisfaction of the real estate investing debt, but the SMIs would generally not permit the servicing lenders to go after the deficiency balance.  Now more of the release documents state specifically that it is not in full satisfaction and they specifically leave open the possibility of seeking the deficiency balance even though in fact they do not pursue it.

Historically, short sales and foreclosures generally did not involve a deficiency balance because most properties in the past appreciated so fast that a resultant sale would bring in more than the balance on the loan plus all costs.  Indeed many REOs if kept long enough would often appreciate so fast that all a lender needed to do was keep it for a while and they could get their money out of it. There were many exceptions of course, but it was not uncommon in certain parts of the country.

Pursuing the deficiency

The policy whether the servicing lender could or would go after the deficiency balance first starts with the servicing agreement between them and the SMI who owns the loan.  I have seen a number of different terms, with no clear policy, leaving the decision either with the SMI or the servicing lender or the servicing lender must consult with the SMI.

Next, the policy decision goes through a public relations and political analysis.  With the federal government so actively involved in the explosion of foreclosures, bailout programs, and attempts to reduce foreclosures, there is presently negative pressure on lenders to not pursue deficiency balances.  There were more than 70 bank failures this year and many banks are still on the edge, so they are experiencing contradictory pressures to pursue deficiencies and to leave them alone.  This pressure will help determine whether to go after only the most egregious cases or to expand the criteria.

Finally, the decision for pursuing a deficiency balance involves the nexus between the capacity of their legal, bankruptcy, and collections departments and the facts of each case.  A certain predictable percentage of their customers will file bankruptcies, so these entities will determine how many and which customers to pursue for the deficiency.The customers they are likely to pursue are customers against whom the lenders believe they may be able to collect.  If the servicing lender owns the note, they may be more aggressive.  I recently had a case in which the second mortgage holder, who also owned the note, refused to permit a release of lien for a widowed man in his late 60’s, medically retired and dying from asbestos related cancer, with no assets beyond his exemptions, and living off of exempt medical retirement income.  He is judgment proof and therefore uncollectible, but they pursued him merely because they did not like this debtor.

Normally, though, the decision to pursue is based upon the collectibility of the debtor.  A medical doctor in his 40’s, with a good income who ended up in financial trouble when he lost business because of mismanagement of the clinic for whom he worked, who has now moved to a new area and set up practice, can be rehabilitated in a relative short period of time.  The deficiency is large, so they will likely pursue this customer.However, a factory worker and spouse, one of whom is suffering from a deteriorating medical condition, who live from payday to payday with a deficiency balance of $30,000 may likely be left alone.  Don’t get hung up on the dollar amount quoted, because each entity will establish their cutoffs.How to know when the borrower is in the clear. The current common practice to leave open the possibility of pursing the deficiency balance does not leave the borrowers hanging out there forever in fear of a lawsuit any moment for the balance.  Each state has laws called “Statutes of Limitations” or “Limitations on Actions”.  These are laws that place a time limit after which the creditor can no longer sue a debtor for a debt.  One state has a statute of limitation for contracts of 6 years.  Other states have shorter or longer periods of time.  Even the IRS does not collect tax debts after 10 years, with exceptions. However, you will say, 6 years is a very long time.  This is true, but there are some ways to know sooner.

First, if the lender required a Promissory Note for part of the deficiency, it is highly unlikely that they will seek more.  Indeed, if they did, the lender may face some legal trouble, for which they are fully aware.

Secondly, if a lender is going to seek a deficiency, it most likely will occur within the first year.  Each year, in January, the lenders must issue their 1099s.  A 1099 is the form they use to report to the IRS the amount that has been forgiven in a short sale or foreclosure.  So, if the borrowers receive a 1099 for the deficiency balance, the lender may be “estopped” thereafter from pursuing the debtors.  The lender receives a tax benefit from the forgiveness, and the borrower may incur a taxable event as a result, so the lender may be estopped from further action.  For most borrowers, that taxable event is not real, but only potential because the lender does not know if it is or not.

Third, the current practice is to request a promissory note for part of the deficiency.  So it is currently safe to assume, in most cases (there are exceptions), that if there is no promissory note demanded as a condition to approval, there will not be a deficiency balance sought.

This is only a guide, and in no event should be relied upon, because there are differences around the country and with specific lenders and SMIs.  I am not providing legal advice, only general, very general information.

Please note: I have endeavored to provide general guidelines.  Because there are a lot of SMIs, and even greater numbers of servicing lenders, many thousands of varying loan products, and often different procedures in different states or regions, many of you may find cases that deviate from the above discussion.  Please keep this in mind.