Tag Archives: money strategies

Free Download “Saving Your Future”

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Learn how to money works, build wealth, and protect your income and assets.

There is no magic for building a solid financial foundation.

You can make more money. The old way of thinking—getting a good job, working until 65 and retiring happily—is over. Nowadays you should be more proactive in your thinking about making money.

If you look for it, you’ll find it.

Make it a mission to change your family’s financial future.

1. Increase your cash flow. Make more money when you can, while you can. Have multiple sources of income.
2. Spend less. Cut down your expenses. It’s not how much you earn that counts. It’s what you keep. Set aside 5, 10, 15% of your income to savings.
3. Reduce your debt and liabilities. Interest on the debt will interfere with your goal for long-term asset accumulation.
4. Understand how money works. You must take time to understand how money works. You must learn how to make money work for you.
5. Have a financial goal. Set up a plan of action.
6. Take care of your responsibility. Have proper protection.

This book is the first step to your financial freedom...

How to Make Money Work for You

Understanding how money work is the first step to building wealth.

Remember, money is a tool. When used properly, money can build you great wealth. But, when used in the wrong way, you can be digging your own grave.

Consider this your user guide to money.

Wealth Formula

The Power of Time

Time can be your worst enemy or your greatest ally. No matter where you are in life or in building a financial strategy, the key is to begin saving now. The sooner you begin, the less money you need to set aside to create a solid financial future.

Pay Yourself First & Save Early

Mr. Save Early saves $3,600 per year for 7 years in an 8% tax deferred account.

Mr. Wait Longer starts saving the same $3,600 per year for 17 years in an 8% tax deferred account, 7 years later than Mr. Start Early.

Procrastination is one of the main causes of failure.

Pay yourself first each month, so you have money to invest and take advantage of the time and compound interest.

Don’t wait until you pay off all your debts to invest. That’ll be too late.

The Wealth Formula only works with early investing, high rate of return, and minimizing tax.

Make small changes in your lifestyle and spending habits to save at least $10 a day.

Related article: Turn Your Cash Flow from Negative to Positive

The Rule of 72 is an estimation of how long it would take for any amount of money to double.

You simply divide the number 72 by the rate of return, and the result is the approximate number of year for your money to double.

Take a look at the following hypothetical example that shows how an initial $10,000 investment grows over time.

How Fast Can Your Money Double?

Notice how a $10,000 investment at age 29 doubles faster as the rate of return increases. Your $10,000 compounded to a grand $640,000 at age 65 with a 12% return versus a merger $40,000 at 4% return.

That’s the magic of compound interest - money keeps making money, which continues to make more money, and saving early.

The Magic of Compound Interest

That’s exciting…but consider the interest rate on your credit card.

Is it 18%? Or higher?

The Rule of 72 can work against you just as powerfully as it can work for you.

The Rule of 72 does not consider impact of taxes. Taxes can increase the amount of time it takes for money to double.

Money or wealth needs time and compound interest to grow.

KNOW YOUR INVESTMENT RISK

How Fast Can You Recover From a Loss?

Stock market fluctuation can greatly influence how fast and how much your money can grow. Any loss will take an even great rate of return to recover. Therefore, you want o avoid risk of loss as much as possible.

Don’t underestimate even a small loss of 5%. It’ll take 10% to recover back to your previous position. A 20% loss will take a hefty 40% return to recover.

So proceed with caution when investing in stock market, if that’s your choice of investment.

Related article: Invest in Real Estate

Impact of Tax and Inflation

In addition to procrastination, tax and inflation are also enemies when trying to build and maintain savings.

Tax and inflation is like the infection that eats at your money tree. However, you cannot avoid tax and inflation completely.

But you can increase your odds to minimize their damage.

Related article: How to Become Rich and Build Wealth

Can You Afford Long Term Care?

Will you need long term care?

Most of you would answer “I don’t know”.

I don’t know either.

If I have a crystal ball that can tell the future, I would give you my honest answer.

Unfortunately, I don’t.

But my best advice for you is “be prepared when the need for long term care does arise in your future”.

And here’s the statistics.

https://instagram.com/p/BSVI-X4Fimr/

Let’s see what options are available.

Medicare covers only a portion of long-term care costs up to 100 days; 20 days are provided at no cost and the remaining 80 are at a significant co-pay for the insured.

Long-term disability covers your lost income only, but doesn't pay for any LTC needs. Oftentimes, when your job ends, so does your coverage.

Health insurance does not cover long-term care expenses. Medigap policies are health insurance and also do not cover LTC expenses.

Medicaid covers long-term care expenses for individuals with countable assets of $2,000 or less and care could be limited to a nursing home. You can no longer just transfer all your properties to your children to be qualified for Medicaid. They look at your assets in the past 5 years. If you sold a house in the last 5 years, they want you to spend down all that proceed until you’re poor enough to qualify.

If you don’t want to spend down all your asset to qualify for long term care…can you afford to pay out of pocket?

Is this a good option for you?

You can always pay for long term care out of pocket. But how deep is your pocket? Do you have the assets to pay for long-term care, and how long can that asset support your long-term care?

Rising Long Term Care Cost

Can your family members take care of you when you can’t take care of yourself?

Even the most responsible family may not be prepared physically, emotionally or financially to care for their loved one. 53% of Americans caring for a loved one lost income due to the demands of providing that care.

Hidden Costs of Long Term Care

Long-term care insurance provides funding to cover home healthcare, assisted living, nursing home and even family member who takes care of you.

Long term care insurance premium are a lot more affordable than long term care. Besides, stand-alone long term care insurance policy, many life insurance policies offer long-term care insurance as a rider at very affordable rate.

So, can you afford NOT to have long term care insurance?

Creative Real Estate Investing

Millionaires Invest in Real Estate

Do you want to invest in real estate but short on cash? Not having to deal with tenants?

Real estate investing does not require lots of your own money. Not only that. You can pay down your 30-year mortgage in less than 10 years, use OPM (other people's money) to invest in real estate AND generate a stream of "passive" income. Income that goes automatically to your bank account without you doing anything or lifting a finger.

Sounds pretty good. I can see you putting on your skeptical thinking hat.

Don't worry. I was in your same position when I first heard of this strategy and was skeptical too. But after I learned what it is, the light bulb in the head just light up.

This is exactly what I've been looking for. I was looking for a way to finance my current mortgage so I can have access to my equity because I realized early on that in a traditional mortgage (the one that you and I have) accumulates equity, which is a good thing. But you can't use that money until you sell your property. That's why some homeowners are "home poor" because most of our money are locked in our homes.

I have always wanted to make some real estate investment, but I don't have the cash available for the down payment. All my cash is tied up in my home equity. And I don't want to take a home equity loan, because that means another loan I have to pay every month.

I started looking into selling my property, which has accumulated quite a bit of value in just 5 years (of course, it is in the highly-sought after Waikiki neighborhood), and purchased another residence with extra units for rental income.

One day while talking to a friend who is in similar situation, she mentioned about "off-set mortgage". Apparently, it is something that has been around for years in Australia and United Kingdom. According to Investopedia, the reason why off-set mortgage is not available in the United States is because of our tax law, which translates to "banks does not reap much profit from off-set mortgage". That's why it be banded by our tax laws.

Investopedia explains the off-set mortgage in a very simple and easy to understand way. You should check it out here.

Then I started asking my real estate broker, who has been in real estate business for over twenty years if he had heard of off-set mortgage. Of course, the answer is no. I asked banks, loan officers, etc. They all gave me a negative answer.

Out of nowhere one day, another friend of mine called and want my opinion about a property she and her husband are contemplating whether to buy or not. And during the conversation, she mentioned some kind of financial education that helps people with their mortgage and it's called "Sweep Strategy". I have no idea whatsoever. But I looked it up anyway per her recommendation.

Voila...the information on the website caught my attention. I attended the introduction presentation, which is totally and purely informative. No pressure or obligation whatsoever to buy anything or sign-up.

After the presentation, I was like "God just answered my prayer". This is exactly what I was looking for.

How funny?

I always say be careful what you ask for, because you always get what you ask for.

Visit www.sweepstrategies.com to learn more. And if you're curious, schedule to attend an introductory class. They have offices in Ward area and Aiea.

Disclaimer: I have no financial ties with the Sweep Strategies other than being one their potential clients and partners. I'm just a purist who loves to spread the joy and any good information that I have to my friends and family. It surely would be nice if you mention my name as the one who refers you to them. They will treat you exceptionally well.

Here are few creative strategies to help kick start your real estate investing career:

9th Annual Wahine Forum October 27, 2016

Don’t miss out on Hawaii’s largest leadership development conference for women, presented by Hawaii Business magazine and The Queen’s Health Systems.

Join over 800 professional women for this year’s inspiring line-up of topics and speakers at the 9th Annual Wahine Forum, on October 27, 2016 at the Hilton Hawaiian Village Coral Ballrooms.

Global Keynote Speaker

Jane Miller
*COO and Executive VP of The Gallup Organization
*Author of world poll study "Women, the Workplace, and 'A Life Well Lived'"
*Keynote speaker at the 2015 Global Women’s Leadership Initiative

Special Performance by

Kimie Miner
*Na Hoku Hanohano Award winner
*Accompanied by the La Pietra School Choir

Featured Workshops

Finance for your Future

New Way to Lead

Enhance Your Digital Reputation

Think Globally, Act Locally

Advanced Negotiation

Build a Legacy

Being the Best

Work-Life Integration

Creating Change

2016 Speakers

Judy Bishop - Owner, President, Bishop & Company, Inc.

Coralie Chun Matayoshi - CEO, American Red Cross

Jodie Duvall, CFP - VP & Sr. Wealth Advisor, First Hawaiian Bank

Brooke Dominy - Director Wholesale and Corporate Business, Honolulu Cookie Company

Susan Eichor - President & COO, aio Group

Elisia Flores - CFO, L&L Hawaiian Barbeque

Kim Gennaula - Executive Director of Advancement, Iolani School

Phyllis C. Horner, PhD - Vice President, Executive Development, Servco Pacific Inc.

Kathy Inouye - Chief Operating Officer, Kobayashi Group, LLC

Meli James - Head of New Ventures, Sultan Ventures

Kat Lin-Hurtubise - Chief Festivities Officer, Gourmet Events Hawaii & Staffing by GEH

Laura Lucas - Managing Partner, Carlsmith Ball

Robbie Melton - Executive Director & CEO, High Technology Development Corp.

Ani Menon - Senior Associate, Advisory, KPMG

Sherry Menor-McNamara - President & Chief Executive Officer, Chamber of Commerce Hawaii

Linda Miki - Principal, Vice Chairman, Group 70 International

Unyong Nakata - Senior Director of Development, Shidler College of Business at UH Manoa

Polly Nelson - Managing Director, DFS Hawaii

Barbra Pleadwell - Partner, Hastings & Pleadwell: A Communication Co.

Lisa Y.T. Rapp - Principal, Architects Hawaii Ltd.

Mahealani Richardson - Director of Marketing and Communications, Shriners Hospital for Children - Honolulu

Crystal Rose - Creative Business Litigation, Bays Lung Rose Attorneys at Law

Monica Salter - Vice President, Corporate Communications, Outrigger Enterprises Group

Emily Santiago - EVP, Chief Human Resources Officer, UHA Health Insurance

Stevette Santiago - Chief Administrative Officer, Y. Hata & Co., Ltd.

Yancey Unequivocally - President, Empowered Presentations

Nicole Velasco - Executive Director, Office of Economic Development, City & County of Honolulu

Rosanna Vierra - Account Director, iQ360

Leslie Wilcox - President and CEP, PBS Hawaii

Cheryl Williams - General Manager, The Royal Hawaiian A Luxury Collection Resort, Waikiki

Shelley Wilson - President & CEO, Wilson Care Group

Alison Zecha - President, Alison Zecha, Inc. Coach AZ

All attendees also have an exclusive chance to win two roundtrip tickets, courtesy of Alaska Airlines.

For more information, visit:
www.hawaiibusiness.com/wahine16

For Sale by Owner Makes Perfect Sense

Where Buyers Find their Homes

Did you know you do not need a real estate agent or broker in a real estate transaction?

If you think about it, buying and selling real estate property is like buying and selling a car, you can do it yourself.

Real estate agents and brokers are just car sales men in the real estate. They just want to make money from you.

For sale by owner makes sense and saves you lots of money.

And here’s how.

The median single family homes in Hawaii is $750,000. The average commission for a real estate transaction with a real estate agent or broker is 6%. You’re paying $45,000 for a random joe to sell your home. If your home is worth a million (which is majority of the homes in Honolulu), you’re paying this random joe $60,000 to push papers for you.

How about you save the $60,000 and hire an attorney, who can draft your purchase contract and give you legal advise about your estate planning and tax at the same time.

People are afraid of lawyers because they think they cost too much, which is true. They do charge a lot for good reasons, they have your ass cover when the time comes.

My attorney charges $400 an hour. The $60,000 commission you pay for your real estate agent, who does not provide any legal advice because they don’t know anything, will buy you 150 hours of attorney time.

My attorney went to 4-year undergrad, 2-year law school and passed his BAR exam, and is entitled to charge $400 an hour for legal fee, which is consider expensive.

A real estate agent (may or may not have a college degree) went to real estate agent prelicensing course for 60 hours and passed the real estate salesperson license test.

Say your real estate agent spends 50 hours for your listing…I don’t know, they may do 1 or 2 open house (4 hours each), writing listing description, etc, etc. Let’s say 50 hours, that’s $1,200 an hour.

Seriously?!

Unless you make more than $1,200 an hour, I would do it myself.

Did you know how easy it is to sell your home on your own. The hardest part is marketing.

Read “How to Market Your Real Estate Property?”

Chances are if you’ll need your attorney to draft the purchase contract and go over your trust and estate planning stuff, you’ll probably needs a few hours of your attorney’s time, which probably would cost you a few thousand.

Even if you use a lot of your attorney’s time chit-chatting, say 50 hours, you’ll still come out only $20,000 on attorney fees.

Remember, the commission you pay your broker or real estate agent is just one of the closing cost. You still have more to worry about when you close.

If you used a real estate agent or broker, his/her only tasks are writing you listing description, list in MLS, find a new agent to do open house for them, answer calls from other agents about showing. Most of the time, it’s the buyer’s agent who show up to showing, so your agent just sits pretty in the office waiting for an offer to come through, and get you to say “yes” to the first offer that come through, so he/she can close and pocket the commission.

Once you have an agreement with the buyer, signed the contract and start escrow. There’s not much left to do - schedule home inspection, and just wait.

Real estate agent or brokers are not allow to give any legal advice. The standard Hawaii realtor’s Purchase Contract specifically provides that your real estate agent is not providing you with legal advice, and you should seek legal counsel. So, you are might as well hire an attorney from the beginning.

You know what’s worst?

Of course in Hawaii, everyone knows a friend or a relative who is a real estate agent. Hiring a Hawaii realtor is especially inefficient when the sale is between family members, and both sides are using a family friend to be the dual agency broker. That “family friend or relative” may receive a six percent (6%) commission for processing paperwork, even though as a dual agent they have probably utilized the standard “Dual Agency” disclosure which provides that he/she cannot really take sides. So who does he/she work for?

They can't give legal advise, and they can't take sides. So why are you pay this person?

Related article: Real Estate Agent…Absurd?

Anyway, if you decide to sell your real estate property on your own and put up a for sale by owner sign in your front yard, the process is really simple.

Advertise your real estate property like you would selling your car. Seriously, do you hire someone to sell your car?

Write a very descriptive ads from your property.

Show your property to potential buyers. You can do a open house event or private showing.

When you have a potential buyer, contact your real estate attorney to have him/her draft your real estate purchase contract.

Have both parties signed.

You’ll contact an escrow company to open escrow. Actually, the buyer opens escrow. When I purchase my last real estate property, I went to Downtown to the escrow company myself. My agent did nothing.

Your buyer should contact a home inspector for home inspection. This is a buyer’s expense. It’s up to the buyer to have an home inspection.

If you’re a condo owner, you’ll contact your property manager to have condo doc send over to your buyer.

The escrow and title company will make sure the transaction goes smoothly and both parties get what they agreed upon.

The other advantage of selling the real estate property on your own is that you know the property best. You get to meet the buyer directly, interact and negotiate with them directly without a third or fourth person involved.

According to the National Board of REaltors, 44% of buyers find their homes online (not from an agent).

Related article: Simple Home Selling Tips to Sell Your Home FAST.

There are many available sites to market your real estate property for sale. Here’s are a few that I use. If you type in “for sale by owner” in Google, more sites would show up.

Craigslist

Owners.com allows your listing to be posted in your local MLS.

ForSaleByOwner.com

For Sale By Owner on Zillow

Don’t forget social media. Share your postings on Facebook, Twitter, Instagram, wherever your people hang out.

Having hard time selling your real estate property? Let us help

Related article: Sell Your Home Fast

Owner Financing Win-Win for Both Sellers & Buyers

What is Owner Financing?

Owner financing or seller financing, is as the name implies, the owner finance the deal, meaning the own is now also the bank. Instead of the buyer getting a loan from the bank, and paying monthly payment to the bank, the buyer will pay the owner a monthly payment.

Owners usually offer owner-financing to make their properties easier to sell because the seller now has a larger pool of buyers, who are unable to obtain mortgage from banks. Sellers may finance part of the purchase price - 30% or 50%. Sometimes they may even finance up to 100%.

A typical owner-financing deal looks something like this. The owner or seller has a property that he/she wants to sell for $500,000. With more stringent bank requirement, mortgage loans are hard to come by. So the seller offers owner financing to less qualified buyers. The seller finance 50% of purchase with a small down payment, which means the buyer only has to come up with the other 50% from the bank. So instead of coming with $100,000 down payment (20% of the purchase price) and getting a $400,000 conventional loan, the owner may only require a $10,000 down payment, and owner-finance the $250,000. The buyer now would need only to borrow $240,000 from the bank for this purchase.

Seller financing are usually short-terms 3-5 years long, at which time the buyer, hopefully with better income and credit score, would be able to re-finance with the bank. Most seller financing charges higher interest rates, something around 5-6% now, for 3-5 years, then balloon payment at the end of term.

Why is Seller Financing a Win-Win Strategy for Both the Sellers and Buyers?

The benefit for the seller is that he/she would earn the interest that would normally goes to the mortgage bank. The seller is acting as the bank and the money he/she is lending is secured with the property, which means if the buyer default or is not able to refinance at the end of the financing term, the property goes back to the seller.

The benefit for the buyer is that he/she can buy the property now, instead of waiting to save up enough down payment or repair their credit score, or whatever their reasons for not getting a mortgage from the bank.

Hopefully at the end of the owner-financing term, the property would have increased in value or equity either through appreciation and/or consistent monthly payment. Now with more equity in the property, the buyer should be able to refinance to a conventional mortgage easily.

Isn't it brilliant?

Owner Financing

Homeowners’ Guide to Avoid Foreclosure at All Cost

Short Sale vs Foreclosure

Homeowners facing economic hardships may have a foreclosure looming, but are often too proud or uninformed to do anything about it, until its too late.  Before considering bankruptcy or allowing the bank to foreclose, consider a short sale.  

Unlike a short sale, foreclosures are initiated by lenders only. The lender moves against delinquent borrowers to force the sale of a home, hoping to make good on its initial investment of the mortgage.

Also, unlike most short sales, many foreclosures take place when the homeowner has abandoned the home. If the occupants have not yet left the home, they are evicted by the lender in the foreclosure process.

Once the lender has access to the home, it orders its own appraisal and proceeds with trying to sell the home. Foreclosures do not normally take as long to complete as a short sale, because the lender is concerned with liquidating the asset quickly. Foreclosed homes may also be auctioned off at a "trustee sale," where buyers bid on homes in a public process.

In most circumstances, homeowners who experience foreclosure need to wait a minimum of five years to purchase another home. The foreclosure is kept on a person's credit report for up to seven years.

Although there is no guarantee your lender will agree to a short sale, here is a list of the benefits of participating in a short sale, versus being foreclosed upon. 

Benefits Of A Short Sale Versus Foreclosure

• Homeowner can apply for a short sale even if they're not behind in payments.

• There in ZERO COST to the homeowner in short sale. The lender pays all the selling costs and real estate commission. Meaning the homeowner has nothing to lose!

• The homeowner receives professional guidance from real estate agent when doing a short sale.

• A short sale may postpone the foreclosure action to allow enough time for house to be sold.

• Homeowner may qualify for financial or relocation incentives from the lender, and receive up to $10,000 for relocation from a government program called HAFA which provides an option for homeowners transitioning out of their mortgage.

• A short sale only affects your credit score between 50-70 points vs 200-400 points with foreclosure.

• Homeowner may qualify for another mortgage loan as soon as 2 years, as compared to 7 years with a foreclosure.

• Doing a short sale avoids foreclosure and waives the full deficiency owed by the homeowner. They can now walk away from the property free and clear.

• Possible tax relief from cancellation of any debt income.

• Short sales are not likely to affect jobs that require a security clearance.

• It is easier to recover financially and emotionally from a short sale than a foreclosure.

If you plan to simply pack up, leave and “let the bank have the property”. This is the worst idea ever for the following reasons:

• If you leave the house, you will still owe the balance on the mortgage plus penalties and late fees (which in many cases is tens of thousands of dollars). This means that by law you are responsible for paying off this balance over the next 10 to 20 years for a property you no longer own!

• If you walk away from the house, the bank will still try to recover the money. They can legally do this by garnishing your future wages and investments!

• If you let the property go into foreclosure, your credit score can be affected up to 400 points. This means that it is going to be hard to find somewhere to rent (if they do credit checks). It is going to be hard to get another mortgage for a very long time with a foreclosure on your record. It is also going to be hard to get credit (in general) with a foreclosure on your record.

• Having a foreclosure on your record can also be a hindrance in getting a job, especially ones that require security clearance.

Read What is Short Sale?.

 

Short Sale vs Foreclosure

Invest in Short Sale?

Short Sale Timeline for Buyers

Read What is Short Sale?.

A short sale can be a good deal for a cash buyer or investor. And it can help the seller avoid having a full foreclosure on his or her credit record.

Because in a short sale, the proceeds from the home sale are less than the amount the seller needs to pay off the mortgage debt and the costs of selling, so for this deal to go through, everyone who is owed money must agree to take less -- or possibly no money at all. This is one reason why short sale can be a very complex transaction that move slowly and often falls through.It is a lengthy and paperwork-intensive transaction that may take up to a whole year to process.

If approved for short sale, the buyer or investor negotiates with the homeowner first, then seeks approval on the purchase from the bank. It is important to note that no short sale may occur without the lender’s approval.

Before you rush in, consider the following issues.

1. Know what you are getting into. Buying a short sale is not a do-it-yourself project. Find a real estate professional (even attorney), who understands the short sale process in your state. Having an experienced and knowledgeable real estate agent (or fellow investor) on your side who knows how short sales work will increase the chances of closing the deal without loosing your shirt. Even under the ideal circumstances, short sales can take a long time to close and may require extra effort on the part of the buyer.

2. Be wary of the condition of the property. If the seller is in financial distress, chances are the home may not be well-preserved. The seller also may be reluctant to reveal serious maintenance issues. Proceed carefully and get the property inspected by a knowledgeable person before you commit.

3. Make sure the deal can close. If you've decided to go for it, the first step is to determine the status of the short sale. Below are items that most lenders require from a short seller. If the seller is unable or unwilling to provide this information, the short sale won't close and any buyer is wasting his or her time.

A hardship letter. The seller must explain why he/she cannot keep up with making payments. The sadder the story, the better. A seller who is simply tired of struggling probably won't be approved, but a seller with cancer, no job and an empty bank account may. The most common acceptable reasons are divorce, bankruptcy, loss of job or some kind of emergency.

Proof of income and assets. It is in the best interest of the lender to recover funds from the home owner. If the lender discovers that the home owner has other assets, including retirement funds, they may prefer to liquidate these assets for payment on the mortgage, and denies the short sale. The proof of income and assets must include income tax and bank statements, going back at least two years. Sometimes sellers are unwilling to produce these documents because they conflict with information on the original loan application, which may have been fudged. If that's the case, this deal is unlikely to close.

Comparative market analysis. This document shows that the value of the property has declined, which essentially means the home owner has no equity in the property, and it won't sell anytime soon for the amount owed. The comparative market analysis should include a list of comparable properties on the market and a list of properties that have sold in the past six months or have been on the market in that time frame and are about to close. This analysis is very similar to the Broker Price Opinion, which is less formal but often more informative than a property appraisal. The prices should support the seller's contention that the property is worth no more than the short-sale price.

A list of liens. The home owner must be at least 3 months behind on the mortgage and has been served a lis pendens from the court indicating that the lender intends to foreclose on the property if they do not receive payment in the near future. There may be more than one lender or liens on the property, and all lien holders have to agree to take less -- or possibly no money at all..

If there are first and second mortgage liens, the question becomes: What's the plan to satisfy these lien holders? If there is a third mortgage lien, reaching any deal is very iffy.

Deal killers include child support liens, state tax liens and homeowners association liens. If they exist and there are no obvious solutions, walk away, Thompson says.

Because a short sale generally doesn't cover the whole amount owed or other liens, it can trigger mortgage insurance. If the property is covered by a mortgage insurance policy that doesn't have to pay off until the home has been in foreclosure for 150 days or some similar length of time, chances are the insurer will hold up the sale because it won't want to pay any earlier than necessary and hopes the foreclosure will just disappear. Often the mortgage insurer will simply go silent. Thompson says: No response, no approval.

4. Be realistic. Short sale is a waiting game. This is not your game, if you're in a hurry.
Part of the slow down in short sale is potential buyers’ lowball offers, which are ultimately rejected.

Another factor is the increasing number of government programs aimed at keeping people in their homes. According to the Mortgage Bankers Association, about 50 percent of defaults never go as far as foreclosure. So lenders see short sales as potentially the least attractive option and aren't willing to expedite them.

To avoid getting stuck in an extended process of negotiation, start by negotiating with the seller and the seller's agent that your offer will be the only one presented to the lender. If the lender isn't flooded with offers, it will be more motivated to move forward.

5. Have your cash ready. Once you have a deal, you should have your money ready, preferably cash. If you're getting a loan, you need bank approval in advance.

As with any deals like REOs, short sales, foreclosure, or auctions -- make sure you have money lined up ready to go. Cash is always the best financing option in all these deals.

Search Hawaii Hard Money Lenders.

Fee Simple vs Leasehold Homeownership

Fee Simple vs Leasehold

n most areas of the United States, land is owned in fee simple. A fee simple owner has ownership of the entire property, including both the land and buildings. Fee simple ownership is the most common and complete form of land ownership.

Leasehold ownership was a very common method of ownership on Oahu 30-40 years ago with most residential homes being owned in leasehold. It enables homebuyers to purchase a properties at far lower cost than if the properties were purchased as fee simple.

A leasehold interest is a rental agreement created between a land owner (the lessor) and a lessee, who is leasing the land from the fee simple owner.

This rental agreement is called a ground lease. It is usually written for a period of 55 years with 30 or 40 years at a fixed rent and then a slightly higher rent for an additional 25 or 15 years. The lease rent is usually renegotiated every 5 years. Lease extensions or renewals are common so leasehold homeowners or buyers could obtain long-term mortgages for refinancing or purchases.

A lessee acquires leasehold rights similarly as fee simple rights. However, the leasehold interest does differ from a fee simple interest in the following five aspects:

(1) The buyer of residential leasehold property does not own the land and in almost all cases, pays a ground rent to the lessor.
(2) The use of the land by the lessee is limited to the remaining years covered by the lease.
(3) When the ground lease ends, the land returns to the owner or lessor. If there is a surrender clause in the ground lease, the buildings and other improvements on the land may also revert to the lessor.

NOTE: Most of the ground leases on Oahu contain a surrender clause; i.e., the buildings and other improvements revert to the lessor at the end of the lease.

That’s why I prefer to purchase leasehold properties in buildings that have a mix of fee simple, leasehold or fee available. This way I know the building will continue to exist when the grand lease expires, and the fee is available for sale.

(4) The use, maintenance, and any alterations made to the leased land are subject to local ordinances as well as any restrictions contained in the lease.
(5) a lessee can sell or transfer the ground lease to another party, referred to as an assignment of lease; however, the sale or transfer is usually subject to the review and approval of the lessor.

So, what happens when the ground lease on a condo expires where the fee has never been offered?

Well, no one knows.

The ground leases on the first two leasehold complexes expired in 2007. It was hoped that a precedence would be set by these first two complexes, but that did not occur. Both complexes were quite small. The first lessor reluctantly caved-in to community pressure and agreed to sell the fee interest to the leasehold owners. The second lessor went to court where a judge ruled early in 2008 that the lessees would have to surrender their homes. Unusual circumstances existed with each of these complexes, but similar unusual circumstances are likely to exist with other complexes.

Leasehold ownership on Oahu has become increasingly unpopular in view of all the uncertainty. If the fee is available, many buyers will purchase it simultaneously with purchasing a unit in leasehold. Therefore, the leasehold value for a unit is usually the fee value for a comparable unit less the cost of the fee and fee closing costs. The cost to buy the fee is a combination of the unencumbered value of the land offset by the remaining years on the lease. As the lease gets progressively shorter, the fee price usually gets progressively higher, particularly near the end of the lease.

Mortgage financing also becomes an issue. As the lease gets progressively shorter, it becomes increasingly more difficult to find lenders that make loans on the property. When there are less than ten years remaining on the lease, the leasehold property is virtually unsellable except to a buyer that is willing to pay cash at a very discounted price.

There is also a 30-year requirement on the land lease for a leasehold property to qualify for a 1031 exchange, which means there must be at least 30 years remaining until the expiration of the lease (not renegotiation).

If you are the owner of a leasehold property, we advise you, in most cases, to buy the fee as soon as practicable, as the cost of the fee will continue to increase with time. If buying the fee is impracticable, in most cases, you should sell your property in leasehold as soon as practicable, as the leasehold value will likely continue to decline with time. If you decide to wait to sell for the next period of rising prices on Oahu, you may find that the cost of the fee has increased more than the increase in value of your leasehold home; i.e., you will net less from the sale. This general advice obviously varies with the leasehold property and the owner’s situation.

So are there good buys in leasehold?

Leasehold is considerably less expensive than fee simple, with the value decreasing toward the end of the lease. But some buyers are more concerned about what they’re able to do today than what may happen tomorrow.

The fact that a home is leasehold has no impact on the rent that it produces. So, some investors opt to buy in leasehold because leasehold properties can generates a pretty handsome cashflow.

The mortgage payment for some leasehold homeowners (offset by tax deductions) is less than the cost to rent a comparable home. So, some homeowners also opt to buy in leasehold. It may enable them to own in a complex that otherwise would be too expensive.
As long as you understand the implication of owning a leasehold property, there are many good buys in the leasehold to generate a good cash flow for investors.

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