What are SOLD comps? Comps mean comparables. Comps are what agents and seller’s use to compare the selling prices of recently sold comparable properties in the surrounding areas. Real estate agents will use these recent sold comps to determine what to list a house for. Agents will do what is called a CMA-Cost Market Analysis. Agents typically do this in the beginning when meeting a seller. It may be part of their listing presentation to tell you what they think they house should be listed for before they would list the house on the MLS-Multiple Listing Service. In today’s market most lenders will ask for more recent comps (3 months or less), some will allow 6 months since last sold. Prior to 2007, lenders often allowed sold comps that were 1 years old. As the market has changed, most lenders have asked that sold comps be as recent as 3 months old or less. Some will allow for 1-2 that are up to 6 months old. Each lender will be different. Also in situations where lenders see that a seller is behind in payments and believe a foreclosure is coming up soon, they will order
3 BPO’s, from 3 different agent/brokers. BPO’s are Broker Price Opinions. These are more like CMA’s without the complete work of an appraisal. The reason is lenders probably want to save the money, plus they want 3 local agents to give their opinion, as the lenders are almost always from another state. Sold comps are best data to find out what your
house will probably sell for.

As a general rule the other properties has to be pretty close to the same house as yours. For example if you have a rambler, the appraiser or agent would compare other ramblers. They would try to stay within a few years of yours, same bedrooms, same garage stall, same square feet “above ground”. You can’t always find exact matches, so the appraiser or agent may make small adjustments to make a more fair comparison. The type of house, year built, condition, sq ft, and bedroom are going to be most of the most important things to compare fairly. Of course if the house is on the lake, you’d have to compare it against other similar lake homes in the area. Please don’t get caught up in the type of trim work, countertops, appliances, etc, that doesn’t make a very big difference when an appraiser or agent compares properties. Some properties just have better curb appeal and curb appeal is something just comes from experience. Curb appeal means it looks good from the street when you drive up to the property from the street, it obviously looks nicer than
the other house that has the same specs on paper. You can try to find sold comps online, but as an agent/broker, I really think the best data is from the MLS, and I would really leave it to an agent.

Typically a buyer is the one that’s going to order an appraisal, usually not the seller. The value of a property is what someone is willing to pay for the property. As of 2008, I would like to be more specific and say it’s what someone will pay, and what a lender’s appraisal review department is willing to accept for a value. A lender’s appraiser will come up with their own value. In markets where prices are going down, a lender typically will want to use more recent comps only 3 months old. If you need to find out your houses value, you can contact me, and I can have my agent associate run a CMA for you before they list your house. If we find out that you owe too much on your house, are behind on payments, we may have you talk to a short sale specialist. Please email me at ron@minnesotainvestors.com.

Please do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
http://www.minnesotainvestors.com/blog/feed/

Real Estate License Cost: Should I become a real estate agent?

One question I hear asked all of the time is should I become a real agent agent?, or not. Most people that ask this are investors, but not always. First I will say that becoming an agent is a lot of hard work, it’s not easy, big money like people make it sound. Yes there are $5000-$8000 checks, but please don’t underestimate how many months agents work for that, and how few buyer’s and seller’s don’t work out, or never make it to closing. Agents do a lot of work for free, and these are the reasons why it’s not a get rich quick. As a general rule agents who have been in the business a longer period of time will work more with seller’s and listing houses. Listing agents just find it to be a better use of their time. Some agents enjoy being both.
Some agents will work on filling up vacant houses, or work with buyers. Some agents will even do property management. What kind of commissions are made? As a general rule listing agents make 5-7% listing fees. In a competitive market it was getting down to 5%, on bigger houses it may also be lower. 7% use to be more in the days when houses were worth $100,000. A seller should not always go with the flat fee, or the cheaper listing agent. The reason is often the listing agent who charges a very low list fee could be hungry for business and that’s why his/her fee is so low. Sometimes the agent just wants listings for the marketing and has a great system in place and is able to compete better and does volume. Also with a flat fee just to get it on the MLS, please keep in mind that’s a lot of work that you have to do, that the agent wont’ do. An agent that does a full listing does a lot of work, a lot. Buyer’s agents back in the day use to drive buyer’s to 15-20 houses, that’s becoming more rare. The reason it’s much more rare is that 84-90% of buyer’s now start their home buying search on the internet, weeks or months ahead of time.

Typically an agent will set up a buyer on an email list for properties that match their criteria. Buyer’s review these listing results maybe daily, or weekly depending on how many fit their criteria. Buyer’s these days do more work up front looking at photos, property info, virtual tours, using mortgage calculators, etc. This means most buyers are a little more
qualified by the time they talk to an agent these days, but not always. Agents will hold their license under a broker, and pay either a desk fee and 100% commission, or pay less of a fee and get 70-80% of the commission. The broker has overhead like office expenses, desks, furniture, printers, fax machines, etc. to pay for. Agents will have to have a license for a minimum of 2 years before they can even take the test and go become a real estate broker. To get a real estate license, at the time of this writing you can probably do it for around $900. this includes about 3 full-time weeks of class which is about $275 per week, plus about $50 for each of about 2 books needed. You will receive the majority of the info in the first week. Get prepared to study and read. You will have to take a test and pass it before getting the license. At the time of this writing 70% score is needed on both the national and state portion of the test. The two objections I hear the
most from people of why not to get a license are these two: 1. You have to disclose you are an agent 2. You are held to a very high standard increasing liability.

These are both true statements, I have not found the disclosing of being an agent/broker a big deal. I don’t understand why that’s a big deal. As far as being held to a high standard, that’s fine also. Agents are suppose to be loyal, honest, ethical, and other stuff. Shouldn’t everyone hold themselves to those standards? If you do more than 5 transactions per year on your “own” transactions you are only allowed to do that if you pay and get a “limited broker’s license” or if you get a real estate license. A limited broker’s license doesn’t allow you to collect a “fee” on behalf of someone else. If you want to get a license, I say go ahead. It’s worth the real estate education, it’s a chance at some extra money, but it’s a job, it takes a lot of hard work. You will end up with 15 credits(14-15 hours) per year of continuing education that’s required as a real estate agent. The cost of 15 credits isn’t much, it’s probably about $200. Contact me anytime if you have questions ron@minnesotainvestors.com

Please do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
http://www.minnesotainvestors.com/blog/feed/

MN Lake Home: Lake Homes in Minnesota Types Include…

In the state of Minnesota there are a few different types of body of water types that houses could be on. Lake Property in Minnesota is a top choice.  First there is Lake View, then their is lake front, or water frontage. Lake View is typically when the lake is across the street or in the distance, the house may be close, but probably has no steps to the water, and no dock on the water. Just because their isn’t a dock hooked up doesn’t mean it’s not lakefront, or water frontage. In Minnesota 50ft of water frontage is on the lower end, and often not considered that much. When it gets to about 90-100 ft of water frontage it’s considered more desirable. 200 ft of lake frontage is a lot, and more common in cities further out of the cities.

In Minnesota, you’ll find various Bay’s and lakes in Minnetonka where the lots are worth the most money. Typically the better the neighborhoods, the more the lots are worth. As a general rule, lake frontage with dock access is worth the most amount of money. How nice the lot is, how good the view is, how many feet, what lake it’s on, how deep the lake is
how good the fishing is, and if you can have motorized boats are all big factors to determine how much that lake lot is worth. As a general rule lake views are worth more than no view, but far less than having the lakefront with dock access. The reason is that lakefront typically allows you to have a boat, and or a boat slip and that offers a lot of luxuries. To give you an idea how much a lakefront lot can be worth, cities 2 hours out of the twin cities, a lake lot may be worth $35,000, wheras a .75 acre, perfect lot, in the perfect part of a lake minnetonka neighborhood can be worth $1-2million just for the lot. I have taken boat rides and seen lots that are worth as much, maybe more than the house itself.

In a decent neighborhood 45 minutes outside of Minneapolis, you could find one house sell for $300,000, where that exact house may sell for $425,000-$500,000 on a regular lake lot, in the same area, lake lots can really make a difference. River Views are worth less than RivewFront. RiverFront is almost always worth less than LakeFront, but if the River was big with a great view it could be worth more than a tiny lake with no motorized boats. Also it depends how deep the river is, and how clean it is. Many Rivers in the twin cities are outside the cities a little bit. Mississippi River of course runs right through the state. Pond Views, and Ponds typically are worth a little more than some houses without them, but I would say not much more, it’s a small add on.

If you want to own a house on a body of water, if you can afford it, I would recommend a lakefront property in a nice city, with a nice house. You may want to check ahead of time if large boats, jetski’s, water toys are allowed on the lake. Some city ordinances may have rules. You may also want to check DNR websites to find out about the animal life in the water, what types of fish, and how often it’s filled up with fish. Some lakes aren’t good for fishing. Some lakes aren’t deep enough and people don’t like that. Some lakes are just very very small and those don’t add much of a premium to a house’s value,
especially if you can’t have motorized boats. You may want to check the DNR website for the clarity of the water. I would also recommend that whatever boat you want to buy for your lake home, please make sure it will fit underneath the bridge, and that it’s not too big where the motor or boat will drag against the bottom of the lake. One of the best parts about lake homes is they should always be in demand, so someday when you want to sell the home, it should be easier to sell. You need to also check if your lake home is in a flood zone. The reason this is important is you will need to get flood insurance for your homes on bodies of water. Some insurance companies won’t even insure homes in a flood zone, that’s important to know. You will also want to think about boat storage and maintenance on your water vehicles, it takes patience and work.
Make sure to have enough lifejackets, and extra gasoline for the boat. Be prepared for the expenses those items bring, it can add up. Will your dock need to be brought in, in the winter time, due to the freezing of the lake?
That’s something to check on. Will your boat need to be put in storage during the winter? How much will it cost to winterize the boat and how much for the storage cost. If you are in the market for buying a property on a body of water
lakefront, lakeview, river front, river view, pond, etc. please email me at ron@minnesotainvestors.com and I’ll have my associate help you out.

Please do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
http://www.minnesotainvestors.com/blog/feed/

What is hard money? Hard money is typically money that’s more expensive then conventional loans from a bank.
The reason it’s more expensive is that in theory the money is lent, not on the borrowers credit score or credit capacity, but instead on the property itself. That means a hard money lender may only lend 60% of the market value of the house. That means the property owner quits making the payments, then the hard money lender forecloses on the property and gets the property back, and keeps the property.

The hard money lender tries to reduce their risk by keeping the LTV (Loan to value) low enough. Most hard money lenders are going to want to lend that money to you only if they hold the 1st mortgage on the property. Typically hard money is lent on properties that need fixup and repairs. Hard money lenders like to know that the property could have value added to it. Hard money differs in it’s expense to investors. As a general rule you will pay 1-4pts on the loan for the hard money. (1pt = 1% of the loan balance) Also you will pay between 12-18% interest rate annually for hard money loans. Short term business to business hard money loans could far exceed that. The % goes up with the risk. 60% LTV with a 1st mortgage is not considered as risky, but maybe in a market where it could take months to resell the property. The money is suppose to be expensive because hard money lenders want to be paid back right away. They make money by lending it out over and over. If you see 2 pts, you may see 18% interest rate, if you see 4pts upfront, you may only see 12% interest rate. Hard money lenders have the money, so they make the rules and set the guidelines.

Many hard money lenders I talk to generally don’t have a problem lending the money out, their is a big demand for it.
Others like hard money because if you have a hot deal you need a loan for ASAP, with a quick title check, you could close in 1-3 days if needed. Getting hard money as a 2nd position or not secured by real estate is pretty hard to get, so you may want to just try your Visa or Mastercard for that. Hard money lenders want their money they lend collateralized by real estate. The hard money lender will decide if your property qualifies. They may have an appraisal done on the property. If you need a hard money lender please email me ron@minnesotainvestors.com

Please do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
http://www.minnesotainvestors.com/blog/feed/

For tenant background checks, you should make it a policy to do a background check for all tenants. You can hire a company to do this for you. I believe Trak-1 is a company that does that. You need to keep in mind that their are a lot of things to check for about a tenant. Let’s go over some of those now. I am from the school of thought like many other investors, that if you get enough money down, in other words double deposit, option money, or a big down payment on a contract for deed, that really reduces the chance of major problems down the road.

Whether you go with a renter, contract for deed, or lease option (rent to own) is a whole other topic I will discuss some other day. Let’s just go over tenant checks for now. First off you will want to run a criminal/background check, and credit check. First off I think you are going to want to eliminate anyone with a terrible criminal background. There are too many other renters to choose from out there where you should be able to have other choices than taking on drug problems, felonies, or anything really bad not mentioned here. You just don’t want a tenant that has been known to cause violence, it just puts you, the landlord, at too much risk. Also you have to see if the tenant is a legal alien of this country.

You will want to check for U/D (unlawful detainer). Unlawful Detainer just means that an eviction was filed against this person and/or spouse, who was on the lease. You just have to ask if you want to take the increased chance to have that happen to you. Yes you could probably get them out of the property in 3-4 weeks if you do it the right way, but most people wait 30-60 days of late payments before they decide. Also do you want to take someone who has recently filed bankruptcy? Do you want to take someone that has recently or in the past had a foreclosure? These are decisions you have to make yourself. Now my personal opinion is I am afraid to take on any major felonies or violence as a tenant due to the problems and liability. Anyone with a non-violent history, that just had a “money problem” in the past, I may be able to see past that if they put enough money upfront, so I feel protected. That’s how I have felt over the years at least about the money. Over the years though I have felt the need to add on to this. First example if I have a rent to own tenant put a substantial amount of money down, maybe $12,000-$15,000 and their credit is 450 and they have 12-18 months to get financing to buy the house, that may not be a reasonable timeframe. Don’t get me wrong I am a big believer their can be a lot accomplished through credit repair, but if finaning of 600-680 is needed in the future, that could be tough. What I will also say is over the years, I really watch how I spend my time, and I don’t want to put someone in my house, and go through the motions if they never are going to have a chance to buy the house 18 months from now, it’s just not worth all the time to go through that. There are also people with drinking problems in their background, their are houses that specialize for just that, a sober housing alternative. If you pick the wrong tenant you really could have a nightmare, so you should get in the habit of doing a credit/background check on every tenant. You may need to charge a $15-35 application fee for this so it doesn’t cost you so much.

If for one moment you think that a tenant can’t be a problem beyond what you can imagine, please just talk to a landlord who has had 50 tenants or has been in the business 10+ years, they will have stories for you. Now their are some pretty good methods also to protect yourself with tenants with ACH for checks, or accepting credit cards, money orders, etc. I will also tell you if you buy rental properties in marginal neighborhoods, you are less likely to be selective of who wants to live in your property, and your group selection may be worse than the average tenant. If I was in another state that took 3-4 months to get rid of a tenant, I would certainly think about all of this even harder.
Another thing you can do is ask for previous references. You can’t just ask the current landlord, he/she may just want them out of their and say they are great, just so you take them. You will also want to talk to the previous landlord before the current landlord. You will want to see if they give their proper notice before moving out, if they don’t by habit, they may also do it to you. Another question is, if they are paying $800 currently for rent now, and yours is $1400/mo, is that a good idea for them to jump such a high amount in rent. I would also check if they have the deposit now, or if they have to get it from the previous landlord. Also if I take on a rent to own buyer, I am all about helping them improve their credit, and their financial lives, so they can own the property someday, after all this business is about helping people out. If you need a company to do a background tenant check for you please email me ron@minnesotainvestors.com and I will help.

Please do me a favor and tell just 3 friends today, to subscribe to this daily blog feed by going here:
http://www.minnesotainvestors.com/blog/feed/