Friday, November 29, 2013
But let me back up. I had had an ERA franchise in The Heights in partnership with my mother, who had a brain aneurysm in 1986 and subsequently died in 1988 without ever regaining full consciousness. My daughter, Katie, was born during that time, and my (then) wife, Rachel and I ventured into the gourmet coffee business with 4 other partners. That was fun, but we went broke. We went so broke that our cars were repossessed, and we struggled to pay the light bills. I took a part-time teaching job at San Jacinto College (South Campus) and tried to run the coffee shop and build my appraisal business. We kept going deeper and deeper in the hole.
Since I'd made many friends while teaching, I decided that -- in order to survive -- I needed to get away from the coffee shop in The Heights, so I ventured down south near San Jac to find a real estate position.
I slowly started building my business, but then the IRS started chasing me, trying to levy my commissions. By this time, my wife and I had split up, though we didn't have money to file for a divorce.
What saved us was owning real estate. We sold our two houses, got some cash, traded in our beat-up clunker cars that we'd been forced to drive since our new cars were repossessed, and went and bought ourselves two new Geos -- me a 4-door, Rachel a 2-door. We found a house in Southdown using my now "infamous" "Absentee Owner Marketing Plan" with an owner who agreed to finance it to us with no money down. Even though we were no longer together, we ALL moved in together to save funds.
Imagine, 1325 square feet -- two exes, their new partners, daughter, and now my real estate business since I had to skate the IRS's levy until I could get them paid off! My father had had a stroke, and my step-mother calls and says, "I'm taking a cruise . . . and I'm dropping your dad off with you for a week while I'm gone!" There we all were . . . happy home, happy work, happy dad, happy daughter -- all in 1325 square feet in Southdown. It's comical now; it wasn't then.
So, I "put blinders on" and pulled a Scarlett O'Hara, "with God as my witness, I shall never be this way again!" And "focus" became my mission. And I became "Pearland Sam." And while I still sell tons of Pearland Real Estate and stay #1 in Pearland . . . the majority of my business is back in Houston where I'm from. But I love my Pearland Home . . . and I love my Houston RE/MAX office (RE/MAX Top Realty, Beltway 8 @ 288). And I'm no longer in danger of losing my vehicles, thanks to God and guts.
There are morals to this story: (1) focus is the key to success; (2) you CAN do it with time; and (3) Tomorrow IS another day!
xoxo Happy Holidays!! -Sam Ferreri
Tuesday, November 26, 2013
Most school children would probably say that Thanksgiving dates back to the Pilgrims at Plymouth as early as 1621. By the late 1660’s, it had become traditional to hold a harvest festival in New England.
President George Washington declared the first nation-wide thanksgiving in 1789 “as a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many and signal favours of Almighty God.”
One hundred fifty years ago during the Civil War, in October, 1863, President Abraham Lincoln proclaimed the first national day of Thanksgiving.
William Seward, Lincoln’s secretary of state, drafted the proclamation: “No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God…they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People.”
Even though the country was in the middle of the costly Civil War, the people of America started an enduring tradition to give thanks. In 1941, Congress determined that Thanksgiving will be celebrated on the fourth Thursday in November.
Thursday, November 21, 2013
Tuesday, November 19, 2013
Most people are familiar with the various reasons a homeowner refinances their home which generally result in two major benefits: saving interest and building equity.
There is however another reason to refinance which may not be as common which is to remove a person from the loan. In the case of a divorce, when one party wants to keep the home and the other party wants their equity out of the home, it is possible for the remaining party to refinance the home. If the equity is sufficient to justify it and the remaining owner can qualify for the new loan, the refinance can provide the proceeds to buy out the other spouse.
Refinancing to remove a person from the loan could also involve a situation where two or more heirs jointly own a property and have differing opinions on when to sell. The same situation could apply to a rental property with multiple owners and the refinance would provide a way to buy out a partner.
Sometimes, it’s not about taking cash out of the home to buy out the other party. If a person’s name is on the mortgage, they’re responsible if it goes to default. One party may be willing to deed the home to the other party but it doesn’t necessarily relieve them of the liability of the mortgage they originated.
Many times, once a person has made their mind to move on, they’ll take the fastest and easiest way out. Removing a person from the deed or a mortgage is a reason to consider obtaining legal advice to protect your interests. Refinance Analysis calculator.
Reasons to Refinance
1. Lower the rate
2. Shorten the term
3. Take cash out of the equity
4. Combine loans
5. Remove a person from a loan
Tuesday, November 12, 2013
As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does. Equity build-up is a significant benefit of mortgaged rental property. As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property. Over time, the tenant pays for the property to the benefit of the investor.
Equity build-up occurs with normal amortization as the loan is paid down. It can be accelerated by making additional contributions to the principal each month along with the normal payment. Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.
In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years. The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses.
Notice that both properties have a positive cash flow before tax. The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property. The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.
If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that. A simple definition of an investment is to put away today so you’ll have more tomorrow. Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.
Contact me if you’d like to explore rental property opportunities.