Usually, in the ideal home, "form follows function". The floorplan is laid out to create the most practical and enjoyable living environment within the limitations of budget and building code requirements. Designs are a compromise between the most desirable plan and living and lot space limitations. But, architects can make mistakes when they design floorplans at random for magazines.
When I was a teenager, I went through a period where it was considered high style to be able to contrive riddles with no answers. One such was, 'How far can you go into the woods?' The answer is, 'half way, because if you go in any deeper, you'll be coming out again.' People who buy or sell are faced with the same sort of tricky questions. Because profit lies in the eyes of the beholder, the determination of how much is too much to pay, or too little to receive depends on the needs and aspirations of those involved.
Continue reading “How High Is Up? How Much Is Enough? Too Much?”
From any lender’s point of view, being able to have interest earn an after-tax yield that is in excess of the long term inflation rate can create significant compounded profits over time. Sellers often carry back financing in order to be able to sell faster; with greater after-tax profit either from higher rates of interest or from higher than market prices. Conversely, borrowers seek to avoid the ruinous effects of compounding interest and to shelter income – whether in the form of rent or gain – to the maximum extent possible from being taxed.
Continue reading “Buyers and Sellers Are On Opposite Ends of The Seasaw”
A Remainder Estate is one of the title interests in real estate. It is usually conveyed by deed, and as such, is a future interest in title that is much stronger than an Option because it survives the death of an owner and divides a property in such a way that judgment liens become very difficult to levy. Here's why:
Sub-prime lenders are bracing for a storm of loan defaults that are going to cost them millions of dollars. They are shutting down their sub-prime loan windows. It could take years before they resume making these loans.
I got a call recently from a young person who met me socially over 15 years ago. He was getting ready to enter college at that time. He graduated with a Degree in business, and bumped around a little, then found himself with a Real Estate license selling houses by sifting on new model homes and taking orders.
The world is changing. We've gone from a strong seller's market
into more normal times. It isn't exactly a buyer's market where
the buyer can dictate both price and terms, but it is a market in
which selling a house can take between 6 months and a year, and in
which houses must be offered in pristine condition and sometimes
staged in order to attract discriminating buyers. Many people
confronting higher payments on higher priced houses are opting to
rent and to defer buying until prices come down and loans are
easier to get. This is creating a strong landlord's market in
which tenants have to jump through more credit and reference hoops
in order to rent a house of a size, quality, and location that they
might otherwise have bought. There are some lessons to be learned
here:
Is negative cash flow all bad? When might it be good? The answers to these questions will vary with your individual status.
In spite of losses incurred because of sub-prime loan defaults, lenders will lend money to owner occupants with reasonable FICO scores who can qualify for a loan. The problem is that today, all those cushy 80/20 and 80/10/10 loans with convenient terms have dried up, so buyers will need to come up with significant down payments in order to buy better homes.
Continue reading “BUYING AND HOLDING BETTER HOMES WITHOUT NEGATIVE CASH FLOW”
I’ve found that splitting the equity and giving financially distressed owners reduced rent until they can get back on their feet to be readily acceptable. The key is to never give a seller an Option to repurchase the property under any circumstances. This has been construed to be usurious practice in most States. An owner who is having trouble making payments on a $55,000 loan balance on a $150,000 house might be delighted to sign over half the house to you in return for your making all the payments while he continues to occupy it. Now, the plot thickens: Let’s say that you would be making all the payments; It would be only fair that he pay you fair market rents for the half of the house that you bought.
Continue reading “Half of Something is Better than All of Nothing . . .”
