Smaller Texas Real Estate Markets Doing Well

Real Estate Investing 3 Comments »

I am in a small Texas real estate market, the cities of Belton and Temple. While some of the larger markets like Dallas, Houston, Austin and San Antonio are feeling the pain of the sub-prime mortgage market collapsing, here in Belton/Temple, it is still a seller’s market. Just last week, I wrote a lease on a small 3 bedroom, 2 bath doublewide mobile home on my terms. As I am a real estate investor though, I am being faced with difficult buy opportunities. There is only one house listed on HUD’s Bid Select website for Belton, TX. Unbelievable!

Large Real Estate Market Situation

So if you are looking to get into real estate investing, and you are in a larger market, now is the time to start buying. But I don’t recommend trying to flip properties, as these larger markets are just too much in favor of the buyer right now. Look for opportunities to buy and hold. Rent out the properties for a while and sell them later when the market gets better for the seller.

Small Real Estate Market Situation

If you are in a small market where the sub prime market hasn’t affected you much yet, be careful. This is a shaky time for selling, as I really see the next couple of years being great for buying and renting, but there just won’t be a lot of selling going on. The smaller markets will feel the effects of the sub prime collapse, we just haven’t felt them yet. If you are thinking of selling within the next couple of years, I would probably try to sell right now, before its gets bad.

Overall we have seen a shift in the market. People who really had no business buying a few years back are now on the street, trying to rent. So we have seen a sharp decline in the number of qualified buyers, with an increase in the number of renters available. When that happens, it becomes harder to sell properties and easier to buy, so the most profitable plan from a real estate investor’s point of view is going to be buy and hold. Just my humble opinion.

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Skip a Payment: Holiday, Gift, Marketing Breakdown

Paying Off Debt, Budgeting 2 Comments »

Many credit lenders (credit card companies, credit unions, banks and so on) offer “Skip-A-Payment” options for borrowers.  Every lender has its own terms and conditions (how many payments per year you can skip, what type of credit is included or excluded in the program, and the amount of fee charged for the privilege), but you typically can skip one payment per year for $10-$50.  Sounds like a great deal?  Well “Skip-a-Payment” can be good or bad – it depends.

Why They’re Bad

The way these services are sometimes marketed towards the financially foolish is disturbing.  The credit lender may send a happy sounding letter, or post on their website something like:

“Dear valued customer, It’s summertime, and X-Bank wants to say thank-you for your business by offering you a vacation from your bills!  That’s right, you can choose to skip this month’s payment on your current account listed above.   Upon receipt of your extension agreement we will waive your payment for this month and apply a $25 extension fee to next month’s invoice.   There’s no need to send any money at this time.  Just think of what you can do with the extra cash!”

 “Take a vacation from paying your bills” subtly sends the message “get out of your responsibility (because we all hate responsibility) – hey why not take a vacation with the money you save because you deserve it!”

Of course not everyone will use the money for a vacation, but many will believe they are getting a break, when really, they’re going to end up paying more than that $25 extension fee.

Meanwhile the credit lender gets a few quick bucks from the borrower that will NOT be applied to the outstanding balance.  The lender successfully extends the life of the loan by one month (at least) and earns even more interest on the money not paid that month.

Why They’re Not So Bad

Skip a payment services can also be beneficial IF they’re used for a good reason and not as an excuse not to suffer paying a bill:

1. Emergencies
There may be a month where you absolutely just CANNOT make a payment – maybe you’re in between jobs, had to take time off work for health reasons or needed emergency surgery for a loved pet.  These things happen. Skip-a-payment services can help you avoid a delinquent account.

2. Paying Off Higher Interest Debt
It makes sense if you have credit card debt (which is usually much higher interest than other loans) to take the money you would have applied to a mortgage or car loan at 5% - 10% and reduce your 18-29% credit card balance.

So next time you get that tempting offer to skip your credit card or loan payment consider the consequences against the benefits. If you don’t have any higher interest debt to which the “savings” could be applied, don’t be suckered into thinking your credit lender is doing you a favor.  If you are facing rough times, remember that you likely can actually miss a payment to avoid damaging your credit history.

Linda Bustos is an Editor for Creditorweb, where you can learn about credit cards, discuss personal finance in the credit forum, read reviews on credit card offers from multiple lenders and apply online for a credit card.

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Free Debt Problems Advice

Paying Off Debt No Comments »

Need free debt  problems advice? Keep reading as I will divulge to you the problems people have with regard to debt, and advice about solving the debt issue, all completely free of charge. The problem with debt boils down to 2 main issues - the first is that as children, we grow up in families that are debt ridden, spend way too much, and have no discipline with their personal finances. They expect to have it all, and have it all right now. Therefore, they spend money they do not have, in order to “keep up with the Jones’s” and fall further and further behind on their payments. This is a miserable life, as they cannot afford to lose their job at any time, or they could lose everything - house, car, and any other possessions that were purchased with debt. The second issue, is that credit cards and other debt vehicles are so easy to acquire, and loan companies are very generous in their upper limits of credit use (eg large maximum balances). So why do people keep falling into this trap?

  • Attitude Toward Debt
    The first issue I mentioned was child rearing. Children, on up to adulthood, are not taught the dangers of debt, and the problems surrounding too much debt. There is an attitude of apathy, and people say things like “Aww, just file for bankruptcy, you’ll be good to go in 7 years.” There is no sense of financial responsibility, thus bankruptcy continues to increase. We need to change our mindset to one of debt avoidance at all costs. We need to ask ourselves questions like “Do I really need that new car?” and ”Why pay $1 for a soda, when I can buy a 12 pack at the grocery store for $3.65?” Asking ourselves continual questions like these will help us to become frugal spenders.
  • Delay Gratification
    We need to deny our selfish impulses for the things that we want, at least for “”right now”", or early on in life when money is tight. Look to the future, invest young, and the end results will be staggering. Investing bears exponential growth over time, so just a couple of years of delay can cost hundreds of thousands of dollars later. Forget about the Jones’s, you’re likely not to catch them anyway. Stay focused, have a little patience, and you can get there.

These are the harsh truths about debt problems, and advice on how to fix them. We must re-train our minds with regard to debt, and stop following in the footsteps of our parents who know nothing about finance. When you get to a point that it stings to buy a happy meal at McDonald’s, you are on the track to financial freedom. Stay tuned for more great personal finance help and sign up for my RSS feed to get the latest updates on everything here at THE Personal Finance Blog.

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Financing Real Estate Investments

Real Estate Investing 5 Comments »

Many emerging and veteran real estate investors are looking for ways of financing real estate investments with little or no money down. The traditional cash down payment of 20% just doesn’t work for most buyers anymore, and sometimes (especially with banks shutting down the sub-prime loan market) a more creative method must be deduced to facilitate the transfer of real property. Further, even if real estate investors have the necessary cash, it is more beneficial for them to finance most of the balance than to fork over the cash, because it will allow them to buy into other properties with the left over monies. But let’s visit a few of the financing strategies used in some of today’s real estate investments:

  • Seller Carry Back
    This method incorporates a mortgage, typically 80% of the home’s value, and the seller takes back a second lien for anywhere from 5-20% of the balance, thus enabling the real estate investor to escape the death grip of PMI (private mortgage insurance) with the added bonus of not having to come up with a lot of money down.
  • Lease Option Agreement
    A lease option agreement allows a buyer to come up with a cash down payment, with a fixed term lease, and the option to buy at the end of the lease. The down payment would then be credited to the buyer at closing. If the buyer passes on the option to buy at the end of the lease agreement, they would forfeit the down payment.
  • Lease Purchase Agreement
    A lease purchase agreement is a more traditional “rent to own” concept. In this scenario, the lessee is allowed to credit a portion of the rent toward the down payment on the house. The lease has a fixed term, and at the end of the lease, the buyer has the option to buy at the agreed price. If the buyer passes, ownership and all rent is retained by the owner.
  • Loan Assumption
    This typically only works for FHA and VA loans. In today’s world, FHA and VA loan assumptions must be approved by the respective agencies. Loans that were issued before the cutoff date are still assumable without FHA or VA approval. This is a great way to get into a property with little or no money down.
  • Low Down Payment Mortgages
    With good to excellent credit, many mortgage lenders will still offer a loan for little or no money down, especially if you intend to live in the premises for awhile. If you go FHA or VA, this is a chance you can get into the property for 0-3% down. Most conventional mortgages will still require at least 5% down, but do some homework, you might find a no money down deal out there.
  • Home Equity Loan from Another House
    I was in this situation recently. There was a mobile home on a small piece of land that I was wanting to buy, and no lender was prepared to lend money on it unless I intended to occupy the property as my primary residence. I had enough equity in my current house to cover my bid amount, but alas, the seller did not agree to my price. Don’t let it discourage you though! Sometimes, it takes many offers before you land on a seller that will agree to your price (or close to it, anyways). Keep plugging!

There are other options out there for financing real estate investments. If you have any questions, feel free to leave them in the comments area below. Sign up for my RSS feed to get instant updates.

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College Kids and Credit Cards

Budgeting, Credit Cards 1 Comment »

College kids and credit cards are a dangerous mix, especially these days. Children in today’s society are more irresponsible than ever before. I wouldn’t even trust most adults in their early twenties to take $20 down to the store to get milk and bread. Kids just do not have any sense of responsibility or care in the world, and it is mostly due to bad parenting. Families today have both parents working, and typically a solid income that will allow for some extra spending money, and debt in the five digit range - yes I said five digits, as in over $10,000 in debt. What happened to our morals, where is our sense of financial management? These are core issues here at Personal Finance Resources. But let’s discuss some key points that will help your child to be aware of their spending, and have a notion of what the value of a dollar really is.

Teach Them How Debt is Like a Prison

Debt really does enslave the borrower. The Bible says in Proverbs 22:7 “The rich ruleth over the poor, and the borrower is servant to the lender.” What would happen to you if you lost your job? Would your finances crumble? Would you lose your house and car(s)? These are very important points that you can discuss with your children. Let them know how dangerous it is, and how it is like a house of cards that can fall at any moment.

Train Them in Personal Finance Management

Small amounts of debt (like a few hundred dollars on 1 or 2 credit cards) can be very beneficial to a first time borrower, like a college kid. This will help them to establish credit, and later they will be able to get approved for a loan for a house, car if necessary, and other things. Running these small balances allows the credit card company to earn a little interest, while building up the college kid’s credit rating. But be very, very cautious and monitor your credit card account, because all too often we fall into the trap that the credit card companies set, “Go ahead and buy it now, you won’t have to worry about paying for it until much later.”

Set Low Balance Maximums

This will help to curb the bliss notion of using a piece of plastic as a license to go on a shopping spree. If you as a parent are helping your child to build credit, set a balance of maybe $250-500 on your child’s credit card, thus forcing them to come to you for additional funds, and allowing you the opportunity to further teach them about financial responsibility.

Today’s lesson, in a nutshell, is focused around teaching. As a parent, we must teach our children all things, including financial responsibility. The earlier they learn, the better off they will be. Take the time to teach them, setup chores and allowances, make them work for things they want to buy. It will make them place the appropriate value on a dollar, and they will need that training later in life.

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What is Probate?

Real Estate Investing 2 Comments »

What is probate, and what does it mean to investors? Many real estate investors use the probate process to find, acquire at a discount, and sell / lease properties for a significant gain. With a little bit of money and time, you could even make this a full time career. Most investors, when they look at probate, think that it is too difficult to complete, with a low success rate. My question is, how many offers have you submitted to typical owners that have been rejected? Personally, I have submitted many, many offers, and have only acquired a handful of houses at the proper price for significant gains. But let’s get into the meat of the probate process…

Probate Defined

When a property owner dies, the property owned must go through the probate process, or the process of distributing the assets according to a will, or at the discretion of a probate court in the event that there is no will. Now, here in Texas, if a married person dies intestate (without a will), then their spouse automatically inherits the assets, except for specific cases such as children that don’t belong to the surviving spouse, etc. There are ways to avoid probate, but that is for another edition…let’s move on to the required probate steps.

Probate Process

If the deceased had a will, an executor would be named to manage the probate process after death. If the deceased did not have a will, an administrator from the court would be named to handle the distribution of the property. The executor or administrator would then have to follow these basic steps to complete the probate process:

  • Inventory and collect all property owned by the deceased.
  • Pay off any debt or taxes owed by the deceased. Often, an ad is run in the local paper to call any lien holders of the deceased to make claim against the estate, so the personal representative can handle all debt issues appropriately.
  • Once all debt is settled, then the personal representative will carry out the transfer of property to the descendants as described in the will, or per the state’s intestacy laws.

The personal representative must be careful to observe the fiduciary responsibility they are under. They must keep funds in interest bearing accounts, treat all descendants equally, and get the probate process completed in a timely manner. Failure to do so opens the door for descendants to remove the personal representative and further delay the probate process.

So What Does Probate Mean to Investors?

Often, when a deceased person leaves property behind, descendants are not interested in inheriting the property, due to having to pay taxes, and the general grief of owning a property you do not inhabit. They simply want to get cash from the property. So this opens up an opportunity for someone to come in with a low offer, and end the frustration surrounding the beneficiaries of probate process. Especially if there is more than one beneficiary, your offer might be just want they need to stop the quarrels among themselves and end the probate process quickly. Stay tuned as I will delve into how to find and acquire probate properties…

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Real Estate Investment Cash Flow

Real Estate Investing 2 Comments »

Building up real estate investment cash flow is one of the cornerstones of the business model I am working to achieve my financial goals. The basic premise of what I am trying to do is income replacement, or building up enough side income to detach myself from my J-O-B (just over broke) and focus entirely on my own business. Now, as some of you know, I live in Texas, and right now, the smaller towns such as Belton/Temple/Killeen/Fort Hood where I live and operate are still fairly strong seller’s markets. Some of the larger cities like Houston and Dallas are experiencing downturns in the market due to the sub-prime mortgage loan industry going belly up. But, as far as the buyer’s side of the equation here in Belton/Temple, it is hard to find houses at prices that will make money. However, the nice thing is, if you can find a good deal on the buy side, you can quickly turn it around and make money.

I own a house that was purchased a couple of years ago at discount, that I put up on the market for rent, ran one ad in the paper for 2 days, and put a sign in the yard. That was 2-3 weeks ago, and I am still getting a steady stream of calls coming in for people wanting to rent the house. I also have one couple that is looking to buy the house and put their Mom in it, which I will see tomorrow if we can work out a deal.

So, to get to the point, working and investing in real estate simply comes down to one thing, and one thing only. Buy Right! The one key to real estate investing is buying properties below market price, and selling or renting them at market price. Now, if you are really looking long term at holding property, you could buy at market price, and rent to try and cover your expenses until the property appreciates enough and rental rates increase enough for you to make money, but typically only people with lots of loose cash on their hands can afford to do this.

So how does one find properties at a discount, and how much of a discount do they need to be purchased at in order to produce positive cash flow? Well let’s first discuss finding the properties.

Finding Discount Properties

There are many ways to find and acquire investment properties at a discount. Probing for houses such as tax sale properties, HUD foreclosures, Bank foreclosures, probate properties, and otherwise distressed properties are the best types of properties to go after. Seller’s must be motivated, or you will not be able to get the property at a discount. My main focus has been on HUD properties, and at, you can find the current list of available properties for sale. In a later edition, I will define and give you some quick pointers on the other types of distressed properties. But HUD properties are the simplest to acquire; you just have your realtor submit a bid, and the day after the bid deadline, you get an answer. Read the full detail of how I buy HUD homes.

Investor Pricing on Properties

The typical percentage that most investors will feel comfortable with is about 75-80% of the value of the home. If they can purchase and rehab properties for about that much, they should be able to make enough from selling or renting the house, to justify the time, money and risk involved with doing the deal. In the market I’m in, I focus on houses from about $40,000 to $100,000 to invest in, and try to make somewhere around 20k for selling the property, or about $150-200 / month renting it out. The main goal is the latter, getting the monthly real estate cash flow going to help me cover enough of my expenses to justify leaving my job.

So, to sum up, acquiring cash flow properties is one of the main things I will be doing to replace my J-O-B income, so I can leave and pursue my own business. I figure it will take about 10 of these properties to allow me to quit my job. How many properties would it take you to be able to quit your job, and focus only on your investments / other enterprises? What methods do you know of to acquire properties at discount prices? Please leave some feedback, as I have only skimmed the surface as to the strategies available for building up income streams.

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Consolidate Federal Student Loans

Student Loans, Paying for College 2 Comments »

Have a need to consolidate federal student loans, “fed” up with the rates? The truth is, college is an invaluable asset to have, and the cost to obtain a college degree rises every year, typically at a much faster rate than the corresponding year’s inflation rate. Most families today are unable to pay for college without some kind of financial aid, scholarship or student loans. There are several kinds of student loans, one of them being federal student loans, which obviously, are backed by the government. Federal loans are given at a variable rate, meaning that the interest rate rises and falls with the current position of the economy. Many may not realize the benefits of consolidating your federal student loans as soon as they can. Not only will it save you money every month, but it will also save you a lot of money in the long run as well. You are allowed to consolidate your student loans if the total amount exceeds $7,500 and you have borrowed from more than one lender.

Save Money Every Month

A statistic from Sallie Mae, the largest provider of student loans in the United States, says that loan consolidation can actually reduce your monthly payments by up to 54%. Doesn’t that sound worth it? Instead of making large monthly payments to several different borrowers, make one lower payment every month instead, with the same terms. On top of that, instead of having several different interest rates to pay on with the different borrowers, you’ll have one interest rate of concern.

Combine Several Monthly Payments

This is great for any college student. You have enough to worry about without having to remember a bunch of extra payments to several different lenders. Once you consolidate your loans into one, you will only need to worry about making one payment every month.

Save Money by Lowering the Interest Rate

Remember how I said before the Federal Student Loans have a variable rate? One of the greatest benefits to consolidating your federal student loans is that after the consolidation, the interest rate becomes fixed at the current interest rate, meaning you will be paying the same amount each month. No more rate fluctuations that can dramatically increase your payment. The amount of money you will save from consolidating should be very substantial. The money you save here can really help you to cover your other college expenses. Another great thing about federal student loans is that all interest is tax deductible, saving you money in your tax returns every year as well. The more deductions you have, the better.

As you can see, consolidating your federal student loans can be greatly beneficial to you financially. Look into it today, and start saving money on your monthly payments immediately.

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Xpress Loan Servicing

Student Loans, Paying for College No Comments »

Xpress Loan Servicing is a company that provides loans to pay for college.  Formerly known as Education Loan Servicing Corporation, Xpress Loan Servicing claims to raise the bar not only when it comes to helping students pay for college, but also sets a new higher standard in loan servicing. They are committed to providing you with excellent customer service as well as effective financial solutions for all of your education loan needs.  One seperation factor is their commitment to ensuring that students retain their good credit ratings through timely loan payments (I’ll explain more in a moment). Xpress Loan Servicing is a company worth considering if you are looking for college money, and here is a list of some of their features:

Borrower Options

Xpress Loan Servicing works to make everything as easy for you, the student, as possible. You can find forms online to cut down on application hassle, as well as eligibility information to receive a loan. Not only that, you can log into your own secure account which will provide you with updated loan information whenever you need it. It’s a great tool, and one that I made sure to have when I was looking at student loans. Not only that, they also provide loan calculators for use at your disposal, and the ability to make your payments online. From what I can tell, they will allow you to set up automatic payments from your bank account at no cost to you, if you like that sort of thing. Personally, I want to be the only one that knows my bank account information.

Payment Deferral Options

Another positive about Xpress Loan Servicing is that if you ever get in a tight spot and think you will have to miss a payment on your loan, they boast that their customer service will work with you to find options to keep you from missing a payment. This could be done through different types of payment deferrals. There are several types of payment deferrals you can use, such as:

  • In School Deferment
  • Education Related Deferment
  • Temporary Total Disability Deferment
  • Public Service Deferment
  • Unemployment Deferment
  • Parental Leave/Working Mother Deferment
  • Economic Hardship
  • PLUS Borrower with Dependent Student Deferment
  • A customer service representative will work with you to find out which deferment you qualify for, and will help to get the deferment approved to keep you from missing a payment. If you don’t qualify for one of them, and still intend to pay your loan in full, then you may still be able to temporarily suspend your payments, delay payments, or pay a smaller amount than previously scheduled through forbearance. 

    Whatever company you are looking at to help you pay for college, Xpress Loan Servicing is one to consider. They really push their customer service as a cornerstone of their business. Loan companies are usually a big hassle, and you usually are picking the lesser of evils, but at least this company puts emphasis on their customer service. If they prove to treat you badly, you can always consolidate or transfer your loan to another loan service company.

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    Texas Electricity Rates

    Budgeting 3 Comments »

    As some of you may know, I live in Texas, and the Texas electricity industry has been deregulated. Thus, Texas electricity rates have become a “shop able” commodity. But why does TXU still get the lion’s share of the electricity market? Because people do not know that they have a choice. I want to address this, and tell you which company I am currently with, why it is so great to go with a different electrical provider, and how much money you can save. I am even going to provide you with a link to be able to shop today’s rate for many different electrical providers.

    • Will Another Energy Company Have Blackouts?
      A lot of people have this concern, and therefore do not want to switch. But in Texas, the generation of the electricity is still regulated. Thus, regardless of the provider, the electricity comes from the same power plant, along the same electrical lines, and if there is a failure, you would call the same 800 number to have the lines repaired. So, the only thing that changes is who the bill comes from, how much they charge you per kilowatt hour, and the terms of the contract. So let your mind at ease, each energy company out there provides the same delivery of electricity.
    • Making the Switch is Too Much Trouble
      I assure you, it isn’t, just make the call to the new company (some even allow sign ups online), complete the contract within a few minutes, and presto, done. Just make sure that you get all the details like how long the contract term is, how much per kilowatt hour, is it a flat/progressive/average kilowatt hour charge, are there any early termination fees, is there a guaranteed kilowatt hour price, etc. I recommend going month-to-month, at least in the beginning, to try the company out.
    • Which Electrical Provider am I With?
      Well, to me, price was the most compelling factor is my choice of electrical providers. After that, I did not want to commit to a one year contract, so I chose Star Tex Power as my provider. At the time, there was only one company cheaper than them, but the name of the company was Amigo Energy. I just couldn’t trust a name like that, so I went with Star Tex Power. One simple phone call, and I was up and running. They also have free online payment processing, which makes the billing very simple.

    To sum up, since the deregulation of the energy industry in Texas, electricity rates have been a lot better. If I were you, I would definitely make the switch. You may shop the rates of many providers at Sign up for my RSS feed for more great personal finance tips and help to come in the near future! So long for now…

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