Buying a HUD Home Part 1: How I Acquired 4 Homes in Under 2 Years

Real Estate Investing, Buying a Home 4 Comments »

Buying a HUD Home can be a daunting task. There is a lot of red tape surrounding anything that involves a federal agency. In this post I am going to reveal the exact method I use to effectively buying HUD homes at significantly discounted prices. In less than 2 years, I have effectively acquired 4 HUD homes for between 60% and 80% of their market value. If you are just beginning, I would recommend that you read the following posts before continuing:

  1. The One Key to Real Estate Investing
  2. Picking Partners for Real Estate Investing
  3. Simple Guide to Real Estate Investment Property Evaluation

Pay particular attention to the last article listed, as you can download the xls spreadsheet and use it to help you produce a bid that may seem low, but will allow you to estimate your offer price per your desired profit ambitions. If you have read and agree to “The One Key to Real Estate Investing“, than you will not think that your offer is too low. However, what has frustrated me in working with sellers that privately own real estate is that they think that they should get an offer that is very close to their asking price, and are unwilling to negotiate. I have submitted countless offers to sellers attempting to acquire a property at a price I know I will make money at, all to no avail. Even if you are able to find a home where a seller is truly desperate, you are often faced with many more road blocks that will derail your contract and drive you bonkers; which is why I turned to HUD home buying tactics.

A quick example of a would be deal I had with a woman who was going through a divorce. I came up with an offer that would work for me, and the seller, but the realtor killed the deal. She knew that the owner’s note was greater than my offer amount, and did not want to put in the work necessary to foster a short sale.  While I am a realtor myself, I must say that most realtors out there are worthless, and provide no value while charging a ridiculous 6%. All that most realtors do for you is list your property in the multiple listing service (MLS), stick a sign in the yard, and wait for another agent to bring them a buyer. The real power is in the MLS, which is the second reason why I became a realtor myself (the number 1 reason is to keep most of the sales commission myself).

OK! Enough ranting about why most realtors aren’t worth throwing peanuts at. Let’s look at the method I use for buying a HUD home. There are 3 basic steps to buying a HUD home for less:

  1. Knowing the HUD Listing System
  2. Timing Your Offer
  3. Don’t Worry about the paperwork

Go to Buying a HUD Home Part 2: How I Acquired 4 Homes in Under 2 Years


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Unsecured Line of Credit Usage and Cautions

Credit Lines Other No Comments »

My views of credit, especially unsecured credit, are particularly negative. However I am a proponent of the unsecured line of credit.  My primary recommendation for the use of an unsecured line of credit is for protection, in other words using it to guard against overdraft. I myself, have and maintain an unsecured line of credit. Through my personal banker, I have obtained an unsecured line of credit in the amount of $5,000. Currently, I am not utilizing it though (zero balance, :)). But let’s do a quick breakdown of this type of credit:

Benefits

Potential Problems

  • Automatic overdraft protection (if I go into the red, an instantaneous transfer occurs from my unsecured line of credit to cover the amount needed, without any fees)
  • Automatic minimum payments are debited from your account, so you are never late or responsible for additional fees (unless you continually run in the negative)
  • Low interest rates (usually prime plus 1-2%)
  • Transfer can be made to your checking account for instant cash without exorbitant fees (I pay only regular interest rates on the transfer, no balance transfer fee or anything like a credit card)
  • No hassle, can be done all online without customer care help
  • Because it is tied to your bank accounts, it can be viewed easily, and in most cases, side-by-side with your deposit accounts
  • The ease of obtaining the money without penalty can lead to excessive spending, be disciplined!!
  • Because of its automatic nature with respect to overdraft protection, balances can go under the radar, and you may be surprised when your bank account is later debited for the minimum payment.
  • Be careful not to count the balance as positive when reviewing your snapshots, it is usually not placed in red, and can look like a deposit account.

I am a big fan of the unsecured line of credit. When used properly, it can save you a lot of money vs miscellaneous credit card fees. It’s automatic protection nature gives you a piece of mind, as well as saving you time when you are in need of a purchase. But let me go on a give a few recommendations on how to establish and maintain a quality unsecured line of credit:

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Term Life Insurance vs Whole Life

Life Insurance 2 Comments »

Term life insurance vs whole life is a well debated subject.  What I hope to accomplish with this post is to give you a few facts, and my opinion on the best option.  But with regard to term life insurance vs whole life, it really will depend on your goals for the future. I have compiled a simple chart that should give you a nice idea of what the differences are between term life insurance and whole life.  Before we go on, you may want to review Term Life Insurance Definition and Definition of Whole Life Insurance. Ok, let’s review the charts, and then move on to some real life conclusions / recommendations:

Term Life Insurance

Whole Life

  • Death benefit only, no cash value
  • Cheaper premiums
  • Premiums increase with renewal
  • Fixed timeline of coverage (hence the word  “term”)
  • No benefit paid if you live past the coverage
  • Generally not pushed as much by insurance salesmen
  • Many different varieties to choose from
  • Death Benefit Plus Cash Value
  • More expensive premiums
  • Usually premiums remain level 
  • Covered for life (or a payout at age 99, typically)
  • Ability to borrow against cash value
  • Typically offer some kind of guaranteed minimum return on the cash value portion of the policy
  • Can be tax free growth on the cash value portion
  • High administrative costs (built into the premiums)
  • Pushed by insurance salesmen (I compare them to used car salesmen)
  • Many different varieties to choose from

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Definition of Whole Life Insurance

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Whole life insurance is one of several types of life insurance you can purchase.  Simply defined, whole life insurance is permanent insurance that will last as long as the person lives and keeps paying the premiums. Whole life insurance is designed to provide protection for the whole life of the insured person. Whole life insurance is a good choice for you if you want to ensure that you have a life insurance policy in place for your entire lifetime and can comfortably afford the premiums, which will never increase. Also, many choose a whole life insurance policy to aid in their retirement planning.

Cash Value in Whole Life Insurance

Each whole life insurance policy has a guaranteed cash value, which usually grows based on a pre-determined schedule during the life of the policy and which should equal the death benefit upon maturity of the policy, typically at the age of 99 or 100.  Cash value in your policy will grow very slowly in the first few years of ownership, and as time goes on, the amount will increase more rapidly. The cash value in your insurance policy can also be used to  buy a paid-up whole life insurance policy in a reduced amount if you want to quit paying premiums, or you can access the cash value anytime from your policy in what is called a policy loan. Cash values are not paid to the beneficiary upon the death of the insured; the beneficiary receives the death benefit only.

Whole Life Insurance Premiums

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Term Life Insurance Definition

Life Insurance 2 Comments »

Just exactly what is term life insurance?  Why would I consider it? And why is my insurance agent pushing whole life over term life insurance? In this post, I want to help you understand the term life insurance definition, and why I prefer it over whole life.

Term life insurance is just what the name implies, life insurance for a fixed period of time, or term.  Term life insurance is generally substantially cheaper than permanent life insurance, and is known to be perhaps the simplest form of life insurance.  Term life insurance is the most popular type of life insurance today, and it is a great way to make sure that your family and other beneficiaries will be protected in the event of a premature death. Not only are they well protected financially, but they are protected without you having to pay a high premium payment every month.  

Term Life Insurance Coverage

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529 Account Pros and Cons

Paying for College No Comments »

First of all, what is a 529 account really? And what advantages will it give me? These are good questions which I will attempt to answer today. A 529 account is a state sponsored plan that allows families to save money towards their children’s (or their own) college education, while being able to invest the money and gain a market return. The best part of the plan is that the money grows on a tax free basis, as long as it is used for education.

The 529 account can be used at any accredited college or university, on anything from tuition and fees, to books, room and board, supplies, etc. needed for college. As I mentioned before, each state has different rules surrounding the 529 account, but you can shop any state’s plan, to suit your needs. The only negative consideration with using a different state’s plan is you may have to pay higher commissions with less investment options available under the proposed 529 account. Let’s take a closer look at some of the key benefits and problems:

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Personal Tax Planning: Don’t Miss These Write Offs

Tax Planning No Comments »

How many times have you completed your taxes, and then found out later that you could have gotten extra deductions if only you had  paid just a little more attention, and you missed your opportunity for more cash back? It’s aggravating, and it doesn’t have to happen to you. It is always a good idea to sit down and review the possible deductions that you can take before you do your taxes, and while there are hundreds of possible tax deductions the IRS allows, here is a list of some commonly missed tax write offs so that you can be prepared not to forget them when tax season comes around again:

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Identity Theft Credit Cards: What CC Companies Do to Protect You

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With so much information at your fingertips these days, identity theft has become a huge issue in the United States and credit card companies are looking to help their clients avoid identity theft at every turn. Identity theft credit cards provide protections available to you for no extra cost, and give you that added security to put you at ease when using your credit card. Each credit card company will offer different identity theft credit card protection for you, and it’s best to know whats out there when applying for a new credit card.  The following is a breakdown of four major credit card companies, and how they deal with indentity theft:

Discover’s Identity Theft Credit Card Protections

  • Credit File Montitoring - All three credit bureaus are monitored for unusual activity every business day, if anything is found that could indicate fraud, you will be contacted promptly by means of an email, text message or mail.
  • $25k Identity Theft Insurance - Provides each client theft insurance up to $25k with no deductible for expeneses associated with identity theft (not for New York residents).
  • Expert Identity Theft and Credit Report Advisors are always on call to answer any questions.

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How is Credit Card Interest Calculated?

Paying Off Debt, Credit Cards 1 Comment »

It is important to know how credit card interest is calculated. It is not calculated the same way that a CD or an interest bearing savings account is calculated.  The key problem for the consumer is that the credit card interest rate is calculated daily.  I’ll will explain more in a minute on this.  First let’s go over the typical balance types that credit card companies use:

  • Average Daily Balance
    By far the favorite of credit cards.  Every day, your balance is recalculated with any payments, adjustments and/or additional finance charges.  With some credit cards, new purchases are also included in this calculation.  At the end of the month, these daily balances are averaged over the number of days in the billing cycle.
  • Two Billing Cycle Balance
    This method is most advantageous for the credit card company.  This method is an extension of the average daily balance method, but utilizes two billing cycles to come up with the average daily balance.  The typical grace period (which is usually 28 days) is non-existent under this method.  Also, all your payments, regardless of size, do not truly reflect in the interest calculation until two fulls months later.  Definitely shy away from this kind of offer.
  • Adjusted Balance
    If possible, this is the method you want to be using.  Under this method, all payments and credits are subtracted from the preceding billing period ending balance.  Therefore all interest calculations for the current month are being exacted on a lesser balance.

So when you are shopping credit card offers, take the above information into consideration.  It may not sound like it makes much of a difference, but you will see in a moment just how much of a difference it can make.  Remember above how I said that credit card interest is calculated daily?  This is how virtually all credit cards calculate interest.  This means that every day compounded interest is added to your balance.  But Jeffry, I don’t see it reflected in my balance, what are you talking about?

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Tips for Monthly Saving Part 1

Budgeting 2 Comments »

Does it seem like you just can’t get ahead?  Like its paycheck to paycheck, and zero room for errors?  I’ve been there.  When I was in college, I was living on 59 cent bread and 49 cent lunch meat.  I could barely make rent and pay payments on the thousands of dollars I racked up in credit card bills.  The financial pain of higher education is incredible these days.  But you may have other reasons why there isn’t anything left at the end of the month…

Today, I want to look at some possible cost cuts you can do to increase your monthly saving habits (or generate some new ones).  I have compiled a chart that will show you how small monthly or daily cuts in your budget can really save a lot of money over time.  But it takes discipline, and you must be ready to commit to saving money as a daily habit, to achieve any real monthly savings.  Here’s some things to ponder:

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