6 Tips To Help Improve Business Negotiation

Negotiation is an essential part in almost everything you do. Without even realizing it you negotiate with your spouse, kids, business partner, contractor and attorney on a daily basis. Some negotiations are worth thousands of dollars and others are strictly for principal. It is human nature to try to win every negotiation we are part of regardless of what is at stake. The best negotiators know that it is not how fast your talk or the cadence of your voice that has an impact on the result. Some of the best negotiators would be considered average speakers. There are several things that seasoned negotiators do that separate them from the pack and give them the results they desire. They do so without raising their voice or speaking 1000 mph. Here are six tips that will help anyone improve their business negotiation.

  • Discover motivation. In every negotiation there is something that both sides want for their desired outcome. With that there is usually a motivation behind their desires. A bank often tries to get the highest sales price or the quickest transaction. A distressed homeowner may need to sell to avoid foreclosure or because they are dealing with a divorce. An attorney may be trying to squeeze extra money from you at the closing. Whatever the case is it is important to discover the motivation of the other party. The motivation will drive their actions, requests and scenarios. It will push them closer to an agreement or drive them farther away. You can usually find their motivation but doing a little bit of research or simply asking the right questions. Before you get too deep in your negotiation you should always try to discover their motivation.
  • Have a walk away number. As you enter in a negation it is important that you know where to draw the line. Many investors that go to live auctions get caught up in the process and before they know it they are in a bidding war thousands of dollars above their desired price. They didn’t have a walk away number in mind before they got started. Regardless of what your number is or what you are negotiating for you need to know when you will walk away. This isn’t being stubborn or unreasonable but rather measured and responsible. If things get too heated or the ends don’t justify the means it is ok to walk away.
  • Never make idle threats. Having a walk away number and making threats often go hand in hand. Everything that you say in a negotiation can be used against you. If you say that you are wholeheartedly opposed to something and later you are open to it nothing else you say in the negotiation will be taken seriously. When you say that you will not go a penny higher or this is your absolute bottom line you had better mean it. Any blanket statements like these should be at the end of the negotiation and only when you feel things aren’t getting anywhere.
  • Give to get. The best negotiations are the ones where both parties feel like they have won. Even if you have the upper hand you never want to completely steamroll the other side. If they feel they are being taken advantage of they will most likely try to find an alternative. One of the best ways to wrap up a negotiation is by offering up a small concession. Not only is this seen as a sign of flexibility but it gives the other party something of value. They may want you to pay for the closing costs but rather you counter that you would pay for some of them. They may want you to go to their number but instead you increase your offer slightly. By being flexible and open minded you can get more negotiations to the finish line.
  • Focus on positives. There are two sides to every negotiation. Most people focus on what they are giving up rather than what they are receiving. Your goal should be to constantly focus on the positives of what you are offering. If you are looking to buy a property at a discount you need to focus on your ability to close quickly given all the issues with the property. Constantly point out any work that needs to be done, the cost of repairs and the limited pool of potential buyers. The better you are at pointing out and explaining the negatives the more likely they will give in and agree to your proposition.
  • Don’t take anything personally. There is plenty that is said and done during negotiation. It is important that you understand that this is just part of the deal and you should never take anything too personally. If someone makes you a lowball offer you should not be insulted by it and cut off communication. On the flip side you also need to recognize what may be insulting to the other party. Not everybody may have thick skin. By nickel and diming the other side you can lose their trust and make the negotiation more difficult.

Negotiation is a cat and mouse game where the more controlled person usually wins. If you are negotiating with someone you frequently work with such as a contractor, attorney or real estate agent you should try to be as fair as possible. Winning the negotiation can cause you to lose a valuable partner.

5 Actions To Take When You Apply For A Traditional Mortgage Loan in Calgary

There are many real estate investors who are utilizing traditional lender programs. With interest rates continuing to slide this has become an increasingly viable option.  As popular as lender programs are not every borrower can get approved.  There are still strict guidelines in place and a mountain of documentation that has to be provided.  With a strong credit score, significant down payment and low debt to income the process can seem as easy as it has ever been.  However, if there is even the slightest blemish you need to have everything in place well before you consider making an offer.  The more organized you are with your loan items the easier the process becomes.  If you are considering applying for a traditional mortgage here are five actions you need to take.

  • Review Your Credit Report. Regardless of what type of loan program you are considering everything revolves around your credit report. If you are considering bank financing the very first thing you should do is obtain a copy of your credit report. For starters this will give you an idea of your score but it will also provide you with all of the liabilities and negative items. If you haven’t looked at your credit report in some time there may be old accounts on there that catch you off guard. One erroneous account or old collection can single handedly pull your score down. The quicker you can get a jump on removing them the quicker your scores will improve. Starting this process after your offer is accepted may not give you enough time. The difference between a 690 score and a 722 can not only impact your interest rate but your approval as well.
  • Deposit Funds ASAP. Loan guidelines for investment loans are different than traditional single family purchases. In addition to stronger credit score requirements investment loans require down payment funds to be seasoned for at least sixty days. Simply put this means the money needs to be in a dedicated account for two months.   If you plan on pulling money from a stock account or anything else you need to do so as soon as possible. Lenders have strict guidelines regarding how long the funds must be in the account for. It is not enough to have them available. If they are not in the account for a full 60 days you will not be able to move forward with the application. In addition to the down payment amount the lender may ask for a few additional months of the mortgage payment for reserve funds. The bottom line is that if you are considering using a bank you need to put all of the funds in one account before you start your search.
  • Pay Down Debt. If your score is dangerously close to the acceptable level you need to focus on how you can give your credit a quick boost. If there are old items on your credit report you can get them removed and have your score updated in as little as 30 days. However, this only works for legitimate accounts. The only other way to quickly improve your score is by paying down your debt. The amount of available balance is second only to payment history when it comes to calculating your credit score. The lower your balance is in relation to your maximum balance the higher your score will go. First look at situations where a balance transfer makes the most sense. From there you should consider pulling funds from your bank account to pay down accounts you are maxed out or near maxed out on. The sooner you can lower your debt the sooner you will see the impact on your credit score.
  • Review Bank Statements. With every loan submission you are required to supply at least two months of bank statements. In addition to verifying the deposit amount you will also need to document any large deposits and withdrawals. A large majority of real estate investors are self-employed and deal largely in cash. This can create a problem when it comes to verifying items on the bank statements. Start by looking for any item over $500. Determine where the funds came from, or went, and write down an explanation. If your offer is accepted you will need to write a letter of explanation for each item and possibly supply cancelled checks. It is a good idea to have your lender review your statements and tell you exactly what you will need to provide.
  • Shop Around. Long gone are many of the loan programs from last decade. Almost all local banks have the same set of investor programs. There may be some slight change in the interest rate but the programs are basically the same. If you are looking for an investment loan your best bet is to shop around and find as many different options as possible. The best way to do this is through a local mortgage broker. Most brokers have access to dozens of banks with several different programs. All it takes is one to be a good fit for you and what you are looking to do. Before you commit to anyone you should talk to at least three different companies. Instead of having them pull your credit you should come armed with your credit score and bank statements. Ask about specific programs and guidelines and find the person or company you are most comfortable with.

There are many advantages of using lender financing. The key is to find the right program for your credit profile.  After your offer is accepted is typically too late to change gears.  Get everything in line before you start your property search.

5 Tips To Help You Deal With Business Debt

There is nothing that can bring your business down quicker than excessive debt. You may be able to manage it for a while but the slightest reduction of income will cause the air to come out of the balloon.  If you are like most business owners, and Americans in general, you deal with debt.  If used properly debt can be a vehicle that helps your business grow.  Unfortunately most investors use it on items that do nothing but increase liabilities.  Managing debt requires education and discipline that can be difficult to obtain.  It is easy to real estate investors fall into the debt trap.  Here are a few tips to help avoid and deal with business debts.

  • Understand Debt. The most basic step in dealing with debt is to try to understand it. In the simplest form you are paying interest for the access to quick capital. The most common form of debt comes from credit cards. You can also accumulate debt through home loans, auto payments and personal loans. It is important read the fine print every time you fill out an application. You need to know everything about the terms you are getting into. Not only do you need to know the interest rates and fees but any potential changes that will affect your monthly payment. It is also a good idea to take note of what happens if you miss a payment. Most credit card rates will escalate after the first missed payment. Even though personal finance can be a difficult topic to learn you need to have a basic level of knowledge.
  • Good vs. Bad Debt. One of the biggest misconceptions in business is that all debt is bad. There are many successful investors who utilize leverage to grow their business. There is a big difference in good verses bad debt. Good debt is anything that is used to add value. This could be using credit to fund a direct mailing campaign. Your debt is used with the hope that it can produce additional revenue. An example of bad debt could be using credit to furnish a rental property or pay for unexpected repairs. You continue to pay for these items months after the fact. With them at least you keep your rental property afloat. It is when you truly abuse debt that you run into trouble. Using credit for personal items like weekend trips, meals and lavish expenses will leave your business on a treadmill. You will end up working twice as hard just to remain in the same spot. The money you bring in is quickly going out the door to manage your debt. Not only is this frustrating but it causes you to cut corners in other areas just to see a small profit. Once you get caught in this bad debt cycle it is difficult to pull yourself out.
  • Budget/Schedule. If you truly want to pull yourself out of debt you need to do something about it. You need to acknowledge the hole you are in and tackle it head on. Start by making a list of all your monthly liabilities. Write down your current monthly payment, balance owed and payment due dates. This may seem very overwhelming but you have to start somewhere. From there make a schedule of when you are going to make the payments. Hold yourself accountable to these dates. There are going to be some months where there is not a lot of excess cash flow. You need to grit your teeth and make sacrifices during this time. Surprisingly enough one of the reasons that people spend is because they don’t have enough money. Credit allows them to spend without having the money available in the bank. Instead of making the problem worse on months when cash is tight fight the urge to spend. The more detailed you in with what you owe and how you will repay it the easier it will be to deal with.
  • Monitor. It is important to monitor where your debt has been used best. Like anything else you do in business you want the greatest return on your investment. When you use credit you are really making an investment. Most people that get into debt trouble will start off strong then quickly fade after just a few months. You need to constantly look at every statement you receive and offer you get in the mail. There are instances when transferring balances from one account to another could save you hundreds of dollars every month. You may also find a monthly fee that catches your eye that could be eliminated elsewhere. Listing all your debt is a good start but you need to stay on top of it every month.
  • Long Term Plan. With any plan it always helps to have a vision of your end goal. Take the time and go through all of your accounts. Write down your plan for how you are going to pay them off. This could be making an extra payment with cash flow received from a rental property or paying it off completely after you close your next big deal. Along the way remember to reward yourself with every three consecutive payments. Give yourself a small indulgence that you may have wanted for a while. Don’t pile on new debt but do something as a reward. If you do this every three months you will be motivated to stick with your plan.

As a real estate investor you can quickly pull yourself out of any financial hole you may be in. There is no cap on your income and no ceiling for what you can earn.  Dealing with debt is often very frustrating but can be conquered with a plan and the discipline to stick to  it.

5 Business Crushing Mistakes You Need To Avoid

There is a certain euphoric bliss when entering any new endeavor. You are so excited that you finally took a leap of faith that you fail to see the bigger issues ahead of you. Being a self employed real estate investor is one of the greatest professions in the world, but it doesn’t guarantee success. There are many minefields that you need to avoid. Just when you think you have everything figured out something new will come out of nowhere.

As an investor you are the CEO & President of your real estate business. You steer the ship of which direction you want your business to go. One poor decision can set you and your business back months and make it difficult to recover. You don’t need to labor over every single decision you make but you should know that everything you do has consequences. Here are five business crushing mistakes you need to avoid.

  • Thinking you climbed the mountain. There is a saying in sports that becoming successful is the easy part, maintaining it is difficult. As hard as you worked to build up your business and grow your pipeline you need to work twice as hard to maintain it. For many new entrepreneurs, and investors, getting to a point where you commit to the business full time is the top of the mountain. You think you have finally made it simply because you are now investing full time. The reality is that now is when your work really starts. Without maintaining the same edge you had to get to this point you will quickly fall behind your competition. Just as you have committed full time there are other investors in your market with the same vision. If you let your foot off the pedal you will lose deals & opportunities that used to be available to you. Entering the business is just the start of your real estate journey.
  • Emotional decisions. There are dozens of decisions needed to be made on a daily basis. Some are obviously more important than others but everyone is important in its own certain way. It is essential that you base your decisions on facts and logic rather than emotion and instinct. There will be times when you come across a property that you love personally but it may not make the best investment. The numbers don’t quite add up or the seller won’t budge off their number. You look at every possible angle to try to make the deal work but deep down you know it just doesn’t make good business sense. As difficult as it may be these are the deals you need to walk away from. Sometimes, some of the best deals you are a part of are the ones you don’t get involved in. It is ok to say no if you need everything to break right just to scratch out a small profit or the deal will engulf too much of your day. Never let your emotions influence the important decisions in your business.
  • Lack of action. If you are like most business professionals you probably have dozens of ideas floating in your head every day. What separates success and disappointment is often the ability to act. It is not enough to say what you are going to do or even write down an action plan. You need to get up and do it every single day. There are days when you don’t want to spend a few hours at a local networking meeting or want to drive to a business engagement. There is nobody telling you that you have to go so you choose your action based on how you feel. Before you know it, you find ways to justify not doing something and slowly it will negatively impact in your business. The action you take is the one thing you can control that separates you from the competition.
  • Putting all your eggs in one basket. There should always be a delicate balance between striking while the iron is hot and putting all your eggs in one basket. Just because something may be going well in your business now it doesn’t mean it is going to last forever. There should always be a safety net if the market shifts or changes unexpectedly. Foreclosures & short sales were a great source of business last decade but have since come back to Earth. If you put all your resources to marketing and generating deals in these areas you may have had a tough time finding good deals and generating a profit. Conversely if you marketed in several areas and had a diverse portfolio you can weather almost any storm the market brings you.
  • Poor time management. As obvious as it sounds you need to focus on doing the right tasks. There are only so many hours in a day. It is easy getting caught up on a simply task for hours if you are not careful. Before you know it half of your day is gone and you haven’t been nearly as productive as you would like. You need to take time to plan your day so you can be as efficient as possible. Wanting to act is great but you need to be able to fit everything in on your schedule. Something as basic as time management can influence how productive you are.

Being your own boss and running your own business can be a difficult adjustment. It is important that you keep working every day and understand the potential pitfalls out there.

Flipping Houses: The Most In Demand Home Feature

What will be the most in demand home feature from now through the next three years?

For a variety of reasons, including changing neighborhoods and rising crime rates, there remains a soaring demand for homes that feature increased security measures.

For those flipping houses, measures taken to secure a home may serve as one of the most important aspects in promoting appeal and facilitating the sale of the property. However, the addition of a security home feature may assist those placing their property on the market and real estate agents promoting said property.

It doesn’t matter who you are selling to, or even if you are attempting to lease out rental properties, enhanced security measures can make a big difference in value.

Many real estate investors have shied away from investing in these types of home improvements in the past to keep costs down and profit margins up, but they can no longer be ignored or their importance underestimated.

So whether you are renting out apartments, sprucing up your property for a quick sale, flipping houses full time or even building spec homes; enhancing security features could prove to increase the value of the property in question.

High-end properties may even benefit from the addition of a panic room or disaster shelter.

Of course, lavish home features like these are not always a viable option for the majority of homeowners. However, that doesn’t mean you can’t make an effort to provide an increased sense of security. Any home can benefit from today’s new breed of advanced alarm systems that offer high tech remote monitoring. They are great selling features that can simultaneously boost value and provide its occupants the protection they deserve.

Even on a tighter budget; items like reinforced security doors, basic alarm systems, secure windows and flood lights on the exterior can make a big difference.

The installment of a secure home feature can facilitate the sale of property for real estate investors or even increase the appeal for a homeowners association.  However, security measures are more than just fancy assets. If a tenant or homeowner has been subjected to theft or injury after requesting a specific home feature, and the renter neglected to provide the security measure, they could potentially sue the owner for damages.

Want to go all out? How about developing your own community with security as one of the main selling features?

 

5 Things You Need To Know Before Making An Offer

Most new investors are in a rush to make an offer. They want to accelerate the process and get things started as quickly as possible.  As great as taking action is you also need to know everything about the deal and property you are making an offer on.  A lack of due diligence in just one of a few key areas can completely change the perception of the property.  Prior to looking at any new property you should have a due diligence checklist firmly in place.  This will help streamline the process and allow you to quickly react and avoid a major oversight.  Here are five things you need to know and have in place before making an offer.

  • Financing. The starting point for any purchase is financing. How you plan on financing the property impacts almost everything you do in the transaction. The terms and price on a property you are paying cash for is different than if one you would utilize lender financing. Either option you chose can work but you need to know which way you are going to go prior to making an offer. If you plan on paying cash you need to have your proof of funds letter updated with any amounts adjusted. If you are using lender financing your pre-qualification letter has to have the proposed purchase price in addition to as much specific information as possible. Your financing can, and probably will, change depending on the specific property. However you need to know which way you want to go prior to making an offer. The type of financing you choose will often influence the decision of the seller.
  • Understand Local Market. Getting an alert about a new listing at a reduced price may seem like a steal but it can end up being fool’s gold. If the property is in a declining market getting it for virtually nothing can still end up doing more harm than good. Prior to making any offer you need to know everything about the market the property is located in. It can be argued that the market is more important than the actual property. You need to understand both the micro and macro view of the property. The micro view looks at properties and trends as close to the subject property as possible. The macro view looks at the town as a whole and the big picture view of the area. It is important that you understand as many trends as you can find and have an idea of what influences them. The local market of the property will often directly influence the property value as well as what your future options are. It is not enough to simply acquire the property and figure things out as you go.
  • Know The Property. If you are going to make an offer on a property you had better know everything about it. Almost every seller will go to great lengths to make their property appear as appealing as possible. If the flaws are not obvious it can be difficult finding them. Prior to making any offer you need to go the extra mile to know exactly what you are buying. Track down the listing history and see if there was any work recently completed on the property. Walk the grounds with your contractor or an inspector to give you an additional perspective of the property condition. In your excitement to make an offer it is easy to gloss over some minor items that can actually have a significant impact. By having someone you trust provide an additional perspective on the property you reduce the risk of finding something unexpected after you take ownership. If you aren’t comfortable with your knowledge of the property you should consider passing until you are.
  • Walkaway Price. There is a lot of work that goes into researching a property and making an offer. There are times when you will do hours of due diligence on a property and not be rewarded with a deal. As difficult as this is it is part of the business. What you can’t do is let one deal influence your actions on the next one. It is important that you have a walkaway number in your head prior to making any offer. Without this number it is easy getting caught up in a bidding war and letting your emotions take over. Sometimes some of the best deals you make are the ones you walk away from. Stand firm with your number and know where to draw the line and walk away.
  • Research Exit Strategies. What do you plan on doing with the property if your offer is accepted? Do you have a backup plan or two in mind if things don’t go the way you anticipate? The longer you are in the real estate business the more you will accept that things won’t always go the way you plan. There will be plenty of times when you need to call an audible and change gears on the fly. If you are not ready to adjust you may find yourself in a situation with a property you desperately want to get out of. Prior to making an offer you need to have multiple exit strategies you can employ in a moment’s notice. The more options you have the more valuable the property is. Never put all your eggs in one basket and assume that everything will go the way you anticipate.

You always want to be confident you are making the right offer on the right property for you and your business. If this means taking a little more time on due diligence than that is what you need to do.  Always know and understand these five areas before making an offer.

Sell Your Property For Maximum Return in Calgary

There is a lot that goes into flipping a property. Not only do you have to acquire it at a price that works for you but also, you need to put the right amount of work into it.  There are many investors who are disappointed in their results because they fail to see the end of the process before they start.  Selling your investment is great but the goal is to maximize your return.  This starts from the minute you take ownership of your property.  There are a handful of things you can do from the time of acquisition to the sale that will help in this area.  Here are five tips to help sell your investment property for a maximum return.

  • Think Like A Buyer. One of the biggest adjustments new investors need to make is to change the way they think. You need to be able to put your personal feelings and ideas aside when rehabbing. As much as you may like a certain property characteristic, you are not going to be living in the house. As you sit down and map out what work you are going to do, you need to keep your buyers in mind. This starts with understanding the area and local market. Put some time into researching what kinds of properties have sold in the last few months. Look at the listing sheets to see what features these properties have. It is also a good idea to take a look at homes that have sat on the market for a considerable amount of time as well. After you do your due diligence you should be able to have a good idea which areas you need to improve and which you can scale back. From the minute you start any work you need to think like a prospective buyer would think.
  • Luxury Vs. Affordability. When rehabbing there is a delicate balance between luxury and affordability. All buyers want to live in the nicest house possible. They want granite countertops, updated bathrooms and stainless steel appliances. However, many are not willing to pay a premium for them. Throwing money at a property does not guarantee that you will see a return. Over improving your property for the market may turn out to be a waste of money. With any sale you want to create the highest amount of demand. This often means making the property as affordable as possible. A strong level of affordability brings in the maximum amount of buyers. Not only do you increase the chances of a quick sale but you can also create maximum demand. This demand often ends up in a bidding war which pushes your final price higher. Nice things work only in markets where buyers are willing to pay for them. Never throw money at a property without understanding the potential return.
  • Work With The Right Buyers. Doing the right work does not guarantee maximum return. You need to sell to the right buyer. Regardless if you have one offer or multiple ones you can’t rush to judgement. Accepting an offer that doesn’t close sets you back months. There are times when the highest offer may not be the best one. You need to look at everything involved. The contract, prequalification letter and any financials must be reviewed. It is no secret that the mortgage market is still filled with delays and 11th hour issues. You want to work with a buyer that is as clean as possible and can close without any problems. By accepting a higher offer with a prequalification that looks shaky you can end up wasting 45 days before you find out there is an issue. At this point most of the buyers that were interested most likely moved on to other properties. You will be forced to start the process over again and wait at least another month, possibly longer. Price is always important but working with the right buyer can help you get the best deal.
  • Don’t Wait To Market. There is some debate in investing circles as to when is the best time to market your rehab. While it may make sense to wait until all the work is done to show it to the public you can always market to your network. There is no need to wait to generate interest with local attorneys, mortgage brokers, contractors and anyone else associated with the business. You can take advantage of social media and make posts regarding your property. The sooner you get the word out the more likely you can find a buyer.
  • Price Right. While this is listed last it may be the most important step in selling for a maximum return. Most buyer interest is based on the list price. If you list too high you will lose a large segment of buyers that may have had interest. By listing too low you can end up leaving money on the table. Trying to squeeze 5% more out of the property has a negative impact. A home that sits on the market quickly loses appeal. Real estate agents will direct their buyers to more affordably priced homes in the area. After a few weeks of inactivity you will be forced with a decision to reduce the price. Once this happens buyers look at your property as damaged goods and any offers that come in will be discounted. You are always far better off listing at the right price and hoping to generate demand than trying to get a price that you know isn’t very realistic.

Generating maximum return begins at the start of the process and goes all the way until closing. Just a few percent more on five rehabs a year can equal a large increase in your bottom line.

10 Documents You Need Before Applying For A Home Loan

If you want to ace the home loan process it pays to be prepared.

While some sources report that it has become easier to obtain a mortgage loan, it is still far from as easy as it was 10 years ago. With the current rush to secure loans before interest rates go higher, lenders get backed up quickly. That means processing times can take longer. This is on top of new TRID rules and the coming seasonal rush. In order to speed loan applications through the system and close on time, it’s smart to have your paperwork in order in advance. This is especially true for those purchasing properties who want their pre-approvals to stick.

So what documents will you need?

1. Bank Statements

Virtually all loan types you would apply for today, will require you to provide bank statements. This especially applies to the self-employed and those seeking alternative income documentation loans. Expect to provide at least two – if not three – months of bank statements for ALL accounts. Watch out for large deposits, non-sufficient funds charges, and loan payments, which you didn’t claim on your initial conversation with lenders. Note that any funds you’ll need to close will need to be in your account for at least 60 days (unless they are a gift). Expect additional statements to be required if you roll into a new month.

2. Identification

Your mortgage lender will want, and need, to verify your identity to comply with the law. You won’t be able to close your loan unless you have valid ID. That means a government issued photo ID and perhaps one with at least 6 months left on it. So if yours is coming close to its expiration date, consider renewing immediately.

3. W2s

If you are employed by someone else, expect to provide copies of your last two years’ W2s. If you receive 1099s instead; you’ll need to provide those and your tax returns.

4. Tax Returns

Tax returns can be one of the trickiest documents when it comes to mortgage underwriting. You’ll need at least your last two years’ tax returns. Make sure you have all pages, of all forms submitted, including any amended returns and originals. Transcripts of returns are not sufficient. This gets trickier around tax time. You won’t be expected to file tax returns early. However, if you do file returns during the process, you’ll have to document that you paid any outstanding taxes and where that money came from. Due to staff cut backs at the IRS, some of the copies can take 75 to 120 days or more to retrieve. Make sure you request and receive them well in advance of applying for a loan.

5. Court Documents

If you’ve filed for bankruptcy or have been through a divorce, expect to have to provide all copies of all pages of related documents. This can be a real pain if you’ve shredded them to put that part of your life long behind you. Don’t expect a request by mail to return all of the pages and documents you need. Play it safe and go to the county clerk of courts office where the documents were recorded and get everything before you apply for your loan.

6. LOEs

If you’ve got any credit bruises, gaps in employment, or are receiving any gift funds from family to cover your down payment or closing costs, you’ll be required to submit Letters Of Explanation. If you aren’t sure what to write, ask your loan officer for an example or for exactly what details need to be included.

7. Current Mortgage Statements

If you have mortgage loans on the home you are refinancing or other property, they will be requested to verify the debt, payment status, and loan details. If you are currently renting, then you’ll need to provide your landlord’s contact information and maybe proof of rental payments for the last 24 months. However, this last requirement seems to be fading with some lenders.

8. Purchase Contract

If you are buying a home, you aren’t going to get far without a signed purchase and sales agreement. Make sure to include copies of all pages and addendums.

9. Earnest Money Deposits

Any deposits made must be fully documented. That includes copies of checks, proof they cleared your account, and proof of receipt by the escrow holder.

10. Pay Stubs or P&Ls

Be ready to submit your most recent pay stubs covering the last month. If you are self-employed, you should be prepared to provide a YTD Profit and Loss statement.

Summary

Get these documents together early, save hard copies, copies in the cloud, and copies on backup drives.

Business Development: Why Every Good Investor Needs A Plan

If you are considering getting involved in real estate you need to have a plan. Your plan doesn’t need to be elaborate or even overly formal but you should have some sense of where you want your business to go.  Where most investors get in trouble is thinking they know the business simply by watching a few shows or reading as few books.  As they quickly discover the business has a way of taking them to places they would have never expected.  Without a solid business plan it is easy to bounce around from lead to lead without any real direction.  Prior to looking at your first property or researching your first deal you need to start with a plan.  Here are five aspects of writing a good business plan.

  • Know What You Are Getting Into. You should never start investing without some idea of what you are getting into. Without the aid of experience you should start your plan by doing your homework. Most investors in today’s market are infatuated with rehabs and quick flip deals. While these can certainly make sense in the right market they may not work for you and your goals. You don’t need to be an expert in every aspect of the business but you should have some idea of what you want to do and how you plan on doing it. There is a big difference in what is needed for a rehab as opposed to a buy and hold rental. When you do get involved in your first deal it shouldn’t catch you off guard. You will never know everything prior to getting started but you should always do as much research as needed to make you comfortable.
  • What, Why, When, Where. Your business plan should serve as a roadmap for where you want to go and how you plan on getting there. Start by accessing what kind of investing you want to pursue. Do you want to get in to the world of rehabbing or are you looking for long term rental properties? How you answer will partially determine which markets will be your focus. Some markets work better for rehabs while others make more sense for long term acquisitions. You also need to determine the timeframe for your first purchase. Are you looking to buy tomorrow if something presents itself or do you want to wait a few months? Under each answer you should play out the best and worst case scenarios. Most new investors think everything will fall in line just the way they plan. When they are presented with the slightest issue it throws everything off. The more you consider all of the negatives that can happen the better you are at dealing with them.
  • Time Commitment. One of the great aspects of real estate investing is that you can do it on your own terms. If you want to buy one property a year there is nothing keeping you from doing so. Part of your business plan should be recognizing how much time you can commit to the real estate business. There is a lot that goes into being part of a successful transaction. Even though there are websites and apps that make the process easier there are no shortcuts to success. You need to do your due diligence on every deal if you want to truly know what you are getting into. It is important to ask yourself how much time you have available during the work day to focus on real estate. This can be a challenge if you want to hang onto your full time employment. If finding time during the day is tricky you need to be able to work at nights or on weekends. There are ways to invest even with just a few hours a week but you need to map out exactly how you plan on doing it.
  • Strengths & Weaknesses. What parts of the business do you feel you have a pretty good grasp on right now? While you really never know until you get started often times you know which areas you are comfortable with and those you need to work on. You should play to your strengths and look for ways to compensate for your weaknesses. Whatever field you come from should be your focus. If you come from finance, real estate or the mortgage business you should be able to understand the numbers and jargon on a new deal. If you have a tech background you can use that strength to help generate leads and promote your business. Getting into any new business requires some self-assessment. As you write you plan you should take the time to consider your strengths and weaknesses.
  • Lead Generation. Regardless of your background the strength of your initial lead generation often determines the strength of your business. A major part of your business plan has to be how you plan on getting leads. Fortunately it is easier than ever to promote a business and reach people. The internet, particularly social media, make it easy to reach hundreds of people every day. However reaching people is not enough. You also need to think about how you will generate leads. You don’t need to spend thousands of dollars on lead generation but you should have some strategy in mind. Finding the right strategy will take some trial and error but you need to have a plan prior to getting started.

Your business plan can be as short as a paragraph or as long as you want. Having a plan of attack is the best way to approach a new endeavor.

4 Ways to Reduce Your Power Bill This Season

As the days get shorter and the weather gets steadily colder, homeowners across the country will see their power bills increase dramatically. Heating and lighting your real estate investment through the late fall and winter can cost you thousands if you’re reckless. So don’t be! Here are a few steps you can take to help keep your heating and power bills to a minimum:

  1. Pull the plug. Did you know that even when a device or appliance is turned off it’s still drawing power? Things like televisions, home theater equipment and stereos actually run in “standby” mode when you leave them plugged in, and they can draw as much energy as a 100-watt light bulb. If you remember to switch off your power strips or unplug the individual devices, you can easily save $10 a month on your electric bill.
  2. Put your computer to sleep. Much like car engines, a computer uses more energy during startup and shutdown than it does when it’s left to continuously run in a low-power state. Instead of shutting your computer down, try putting it into hibernation mode instead. You’ll save money on your power bill, and because you won’t have to boot up quite so often, you’ll save time too.
  3. Use small space heaters. Don’t crank up the thermostat every time your real estate investment gets a little chilly. Small, portable space heaters can warm a bedroom in minutes, and when used wisely they can save you hundreds a month on your heating bill. You can pick them up at any department store for less than $20 per unit.
  4. Upgrade your windows. Do you have double-paned argon-filled windows in your home? If you don’t, they’re definitely worth considering. Not only will they save you 9.8 tons of heat annually, they’ll also boost your property value significantly.

The weather might be extreme this season, but that doesn’t mean your power bill has to be. If you take the right steps to insulate your real estate investment and remember to unplug your appliances when they aren’t being used, you can keep your wallet stuffed and your property value high.