Steven Covey has sold over 10 million copies of his classic book “The Seven Habits of Highly Effective People”.

The second habit of highly effective people is to “Begin with the end in mind.”  In other words, you should know where you are going to finish.

When you buy a property, and plan to renovate it, are you disciplined in your approach?  Or do you spend a few minutes looking for the lowest price home in a community, make an offer and hope for the best?

Today, there are stories everywhere about people who have had it rough over the last few years.   Bud Matthews in North Carolina has been asking Suntrust bank to stop the foreclosure on his business headquarters building for months.  He has not missed a payment in over 10 years, but Suntrust Bank has called his loan.

Bud Matthews decided to fight back and has now hired an attorney to help keep his business going.  If you attended WREIA last month, you heard some other similar stories here in the DC area.  To read the rest of Bud Matthews story visit http://www.newsobserver.com/2012/03/11/1919843/entrepreneurs-scramble-as-banks.html

We want you to understand where you are going with your real estate business.  Most of us who attend WREIA each month either have, or have the desire to buy, renovate and sell a home.

When you finish the hard work of renovating the property, who will buy the home?  How will they finance the property?  How much is their down payment?  How much will YOU make as a profit for you hard work?

If you know the answer to these questions – FROM THE BEGINNING – you will have a much higher level of success in this business.

For instance – let’t talk about the note business for a moment.  Specifically, the commercial non-performing note business.  Following is a brief piece from MarketWatch.

“According to the latest Ernst & Young US nonperforming loan (NPL) survey, At the crossroads: Ernst & Young 2012 real estate nonperforming loan investor survey, investors could also see more opportunities to acquire commercial real estate debt instruments in the year ahead. Despite improvements in bank earnings and declining loan loss reserves, the sheer volume of US commercial real estate loans maturing in the next five years — estimated to be close to US$ 1 trillion — could put pressure on US banks to step up their efforts to strategically sell some of the more than US$100 billion in NPLs, currently on their books.”  You can find the article in it’s entirety at http://www.marketwatch.com/story/ernst-young-investors-eye-four-more-years-of-distressed-real-estate-debt-opportunities-2012-03-12

The numbers boggle my mind.  $1 TRILLION in commercial real estate loans will be maturing in the next 5 years.  And already, there are $100 Billion  in non-performing loans.

Could you work with a small bank and purchase (at a discount) a few small commercial loans?  Could you re-structure those loans and keep another small business afloat, like Bud Matthews we talked about above?

This month at Washington REIA we are going to have a few people who work on the front lines of the residential home financing business. They originate loans for retail homeowners and for investors.  Join us for one night and learn where the business is, and who you should be targeting in the retail market. The loan market is still a challenge, but when you have the right mix of properties, home-buyers and price, business is getting done.

Begin with the end in mind.   Know who will purchase your renovated home. Know how they will finance it.  Most importantly, know how much their down payment will be.  Very few deals are going to a closing table without the right mix of these “ingredients”.

In The Seven Habits of Highly Effective People “Begin with the end in mind” is habit #2.

Habit #1 is “Be Proactive”.  Register now at http://mar2012-wreia-ws.eventbrite.com and join us on Monday at WREIA. Learn where the financing business is headed, and learn first hand where retail homes are being sold.

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And as always, let me know how I can help with your real estate investing here in the DC area.

See you on March 19th,

John Peterson
301-881-5541
Washington REIA Network, President
Profitable Property, Founder

Find video updates on the Profitable Property Channel at
http://www.youtube.com/ProfitableProperty

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Register early for the March 19th WREIA meeting online, and skip the registration line!

You will also find the registration link at http://mar2012-wreia-ws.eventbrite.com

Home Foreclosures. 

They are here with us, and will be in the news for the next few years.

First – lets put the last few years in perspective.  Over 2 Million people have lost their homes to foreclosure since 2008.

The lenders know that some of those foreclosures were completed with less than stellar paperwork.  That’s why the largest servicers agreed to a $25 Billion payout in the settlement last week.   I use the term “payout” loosely.

If you lost your home to foreclosure in the last few years, and can prove any type of mistake in the foreclosure process, there is $1.5 Billion that will go into a trust fund to pay others like you.  There are estimates that up to 750,000 people will receive a check for $1,500 to $2,000.

“Sorry you no longer have a home of your own, here is a check for $2,000.”

That makes some people upset.   The LA Times had a pretty good article last week about the settlement here.

You can also find the link athttp://articles.latimes.com/2012/feb/11/business/la-fi-hiltzik-20120212

Second, lets talk about the current situation.

There are estimates that over 4 Million people are still at some risk of immediate foreclosure, and closer to 11 million more are underwater on their mortgages.

When I talk with banks and attorneys across the DC area, most agree that we are 2 or 3 years, and some are saying as much as 5 years, from real resolution to this mortgage situation.

I tend to agree.  In the servicing settlement last week alone, the banks have up to three years to implement the entire plan.

Some people are upset with the pace that these banks are proceeding.  Some homeowners are choosing to fight for their individual situations.  Most people outside of government agencies are upset with what appears to be lopsided settlements with the largest lenders, banks and servicers.

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Register early for the Feb. 27th WREIA meeting online, and skip the registration line!

Ahh, those pesky 1099 forms we all have to file with our taxes.

Small business owners are always on the lookout for deductions.  I was combing through my files from last year, and came across something I thought you should keep in mind during 2012.

Most of us real estate investors have found ourselves working with short sales, or foreclosures over the last few years.  You and your clients should be aware of a BIG advantage written into the IRS code.

“The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence.”

Until a few years ago, many investors had never seen a form 1099-C.  Lenders are required to report any cancelled debts to the IRS using this form, 1099-C, Cancellation of Debt.

Here is a simplified example –

• Homeowner pays 100k for a new home.
• Recession hits, and homeowner sells their home for 80k through a short sale.
• The following January, the lender sends homeowner 1099-C for 20k.

Before 2007, the homeowner would be required to pay income taxes on $20,000.

Today, if the situation qualifies, (your accountant can help you understand the full guidelines), you can exclude the full amount from your income.

This provision applies to debt forgiven in calendar years 2007 through 2012.

The Mortgage Debt Relief Act expires this year.

If you want to read about more details, you will find full details at the IRS link here.

PDA and smartphone users will find the details at http://www.irs.gov/individuals/article/0,,id=179414,00.html

There is motivation to get these short sales completed this year.  I realize it is only February, but it’s not too early to be paying attention to these items.

Short sales and the issue of foreclosure can still be a tricky area for real estate entrepreneurs.  We will be spending an entire evening discussing these topics at our Feb. 27th WREIA meeting.

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Register early for the Feb. 27th WREIA meeting online, and skip the registration line!

You will also find the registration link at http://feb2012-wreia-wreiacom.eventbrite.com