Welcome to the Real Estate Investment Terms From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. There were not too many key terms for the letters J and K, so we’ve come back with a vengeance with today’s letter……L!

This week our feature words are lease, lenders, leverage, liability, lien, line of credit, loan, loan origination fee and loan to value.

A lease is a contract that spells out the terms of an agreement between a landlord and a renter. This agreement will state the amount of rent that the tenant must pay and the amount of time the property will be rented. The lease will also list what the landlord’s responsibilities are to the tenant, and what the tenant’s responsibilities are to the landlord.

A lender is an institution that lends money to an individual or a company to secure property. A lender could be a mortgage company, a bank, a private person or a group of people.

When you leverage a property you are putting a mortgage on the property for the purpose of using the equity to purchase another property or making another business transaction. Leveraging allows you to avoid using your own money to advance your business forward.

Your liability is your exposure or risk that you have in a business transaction. You want to keep your risk or liability as low as possible. In the event the deal goes bad, you don’t lose too much equity or money.

A lien is the mortgage that is held on a property. A lien or mortgage holds the property as collateral until the monies are paid back in full.

A line of credit can be secured or unsecured. If secured, the line of credit would be a home equity line of credit. This loan would be secured by the real estate. If the line of credit is unsecured, then there is no collateral. The difference between a line of credit and a mortgage is when the line is paid off or down, that amount paid is available for use again. When a mortgage is paid off, those monies are no longer available.

A loan is a lien placed on a property that is being used as collateral to secure the monetary security.

A loan origination fee is the fee the lender charges to do the loan. This fee is a percentage of the total loan amount. It also can be negotiated to a lower percentage.

The loan-to-value (LTV) is the ratio between the loan and the appraised value of the property. If the LTV is 90% of a property that is valued at $100,000, then the loan would be $90,000.

That’s all for this week. The next group of real estate investment terms will all begin with the letter “M”.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……I!

This week our feature words are income property, interest rate, internal revenue service and inflation.

An Income Property is the real estate you purchase to provide steady income to your business. It could be a condo, townhouse, single family home or an apartment building. No matter what type of real estate you purchase, the goal is to buy the property at a good price, rent it for an amount that covers all your monthly expenses (mortgage, utilities, taxes, insurance, etc.), plus give you some extra money in your pocket.

The Interest Rate is the amount of interest a lender charges on the money you borrow. This is how the lenders make their money in the transaction. Based on the strength of your credit, the interest rate may be negotiated. An amortization table will calculate the amount of interest you’ll pay over the life of the loan. Your goal is to get the lowest interest rate possible, so you save money in the long term.

The Internal Revenue Service (IRS) is the government agency responsible for collection of taxes. They make sure you are filing and paying your fair share of taxes. As a business owner, you pay taxes to the IRS just like an individual would. Different forms are required and different deductions will apply, but you still must file taxes stating the income you made from your business. The IRS is your silent partner and you want to be sure they don’t feel slighted. Make sure you have an accountant that is well versed in real estate investing to filing your business taxes.

Inflation may affect your real estate investing business in different ways. It refers to the buying or purchasing power of your money. When inflation is high, you can’t purchase as many products or services for the same amount of money as you might have in the past. This may apply to materials you buy for a rehab, fees for a contractor or for properties that you purchase. Low inflation numbers mean you’re getting good value for every dollar you spend.

That wraps up our real estate investing terms for this week. Next time we’ll talk about joint ventures, judicial foreclosures and junkers.

Now is the time to learn about foreclosure real estate investing. Banks have a surplus of foreclosed homes they want to get rid of, because they’re carrying the associated costs every month. Learn the in’s and out’s of the foreclosure market and develop a foreclosure investing strategy that will build your real estate investing portfolio.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……H!

This week, we’ll cover Hard Money Lenders, Housing and Urban Development (HUD), Home Equity Loan, Home Inspection and Holding Costs. It’s been a while since we covered the “G” words so let’s jump right into it!

A Hard Money Lender is a lender who will lend money on projects that the banks and other typical lenders will not. For this service their closing cost and interest rates are generally much higher than other lenders. These loans typically are only for a short period of time, a year or so, and then they need to be refinanced or paid in full.

Housing and Urban Development or HUD is a government department that administers the FHA and FNMA loan programs. They are a source of foreclosed homes that you should be investigated as part of your due diligence.

A Home Equity Loan is a mortgage that is secured by the equity in a property. The equity is determined by the difference between the appraised value and the mortgaged amount owed on the property. Home equity loans can be used to finance portions of another property or make repairs on an existing property.

Typically a Home Inspection is done by an independent company that determines the condition of a property before a buyer goes to settlement. If this inspection finds major damage to the structure of the property, the seller may have to make repairs or the buyer may decide to back out the deal.

Holding Costs are the monies needed to float the project until it starts marking a profit. All the costs that are expended until the project can sustain itself such as; taxes, mortgage payments, etc. For example, if you purchase a property and fix it up, but cannot find a renter quickly, the mortgage payments, utilities and other payments you make until you get a renter are considered holding costs.

That’s it for this week. We’ll get back on track next week and talk about the “I” words you need to know to be a successful investor.

This video details the questions that must be asked when looking to hire the best real estate agent for your real estate investing business. Real estate investors work with agents to find suitable income generating properties. Do you know how to interview a prospective real estate agent to make sure they’re a fit for your business?

Buy and hold real estate investing is defined, contrasted with other real estate investing strategies, and laid out in an implementation plan, all in this podcast. Buy and hold is the perfect strategy for the current economic conditions. Ronnie explains how he’s used this strategy in the past, and provides the steps required to incorporate this strategy into your real estate investing business.

Since mortgages are hard to obtain in these tough economic times, is cash really king? Should I purchase properties using cash if I have it available? This article is written in response to a question I received via email from a reader named Sebastien. Sebastien had a great question. He asked if he had $100,000 available, should he buy properties using cash. I emailed him back to let him know that I’d be writing an article in response to his question, because I thought our readership would benefit from my response.

Sebastien, today’s market is very different from what it was three years ago. Being your trusted mentor, I’m going to give you the good and the bad. You’ll be able to make your own decisions with all the facts. I believe purchasing properties cash is the best way to make sure you get all of your investment back out of the property. If you purchase a home for $70,000 cash, and that home is valued at $100,000 you have 30% equity in the property. In today’s market, a mortgage company is only going to lend on about 70% of that property value. This would allow you to recoup your $70,000 that you used to purchase the property. Any property that I were going to purchase using cash, I’d make sure I had a mortgage company that already looked at the deal prior to me going to settlement. They would have to give me the ok that they would finance me before I purchased. If you didn’t find a mortgage company before you purchased, you might not be able to recoup all of your initial investment. In today’s market, mortgage companies may not be apt to lend on the same types of properties that they would have in the past, so you want to do your homework before you purchase.

Also there is a term called seasoning, which refers to the property and how long you’ve owned it. Prior to this current housing market, you could find mortgage companies that had no seasoning issues on their loans. This meant they didn’t require you to own the property a year before they would lend on the appraised value and not the purchase price. Lending on the appraised value allowed for more equity to be accessed. If the lender required seasoning, they would only lend on the purchased price, which made it impossible to recoup your full investment. Remember, the loan still would only be a percentage of the purchase price. In today’s market you have to hope for the best but plan that you might not get your money back.

Of course, using a loan to purchase a property is fine, but unless you have an endless flow of money for your down payments, sooner or later you’ll run out of money. This means you’ll run out of properties to buy. When using a mortgage to purchase the property, the mortgage company uses the purchase price not the appraised value to determine the loan amount. This will require that you always have your own money locked in the property.

Purchasing using cash is the best way to go, but as you see there are details to consider before you make your move. As long as you plan your next three steps before you take your first one, you should be fine. Just know in today’s market you must be smart and careful. Always keep this in mind and your chances for success will greatly increase.

Welcome to our real estate investing video series. Today’s “Quick Tip” outlines how successful real estate investing can provide the financial freedom and lifestyle design elements many people desire. In the video, Ronnie describes the benefits he enjoys since he’s built up his successful investing business. We want to share with everyone what’s possible if you stick with your goals and get advice from a proven, successful mentor.

Welcome to the Real Estate Investing From A to Z series. Each week we’ll take a letter from the alphabet and define all the real estate investing terms you need to know that begin with that letter. Today’s letter is……G!

The words for this week are: Good Faith Estimate, General Contractor, and Guarantor. Short and sweet this week

A Good Faith Estimate is the cost a contractor would submit as a bid to perform a certain unit of work. This estimate is generally good, or honored, for a specific time period before it expires. You can have a number of contractors submit these estimates, and you can choose the best price for your purposes. Good faith estimates are also used by mortgage companies to estimate the costs you will incur at closing (points, fees, etc.).

A General Contractor is a company that will contract out the required work to subcontractors, who will perform the different units of work. A general contractor rarely performs the work with their own work force. They usually contract with other companies, then supervise the job to it’s completion. The general contractor adds a percentage to the overall cost of the job as their fee. You can keep the cost of the job low if you act as your own general contractor and sub the work out yourself.

A Guarantor is one who provides a warrant or guarantee to another. A guarantor is going to guarantee that the service or merchandise you’re supposed to receive is rendered.

Not many words, but important nonetheless. We’ll try and make up for it with our “H” words next week.

In this episode we’re going to compare the benefits of real estate investing to benefits from other business opportunities such as stock investing, multi-level marketing and franchising. Each of these opportunities can be profitable, but real estate investing offers some unique opportunities to not only make a lot of money and provide for a secure future, but to also design your lifestyle the way you want it to be. This podcast should go a long way towards motivating you to achieve real estate investing success.