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”.

Do you need a partner to have a successful real estate investing business? Is it better to work with someone else or go it alone? Are two heads better than one? These are some of the questions I’m going to attempt to answer for you in this post. There are no right or wrong answers, only different scenarios for different people. I’m going to give you my veiw on this subject.

When I started my business, I began by getting a partner. I felt I needed someone to help ensure my success. I quickly found that it’s very hard to get two people to work with the same passion and intensity. One person may start feeling that the other partner is not carrying their weight. That’s how I started feeling after a while. I felt like when the money eventually started coming in, there was no way I could take care of his family and mine. I didn’t want that responsibility. We went into the arrangement with the idea that we would both work hard and both reap the benefits. It didn’t turn out that way.

So, the partner scenario really didn’t work for me. The only problem was, by the time I realized where things were going, we had purchased four properties together. When he let me know he was done, I had to refinance the properties to get him off the mortgages. That process took a year to complete and a bunch of wasted time. I could have been growing my business instead of worrying about getting out of the partnership! My insecurity cost me a year and way too much heartache. If I’d just had the convidence I have now, I would have never went through that whole ordeal. The partner and I are still friends to this day. He didn’t keep up our dream of being real restate investors. Well, I guess it wasn’t really his dream, just mine.

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.

This is part two of the video series which introduces you to successful tactics that you can employ to manage your tenants and keep your sanity at the same time. No one said it would be easy, but following this formula should help.

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.

Managing real estate tenants can be considered anything but easy. This video introduces you to successful tactics that you can employ to manage your tenants and keep your sanity at the same time.

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.

Fear of losing money is one of the biggest reasons most people shy away from real estate investing. In truth, you can overcome this fear by taking steps to mitigate potential losses. By getting the proper real estate investing education, determining the worst case scenario and setting up plans to deal with the worst case, you can say goodbye to that fear and start making money! In this episode, Ronnie talks about the techniques he used to overcome this fear and others, on his way to becoming 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?

This post is in response to the Poll Question entitled, “What One Thing Would Help You The Most In Your Real Estate Business Right Now?” There was an overwhelming response to the choice….”A mentor to help guide me through the process”. I’m glad that many people see the value in having someone to help them make the right choices and limit their mistakes.

I’m working on making this site a growing community, where everyone can learn from all the contributions to this site, whether it is poll responses, email questions or post comments. All experiences, good and bad, are learning tools that we can benefit from. That’s why I encourage everyone to register for the free email course on this site, and join my face book fan page that is linked from this site.

Please continue to email your questions and comments. They provide so much value to the overall community. They will be answered through a post, podcast, article, or even a video. I’m very excited with the progress we’re seeing on the site and look forward to helping you achieve your financial dreams.