Wednesday, February 18, 2009

Experian stops selling FICO scores to consumers

On February 9, 2009, Experian stopped selling consumers their own score. They will of course continue selling them to creditors. Apparently, we as consumers no longer have access to FICO scores at all from them. The sell Vantage and Plus scores, which aren't the same as FICO scores.

FICO score are the ones that matter; they are what lenders use. It's not clear what, other than score, you'll have access to when you apply for a loan.

There is a serious drawback for consumers here: you have to have a pull on your credit now to get a real score and you still may not have access to the information in your file. That makes it very difficult if not impossible to correct errors. It also makes it nearly impossible to enforce your rights under the fair credit laws and I suspect that that is the reason why Experian went this route.

We have the right to see the reports on which the scores are based but currently not the scores. I think we should. One of the things I find to be sleazy about this industry is that they don't have to show you what they share with lenders.

Friday, February 13, 2009

How will you get the money for a down payment in this real estate market?

Think about this question for a moment. Really think about it.

Many people are interested in investing in real estate now because prices are the lowest they've been in years. But did you know that you need more cash/equity now to do the deal than you did at the height of the boom?

It's true! For example 3 years ago, I bought two properties one month apart for a combined purchase price of $1.09M. After closing, I actually had about $30K IN MY POCKET! I was only required to have 30 days reserves and the cash out counted towards it and exceeded the amount required. Talk about easy access to money! And you only needed about a 650 credit score, sometimes less.

Today, those same properties would still be about the same price because of location but today, I'd need at least $273K cash for just the down payment plus nearly $80K in reserves. That's not what I'd call ideal especially when you'll need at least a 740 score. And we ain't talking about no stinkin' Plus score! You need a real FICO score. You can get all 3 real bureau scores at that link. A Plus score, which is what most sites give you is a sham. It's not what the bureaus and it's designed to blow sunshine you know where! There's a reason they cost so little. You should alway know what your score is BEFORE applying with a mortgage broker. Aside from looking like a novice, you a decidedly unprepared because you don't know what to expect. Buying real estate is a business and if you aren't prepared to spend a little under $50 to be better prepared, you are in the wrong business! Besides, how much did you spend on mentoring or a boot camp and you still weren't prepared?

3 years ago, you also could sometimes refinance a newly purchased property THE SAME DAY or within 6 months! Ask me how I know!

Let's take a representative bank-owned 3-family property in Fitchburg or Worcester today that only needs minimal work. Okay, so you are probably looking at $120K to buy and $20K for repairs or perhaps $60K to buy and $100K for repairs. If it's a typical property with 2 or 3 bedrooms, active sales comps put this at about $200K after repaired value (ARV). Your best case scenario for purchase is likely to be on a $120K purchase, about $30K down plus another $20K in repairs? Where will you get $50K? Where will you get the additional $20K reserves? 3 years ago, you could have bought that property when it was in a little better shape for $300K and only needed about $15K to buy it.

So let's look at sources of money for down payment. Without getting too creative, you have to look to yourself.

Do you own stock? It's harder today to borrow against a stock portfolio than 3 years ago. Unless you've lived under a rock, you've watched the value of companies listed on the New York Stock Exchange loose what, about $50 Trillion in value?

Next typical source, cash you've got locked away in a savings account. Most people in America now don't have cash savings.

Instead they credit card debt. 3 years ago, it was pretty easy to throw a down payment on a credit card. Ask me how I know! Try that now with the average credit score down over 100 points, amount owed up, limits reduced and interest rates up on cards.

Next source private or hard money. There are fewer players for this since many people have lost a lot of money recently but they are still out there. I still have some private money available to me. Just not as many. Many people are scared and have gone into bunker mentality so unless you have experience, you may have a harder time getting private or hard money and you can expect higher interest rates.

So where does that leave you? There are still options. One is working with partners. I do it. It gives you options and the ability to do more deals. That's a good thing.

And there is another way. It requires some effort on your part and maybe that scares away a lot of people. If they don't think sourcing, financing, buying or managing real estate, much less screening tenants, contractors, your power team, etc., is work, they are deluding themselves but I see that too.

What's the other way, the Plan B? Robert Kiyosaki talks about it in "Rich Dad Poor Dad", "The Cashflow Quadrant" and "The Business School for People who like Helping People" and "Before You Quit Your Job". Cashflow 202 includes it as A BUSINESS. As a matter of fact, he suggests you do it for 1-2 years before starting or buying a business because you'll learn a lot of skills that will help you in business (including as a real estate investor). You'll have little or no overhead and generate massive tax breaks. And you just might make a fair amount of money that will help you achieve your real estate goals. You certainly learn more about business and marketing than you ever will in a bootcamp. You'll increase your knowledge in a way that useful for investing, you won't spend huge amounts of time, and you won't let someone else determine what you are worth by a paycheck. Indeed, you find something that has unlimited income potential, allows you to help people, get you out of the Rat Race sooner and fund or help fund your real estate investments. You even have the ability to grow something that will pay you even if you never want to get out of bed in the morning!

What am I talking about? Network marketing. Many people think it's bad. Indeed, there have been some bad companies out there, some with business models that are illegal, have bad reps, etc. The majority a good, solid companies, have people involved with integrity. You can make a substantial amount of money and help other people do the same. Oh yea, and self-fund your deals. If you think like a business owner and treat it like the million dollar business opportunity that it is.

Network marketing is business ownership with low expenses. If you have ever owned a business, you are used to having expenses. I know I've spent millions reinvesting over the past 10 years on just one of my businesses. You also meet hundreds of potential power team members that can directly affect your real estate business. That alone should get your attention.

I was alway down on network marketing before. But I've found a couple I really like. I focus on one of them. There's no pills, potions or lotions. No investory. I wouldn't try to give you a hair cut in a blog post and I won't try to explain the business in one. You can talk to me if you'd like to know more. I even have a 6 year old girl (obviously she's not working the business!) I'm working with that's in a position to make money and I expect she will make several hundred dollars THIS MONTH. So talk to me if you are interested. You'll learn about yourself, improve yourself, learn valuable lessons that will help your real estate business and perhaps fund your deals. My business is exploding and I'll can help you do the same if you have work ethic.

You know how to reach me.

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Wednesday, January 28, 2009

Great post on marketing by a Worcester County business owner

Laura Briere is someone I've come across because of posts we both belong to the Rich Dad Followers group on LinkedIn. If you aren't a member, you should be (it's free) and if you do join, connect with me!

Anyway, anyone who follows anything to do with Robert Kiyosaki want to own a business, real estate and or other investments. That means you should be marketing (hear that real estate investors?!?). Check out Laura's post below. I'm going to invite her to join us for a game.

Robert Kiyosaki Knows His Marketing | Vision Advertising

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Tuesday, January 27, 2009

18.2% drop in home prices and it's not getting improving!

No brake on home-price free fall in Case-Shiller index - Jan. 27, 2009

For the 12 month period ending November 30, 2008, the Case-Shiller Home Price Index shows a drop nationwide of 18.2%. Since mid-2006, it's fallen 25.1%.

Don't expect this to change anytime soon.
Flood of foreclosures: It's worse than you think - Jan. 23, 2009

Banks are slow to foreclose and list right now. The supply of homes is roughly double what is currently listed. Make sure you have enough margin in you calculations or will cash flow!

Additionally, more people are out of work.
Bloody Monday: Over 71,400 jobs lost - Jan. 26, 2009

Plan B (or C, D, E or F) is even more now than ever. Real estate is a good plan B; I obviously think so or I would be involved. You still should be looking at other ways of making money.

Curious? Email Lee or give him a call!

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