Posted: 15 May 2014 12:15 AM PDT

If only buying or selling a piece of property was as simple as signing a contract and transferring the funds over from buyer to seller at the agreed upon purchase price. Unfortunately, when completing a real estate transaction, there are closing costs involved. For anyone who has never closed escrow before, this kind of thing can be intimidating because there are so many items to account for.

Getting Started

Naturally, you might be wondering what all of these items are, and worried about overpaying.

Closing costs will always vary from lender to lender (and from property location to location), but I will provide a real example to give readers an idea of what to expect. I will use Rental Property #3 as an example, which closed in July 2013.

When first engaging with a lender, they will typically provide you a good faith estimate (GFE) document that estimates all the closing costs involved in the transaction. In general, the GFE is conservative and will tend to overestimate the closing costs that you will actually need to bring to the table.

Good Faith Estimate (GFE): Chicago

GFE for Rental Property #3:

Here's a breakdown of each item:

Origination Fee: This activation fee is an expense the buyer pays the lender for setting up an account for the processing of your loan.

Rental Property #3: Origination Charge: $990

Origination fees typically varies from about 0.5% to 2.0% of the purchase price.

Points: Depending on the lender, it may be possible for the buyer to secure a lower interest rate by paying an upfront charge to purchase points. Also, during the loan process, at some point, the lender will ask you about locking in your interest rate. A rate-lock protects the buyer from rising interest rates. Typical rate-locks expire somewhere around 15-60 days. From my own experience, most lenders will lock the rate for around 45 days or so.

For Rental Property #3, the rate-lock was set for 49 days. Should the rate-lock expire, the buyer would need to buy points to extend the rate-lock, or accept the current market rate. If you are attempting to close escrow at a time when interest rates are rising, it makes sense to do so before the rate-lock expires. With Rental Property #3, I wasn't able to close on time and needed to pay extra to preserve my 30 year fixed, 4.5% interest rate. At the time of expiration, my lender was quoting me around 4.7% or so. So, I should have done a better job of closing on time (although not always within the control of the buyer since there are many other parties involved with closing).

Rental Property #3: Points Charge: $378

Appraisal Fee: An appraisal is typically ordered by the lender 1-2 weeks after the loan origination. With residential real estate, appraisals are set using the "Sales Comparison Approach", which is one of three valuation methods (Cost Approach and Income Approach being the others). The value of your property will be assessed based off of what nearby comps have been selling for recently. The appraiser will do their best to handpick a few "like" properties, similar in makeup/characteristics.

Rental Property #3: Appraisal Charge: $350

In my own experience, I've seen appraisals priced anywhere between $350 to $500.

Lender's Title Insurance: The Lender's Title Insurance, or Loan Policy, protects the lender in case there are issues with the title of the property you are purchasing. This charge is typically paid for by the buyer. A Lender's Title Insurance is required for a lender will issue out a loan for you. It protects the lender ONLY, not the buyer.

Rental Property #3: Lender's Title Insurance Charge: $2,600

In my own experience, the buyer has ALWAYS been responsible for paying for the Lender's Title Insurance. Also, I've seen this charge vary A LOT! I've been quoted as little as $595 to $2,600.

Owner's Title Insurance: The Owner's Title Insurance is needed to protect the buyer in case there are issues with the title. This can be due to liens, legal judgement, or unpaid taxes. Although purchasing an Owner's Title Insurance may be optional in some cases, it is always better to be safe than sorry.

Rental Property #3: Owner's Title Insurance: $2,000

In my own experience, the seller has ALWAYS paid for my Owner's Title Insurance. This will vary from state-to-state, but so far, I have never paid for my own policy in: Bay Area, Chicago, and Indianapolis.

Government Recording Charges and Transfer Taxes: These are fees assessed by the state and local agencies for recording your deed and documents, and entering them into official record. Transfer taxes will vary from location to location.

Rental Property #3: Government Recording Charges: $400

Rental Property #3: Transfer Taxes Charges: $1,182

Initial Deposit to Escrow: This is the initial payment you make into your escrow account to get it funded. It may, or may not be different from your monthly payments moving forward, depending on what your lender requires. The money in this account is used to pay for property taxes, insurance, and flood insurance (if required). I do not have an escrow account setup for any of my Bay Area properties (Rental Property #1 and #2). Escrow accounts are convenient, and I plan on using them for all purchases moving forward.

Rental Property #3: Initial Deposit to Escrow: $2,799.30

Daily Interest Charges: Daily interest charges are for any daily interest that will accrue on your loan from the period of settlement until the first day of the period covered by your first scheduled mortgage payment.

Rental Property #3: Daily Interest Charges: $218.45

Credit Report: Credit report is obtained through a credit reporting agency. Your lender will run your credit at the beginning of the loan application process to qualify you and determine what interest rate you are entitled to. The three major credit bureaus are: Equifax, Experian and TransUnion. You will receive a credit score from each of the three bureaus, and the middle score will be the one your lender uses.

Rental Property #3: Credit Report: $5

Credit report fees typically range from $5 to $15.

Flood Certification: Flood Certification is needed to verify that the property is not located in a flood zone.

Rental Property #3: Flood Certification Charge: $5

Flood Certification fees typically range from $5 to 20.

Total GFE Breakdown: The GFE estimated that the total settlement charges that I would be responsible for to close escrow was $10,927.75. This is the additional funds needed on top of the downpayment for the actual property itself (typically 20% to 30% for a residential investor property).

Final HUD: Chicago

As mentioned above, the GFE is conservative, and tends to overestimate the amount you will need to bring to the closing table. This isn't necessarily a bad thing, and it helps insure that the buyer has sufficient funds available to close escrow. When in doubt, aim to have at least the amount estimated in the GFE on the day of closing.

Here's the breakdown of the Final HUD for Rental Property #3:

Origination Fee (GFE): $990
Origination Fee (Final HUD): $990

Points (GFE): $378
Points (Final HUD): $378

Appraisal Fee (GFE): $350
Appraisal Fee (Final HUD): $400

Lender's Title Insurance (GFE): $2,600
Lender's Title Insurance (Final HUD): $1,935

Owner's Title Insurance (GFE): $2,000
Owner's Title Insurance (Final HUD): $0 ($1270 paid for by seller)

Government Recording Charges (GFE): $400
Government Recording Charges (Final HUD): $146

Transfer Taxes (GFE): $1,182
Transfer Taxes (Final HUD): $1,181.25

Initial Deposit to Escrow (GFE): $2,799.30
Initial Deposit to Escrow (Final HUD): $606.46 (3 months insurance; 2 months property taxes)

Daily Interest Charge (GFE): $218.45
Daily Interest Charge (Final HUD): $131.07

Credit Report (GFE): $5
Credit Report (Final HUD): $5

Flood Certification (GFE): $5
Flood Certification (Final HUD): $5

Total Closing Costs (GFE): $10,927.75
Total Closing Costs (Final HUD): $5,777.78

Summary

The above example shows that for a GFE of $10,927.75, the actual costs came out to be $5,777.78 for a 2-flat purchase in Chicago. For one, the GFE budgeted $2,000 for an Owner's Title Insurance, which is customarily paid for by the seller (in Chicago). Also, other items such as: Lender's Title Insurance, Government Recording Charges, Initial Deposit to Escrow, and Daily Interest Charge were overestimated. Of course, your mileage will vary, depending on both the location of the property, and lender you decide to use.

One thing to keep in mind is this — Closing costs are not fixed, and like most things in real estate, are negotiable. It doesn't hurt to shop around, getting quotes from various lenders. Also, when negotiating with a seller, don't be shy about bringing up the subject of closing costs. If negotiations reach a standstill, concessions made towards closing costs can help bridge any gaps in the deal. Always work with the other party (both seller and lender) and see what they can concede to you; this can help you save hundreds, if not thousands of dollars in closing costs.

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Hard Money Loans And How They Can Help You - REIClub

Posted: 16 May 2014 10:43 AM PDT

Basically, a hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by the value of the property.

The hard money lender looks first and foremost at the value of the property in question as opposed to the credit rating of the borrower, and grants a loan based on the equity of the property providing it is sufficiently valued over and above the amount of the loan.

Interest rates are usually higher than conventional commercial or residential property loans because of the higher risk taken by the lender. Most hard money loans are used for projects lasting from six months to a few years.

How To Get Approved For Hard Money Loan

There are a few steps one can take when considering a hard money loan in order to be prepared for approval:

Property Location: Hard money lenders need information regarding the location since the property will stand as collateral. Be sure the property is located in an average (or above average) area or neighborhood with comparable properties so the lender will feel their investment is protected. Show the lender photos and comp documents of other properties in the area, as well as recent sales of similar properties.

Project Cost Projections: If possible, get estimates from contractors that describe the repairs and other costs involved with the purchase so they can have an idea of current vs. future equity after improvements are made.

Verify Your Current Assets: Tell the lender how much cash you may have on hand, your income, your credit score, and how much experience you have in purchasing or investing in real estate. Although the lender may not require some of this information, this helps the lender understand your past and current financial situation when considering your loan.

Know Your Exit Strategy: Since hard money loans are usually short term (6 months – 2 years), tell the lender your plan for either selling or possibly refinancing the property before the loan term is over. This helps them understand your plans for repayment when making their decision.

How Best To Use Hard Money Loans

Real Estate Investors often purchase foreclosure properties or properties from sellers willing to accept low ball offers that are in need of repair and updating, then refurbish them and "flip," or place back on the market, at a higher price. A hard money loan may be taken out to purchase new investment property or refinance an existing investment property previously acquired in order to free up funds to make new investment offers.

If you have questions or would like additional information about how a hard money loan could help you with your real estate investment needs, please feel free to leave a comment.

Edmonton <b>Real Estate Investor</b>: Mars need women

Posted: 16 May 2014 11:44 AM PDT

Alberta Oil Sands Investment Real Estate News®
Glenn Simon Inc., Suite 1217, 5328 Calgary Trail NW, Edmonton, Alberta, Canada. Tel 1-888-780-5940 Fax 1-888-276-4517
www.glennsimoninc.com email: info@glennsimoninc.com

May 15th., 2014
Volume 16, Issue 8

Dear Friends and Partners,

As bad as Mars needs Woman, Edmonton needs fish.

One would have thought that sending fresh fresh from B.C. or Eastern Canada would provide fresh and bountiful choices, but it does not. Many of the top grade selection is exported out of Canada or sold to high end commercial buyers (then resold and shipped again) at point of origin. What's left is a small portion of select fillets and lesser grades that are shipped throughout Canada and processed.

Now, with Icelandic Air flying directly between Edmonton and Reykjavik fresh fish, make that really fresh fish, is finally here! There is discussion of sending local Bison and beef back to Iceland as well.

I like this story because it shows what can happen when Alberta opens up and begins trading on a larger scale, no matter the product. And having fresh fish is just another thing that makes Edmonton a desirable place to live, increasing the social and economic value of our province.

South Central Edmonton: Strathcona Tri-Plex Cashflow

Turbo charge your portfolio. This 100 year old, 3 floored and 3 suited property is located on a treelined street, 1 minute from park, school and 5 minutes from trendy Whyte Ave.

This 1914 built property has a covered porch entrance for the 1 X 2BD main floor unit and the 1X 2BD upper unit. The 1X 1BD basement suite has it's private entrance around the back of the property.

This is a legal non-conforming triplex and is in great shape with an effective age of about 1980.

Our renovation team will add a few tweaks to modernize the lower unit while retaining the character of the home.

Shared laundry down, parking for 3 cars, fenced yard and garden, 2 balcony/patio suites and fireplace.

Great access to UOA, Whyte Ave., downtown and Saskatchewan Drive.

Comes complete with great tenants making this a totally turn-key property for you. Convenient and extremely sought after area with easy access to UOA, Whyte Ave., transit and downtown. Strathcona is a high demand area with plenty of schools, parks and amenities. Highly rentable; solid value and increasing rents. HUGE upside potential due to the great purchase price, strong economic fundamentals and the proximity of this property in relation to Edmonton's desirable growing core.

Purchase price: $475K
Total Investment: $125K.
Your Estimated 5 Year Profit $85K.
Your pre-tax Total ROI is 68% or 13.5% per year

These 3 suites rent for top dollar and have everything arranged, including financing structure and incredible tenants. Your investment includes: impeccable tenant selection, financial analysis, professional inspection, insurance, financing set-up, legal fees, basic accounting, reserve fund, CMA, bi-annual statements, strategic market planning to ensure successful entry and exit, plus much more!

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Business Booming at Edmonton explosion-testing lab

By Bill Mah, Edmonton Journal, May 9th, 2014

EDMONTON — A booming resource sector means the CSA Group is seeing explosive growth of its own in Edmonton.

In fact, there will be many blow-ups at its explosive atmosphere testing laboratory in the Edmonton Research Park, which will double in size by September.

"We have explosion chambers where we actually explode the product," said Ash Sahi, president and chief executive of CSA.

"Let's say a valve has to be tested so we put it in an explosion chamber, pump in gas and oxygen and a flame and blow it up — just like a bomb."

Toronto-based Sahi was in Edmonton Friday to turn the sod on an expansion of CSA's current hazardous locations laboratory.

A new windows and doors test lab, CSA's first, is also coming in September. FOLLOW THIS ARTICLE
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Land rush hits Edmonton as hopefuls camp out overnight for individual lots

By Gordon Kent, Edmonton Journal, May 9th, 2014

EDMONTON - There was a modern Edmonton land rush Thursday as people waited outside overnight for a chance to buy property in Oxford Phase 2.

About 250 people lined up to be part of the draw for 40 city-owned lots in the northwest community.

"These days, people want to build their own house the way they want … That's the major attraction, you can build the way you want," Rajesh Arora said. "It's very difficult to get individual lots."

Arora, who lives in Ellerslie, was among the first 200 people at the Central Lions Seniors Recreation Centre, so his name will be part of Monday's draw. GRAB THIS STORY

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Alberta leads Canada's economy

The Advisor.ca, May 12th, 2014

Energy is the fuel and engineering is the machine that keeps Alberta's economy running in high gear, says a BMO report.
Business dynamism in Calgary and southern Alberta continues, says Mike Darling, southern Alberta regional vice president of Commercial Banking at BMO. "Oil and gas companies still dominate the scene, but we see significant opportunity for firms that support the industry spinoffs. This particularly applies to the engineering sector." READ MORE HERE

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Your success continues EVERYDAY, let me help you build for tomorrow.

"The secret of getting ahead is getting started." - Mark Twain

Warm Regards,

Todd and Danielle Millar

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Real Estate Investing

Friday, 16 May 2014