TOM CRONE'S Quick Information on Investment / Income Property Action August, 2005

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Winners Have a Gold Rush Perspective

There is gold in them thar hills. In the gold rush days, some folks just got lucky, and that was it. Other's learned how to mine, and they got and stayed wealthy. This is how Bruce Colton works the territory.

The terms of financing are key to successful investment property ownership. If you don't do it right on the front end of the deal, making it up is nearly impossible. It is for this reason that Bruce Colton, the financial expert on our team, is always panning for new programs and financing options that broaden your ability to capture that choice piece of investment property and to make that investment property pay the maximum returns possible. Bruce is constantly mining the field, monitoring new programs offered and modifications in terms from all of the lenders in the market. And he just struck a rich, new vein of investment ore.

Bruce has signed up a new program about which he is so excited that I felt it important enough to highlight here. It has these significant new advantages.

This program allows the purchase of investment property with an ultra low payment rate (As low as 2 % amortized over 30 years). An Option ARM is called by some lenders a Cash Flow ARM, as it is an ideal program for cash-flowing investment property.

Keep in mind that it is the claimed abuse of ARMs that has been part of the bursting bubble scare; the idea is that as interest rates rise, the ARM will demand more money and people will not be able to cover their mortgages. "Abuse" is the key word, and it isn't happening generally, despite the doomsayers hype, and it certainly isn't something to fear in the investment game, where it become a tremendous tool.

Option ARM's are not entirely new, but what Bruce is excited about is the ability to qualify for an Option ARM on Investment property using only "stated income" and with loan values as high as 90%. This gives the prospective owner tremendous leverage in the market to milk the gains out of investment property. It's all about how much of your own money you have in the game, and what your debt service is, and this diminishes both relative to your income and equity gains.

Don't just pan for gold; own the gold mine.

In addition, the lender Bruce has signed on sells all of their loans to other institutions. This is a major advantage to the investor who is trying to grow by owning a number of residential investment properties. Most lenders only allow a limited number of investment property deals a single individual can hold. Most often that limit is in the range of two to four loans. After one has completed the maximum number of loans with that lender, that lending source becomes closed to further transactions.

Since most companies keep these loans as "portfolio loans" you are blocked off from further investment property transactions with that lender until you sell one of the properties upon which that lender holds the mortgage. Since the lender Bruce has acquired sells its loans, it becomes a renewable resource for further funding. The company consequently does not limit your growth rate either; that is, it does not cap the number of property purchases per year, or per six months.

The full explanation of the Option ARM and its effects on property performance requires more space than I can allocate here, but give Bruce a call and he will be more than happy to explain all of the details of this financing tool. Call him at Olde Time Mortgage: 952-746-1888.

And of course, the performance aspects of obtaining the right financing is a major topic in our seminars. Speaking of which . . .

New Income Property Investment Seminars Offered

Come sit in on one of these. Bring a friend, particularly one with whom you might want to partner.

Presentations will be given at these times and locations. Please select one if you can attend. RSVP to Tom Crone

EVENING: Sept. 14th-5:45 PM Registration, 6:00-7:30 Snacks and Presentation. CBB Mpls. Lakes Office, 3033 Excelsior Blvd.	EVENING: Sept. 28th-5:45 PM Registration, 6:00-7:30 Snacks and Presentation. OTM, Eden Prairie (169 & Anderson Lakes).
NOON: Sept. 21–11:30 Registration, Noon—1:30 Presentation. Lunch and Presentation. OTM, Eden Prairie (169 & Anderson Lakes).	NOON: Oct. 5th 11:30 Registration, Noon—1:30 Presentation. Lunch and Presentation. CBB Mpls Lakes Office. 3033 Excelsior Blvd.

These are the dates and locations. Call me or e-mail me if you’d like a seat reserved for you. Only six to eight people per session, so do it today.

Types of Income Properties

There are several ways people can be Income Property Investors (IPI). Some people do it to supplement their own home ownership. For instance, they would own a duplex, rent out half to cover much of their ownership debt service.

There’s the "hobby" IPI. These folks own a property or two, work about ten hours a month max on them, and don’t get too carried away with it all.

You have the "It’s a Business" IPI. These people do it as their major source of revenue. They own big.

There are some in-between ways to do this. An example - There’s those who buy a home for their kids to live in during college, also collecting rent from other roommates, and then selling the property post- graduation.

When spouse, Shelley, was in real estate class recently, there was a medical doctor there who was taking the classes so he’d know more about his already existing income property business (that, aside from a medical practice!). More than a hobby, less than a career.

Tom Crone
The opinions expressed in this newsletter are solely those of Tom Crone and others being quoted and do not necessarily reflect the opinions of Coldwell Banker Burnet or its affiliates.