Returning to normal. That's what I like to hear.

There's no doubt Southern California’s housing market has been skyrocketing over the last five years. Double-digit returns were common place and many home owners and first time buyers have taken great advantage, i.e. buying on the cheap (comparatively speaking) early in this cycle then riding the 20+ percent equity growth for a year or two and doing what I like to call the “bump and run”. They sell the starter home and move up in market quickly (using the equity gained as their down payment). They did this once or perhaps twice in less than five years. In my personal experience my father’s bump and run took over a decade to accomplish this task for simply one home upgrade. But homeowners in Southern California have been wisely taking advantage of low interest rates and sky rocketing home values for the last few years. But not anymore…

Yes, the fun of the “bump and run” is waning. Rates are returning to average levels (KK NOTE: above 6.5% to 8.00%) and equity growth is still in double digits in places but for the most part we are settling into a solid average of 6% to 10% which is normal.

I’m sharing a great piece of an article from President Thomas M. Stevens, NAR President in Vienna, VA. He said, “Comparisons with market performance over the last five years distort what people should expect from housing as an investment. “Housing is simply returning to a normal market, where annual home prices will rise a little faster than the overall rate of inflation,” said Stevens, senior vice president of NRT Inc. “However, in looking at total returns, you need to consider that the typical buyer is making only a modest down payment (KK NOTE: nothing or less than 10%) but enjoys a return on the full value of the home (median home price in Riverside, CA $367,600 Q2 2005), which is many times the actual cash investment. In other words, normal is pretty good for the typical homeowner (KK NOTE: especially in Southern CA where values of homes are higher than national averages), and that’s what we expect for the foreseeable future.”

Stevens noted that price appreciation has yet to cool significantly. “We’re still seeing double-digit annual price gains, but we should get down to single-digit appreciation fairly soon,” he said (KK NOTE: Los Angeles and San Diego Counties were already cooling late in 2005 to 8%+ equity growth rates, which is still very respectable on average).

The national median existing-home price for all housing types was $209,000 in February, up 10.6 percent from February 2005 when the median was $189,000. The median is a typical market price where half of the homes sold for more and half sold for less."

So for any first time homebuyers and would be bump and runners reading this blog it’s still a good time to shop and buy, it will simply take a little longer to live out your dream of upgrading your home to one on the hill. The market is stabilizing and rates of return are still extremely respectable. Less we forget the enormous tax advantages of writing off ten of thousands of dollars in interest every year. Home ownership especially your primary residence is never a bad idea. Just ask your CPA or tax advisor and they’ll let you know great benefits you’ll receive in tax relief simply for owning a piece of the American dream.

If you’re not convinced let me break down the math for you:

Home price $400,000 (just an estimate)
Down payment $0 (100% financing – 80% first lien and 20% second lien purchase)
Estimated Closing costs $8,000 (with impounds and taxes paid, these costs can be folded into your loan, so very little, perhaps $1,000 for appraisal and inspection, or no out of pocket money may be required to buy your new home)

$400,000 x 8% equity growth over one year = $32,000
1st year value gain = $432,000
2nd year value gain = $466,560
3rd year value gain = $503,884 (It’s time to consolidate your loan)

In just three years you’ve earned $95,884 dollars in equity growth.

By year three you’ll have over 20% equity build up in your home most likely. It’s a good idea to refinance at year three and lock in an 80% CLTV (Cumulative Loan To Value) loan. You will most likely lower your overall payment and consolidate your 80/20 100% purchase loan to a conventional jumbo loan.

From there your investment will grow steadily over time. Remember property investment is never a short-term proposition. Overtime property values always go up on average.

Once you have build up some equity you can investigate further equity diversification plans with our company to invest your growing wealth in other real estate markets across the US and realize the best possible equity growth over time as other markets hit spikes similar to those experienced in CA over the last five years.

Home prices in other states are not as high as CA so your primary residence here can potentially fund purchases of multiple single family or multi family cash flow positive residences outside our state. Overtime your investment portfolio can exceed your monthly financial consumption and POOF your independently wealthy (your investment income exceeds your monthly income requirement). Your investment property income can now support your current lifestyle and you are free to manage your investments and leave the nine to five grind forever if you so choose.

If you have further questions send me an email or call me: 888-367-6926 or kknapp@signaturecapital.net.

You can always find me here: www.homeloancoaches.com.

It’s A Good Life So Make It A Great Day!

KK


Kenneth Knapp
Visit us at: http://www.homeloancoaches.com
Signature Capital - Corona
949-294-0403 cell
951-520-0058 ext. 225 direct
951-520-9725 FAX
***LOANS NATIONWIDE - ALL 50 STATES!!!***

Oh, By the way, if you know someone who would appreciate my services, please call me with their name and number and I will be happy to help them.

What the Bleep Are You Thinking???? Get out of that funk!

I just read a powerful article by David Bartels an authority on lead conversion. He is speaking about what we think and do when our performance is not up to par. He has four action ideas to take you out of the funk and back into the game. I loved it so much I had to blog it for my friends and clients.

"Sometimes in spite of our planning things just don’t always go as planned, right? Well, our businesses and our lives have peaks and valleys. So here are a few suggestions for when you move into a valley and are feeling stuck:

1. ASSESS - Realize where you are and come to terms with the fact that you are not getting the desired outcomes. Denial is not your best friend when it comes to a valley - the sooner you realize where you are, the better.

2. VISION – Stop accepting what the market dictates and develop a clear vision of what you
want in your life today and tomorrow (5 to 10 years). Challenge yourself to achieve a new level of success. The power of this step alone - focusing on what you want (or even what is possible) vs. wallowing in fear, complacency or despair - is huge!

3. ACTION - Choose 3 small manageable action steps that can take you closer to your vision.
The enemy is complacency - taking some action, any action, will show complacency that you are now in the driver's seat. An example of this might be to try a new technique or explore a new way to close more business. Even if you are already successful you should explore ways that allow you to increase the number of transactions, purchases or whatever it is you do without increasing the number of leads worked. (Kenneth's note: Basically become more efficient and proficient with what you already have)

4. ADJUST - To continue your forward momentum, go back to your vision and see how you are doing. Are you on track? Are your actions moving you closer to your vision, or away from your vision? Adjust your actions accordingly to stay on track and continue to add action steps until you reach your vision."

I love this montra as well:

Find People to Sell
Sell the People you Find
Sell the People you Sold


It's applicable to any sales profession. One of my favorite hobbies is collecting great or prophetic quotes. Got one?... Then send it to me. I appreciate the help.

It's a Good Life! Make it a great day!


KK

Kenneth Knapp
Visit us at: http://www.homeloancoaches.com
Signature Capital - Corona
949-294-0403 cell
951-520-0058 ext. 225 direct
951-520-9725 FAX
***LOANS NATIONWIDE - ALL 50 STATES!!!***

Oh, By the way, if you know someone who would appreciate my services, please call me with their name and number and I will be happy to help them.

How to Pay No Taxes on the Sale of Investment and Owner Occupied Properties

I just read this article and knew lots of my clients would want to understand this topic better. As always seek compotent legal and tax advise advice from a licensed professional. If you are in need of a compotent CA attorney you can trust I heartedly recommend giving Allan M. Soto, he's a Living Trust specialist priced just right for home owers who want to protect their assets without spending a ton of cash to do it. Please feel free to give him a call regarding any of your trust related questions. Tell him Kenneth Knapp sent you. His number is 714-899-9671 or via email: a.amstrustlaw@verizon.net.

Enjoy the article:

by David P. Greenberger, Esq.

Taxpayers are earning record gains on both their investment real estate and personal residence, which means potential record taxes. But did you know you can avoid all taxes on sale through creatively combining Internal Revenue Code (IRC) Sections 1031 and 121?

When you both live in and hold a property for investment, such as living in one of the units in an apartment building you own, or occasionally using a vacation home you rent out, or living in a residence that sits of land held for investment, you may qualify for two tax breaks under IRC Section 121 and also Section 1031.

Many people are familiar with IRC Section 121 which allows an individual a $250,000.00 gain exclusion ($500,000.000 if you are married filing jointly) on the sale of your principal residence. The property must have been your residence for at least two (2) years out of the past five (5) year period. The period begins on the date of the sale of the property. But what many people do not know is that one can combine section 121 with section 1031 in a transaction, and utilize section 1031 on the same transaction for the portion of the property the taxpayer is not living in.

Suppose a couple lives in one unit in a multi family building and uses section 1031 to exchange the portion of the property in which they do not reside. In this way, the unit they reside in is sheltered up to $500,000 in gain, and the remainder of the building is valued and exchanged as investment property under section 1031.

How do you divide the value between your residence and your investment property? This calculation may be based on the square footage, or you may use any appraisal which has been conducted for the unit one is living in and calculate the difference from the sales price for the investment part of the property.

How is the exchange/transaction conducted? The closing agent should prepare two closing statements, one for the value and adjustments relative to the personal residence, and one for the remainder of the property. The exchange accommodator will prepare exchange documents which describe only that portion of the property that is being exchanged. When the monies are disbursed at closing, the funds that relate to the personal residence portion of the property are disbursed directly to the taxpayer. The remainder of the funds are disbursed to the exchange accommodator who processes the exchange. The taxpayer reports the transaction on form 1040 schedule D for the personal residence sale and the 1031 exchange portion of the transaction is reported on forms 4797 and 8824.

In this manner, a taxpayer who has resided at the property while renting out the remainder of the building can successfully avoid taxes on the gain for the entire parcel and exchange into a new investment using tax free dollars to purchase it.

This type of mixed use transaction need not only be performed in a multi family unit property but can be used for a transaction when the "non residence" portion of the property is any other kind of investment property; commercial or land. In the instance of land, an allocation issue does arise.

The land which surrounds the residence can be exchanged under section 1031 and the personal residence will qualify for section 121 treatment. An appraisal should be done and the value of the residence should be sectioned out of the value of the adjoining land.

What about a vacation home qualifying for 1031 treatment? In most cases, homes that are exclusively used for vacation residences will not qualify for treatment under section 1031. There is no specific formula to use and cases of "incidental use" have been permissible. If one were to look to section 280a which doesn't specifically deal with 1031 matters but talks about the deductibility of losses on vacation homes the rules are more straightforward. They say 14 days per year or 10% of the time the property is rented throughout the year may be dedicated to personal use. There are no straight forward rules for vacation homes and section 1031; however, one can extrapolate that if property were held for personal use and then rented over a period of time, at least for a few years before doing an exchange one would be able to exchange it as property which has been used primarily for rental/investment.

The clear victory comes when the taxpayer who resides in a mixed use property takes advantage of section 121 and 1031 to remove all taxes on gains and diversify into other properties. Clearly, living in a property that appreciates and does not present you with a tax bill when you leave makes for a very welcomed stay.



About the Author: David P. Greenberger david@1031exchangeadvantage.com is an attorney and president of 1031 Exchange Advantage, a bonded, licensed and insured real estate exchange accommodator with headquarters in San Diego, CA and
satellite offices nationwide.

Understanding Credit Scoring & Credit Repair

Credit remediation is a subject consumers often face with fear and trepidation, and for good reason. With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. Sub-prime borrowers who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history. The good news is there are ways to improve less-than-perfect credit scores and obtain a loan for the home you really want.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you’ll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com)

It's also important to know just what a good credit score is. Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Don't despair if you come up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan’s interest rate.

While credit repair is necessary for some, it's not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

· Evenly distribute your credit card debt to change the ratio of debt to available credit. Let's say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

· Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don't close those old accounts!

· Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you're only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Remember, credit scores don't change overnight. Improving them requires time and diligent effort on your part, so it's a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing.

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights. Diligently search through them and educate yourself to ensure that you don’t sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission's website, which contains a wealth of helpful literature.

If you’re facing severe or complicated credit issues, then you’ll probably want to enlist the assistance of a professional credit repair company. Before you do, be sure to familiarize yourself with the FTC's regulations on credit repair. With over 1100 credit repair companies to choose from, it's important to be certain you are dealing with a reputable firm. Examine the FTC's information on fraudulent practices to avoid falling prey to credit repair scams.

Addressing credit issues can be uncomfortable to say the least. But by taking these steps now, you’ll be that much closer to obtaining the home of your dreams.

Additional Resources:

To order your free credit report, go to:
www.annualcreditreport.com

To read the Fair Credit Reporting Act, go to:
www.ftc.gov/os/statutes/frca.htm

For the Federal Trade Commission's information on consumer credit, go to:
www.ftc.gov/bcp/conline/edcams/credit/index.html

Bubble, What Bubble!?

I just read this powerful article and thought I would share it with folks that think CA has experienced a real estate bubble.

"Dr. David Lereah is a best-selling author and the Chief Economist for the National Association of REALTORS® (NAR). In a recent interview, Dr. Lereah revealed, "The biggest factor that affects real estate today, and has made it immune to some cyclical changes in the economy, has been demographics." Here's why:

• The "Baby Boom" Generation - This generation is the largest so far, and their impact has been felt across the nation. Now that Baby Boomers have reached their peak earning years, they are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of all home sales going toward second homes.
  
  
• Immigration - There has been a large influx of immigrants over the past three decades. According to Lereah, it typically takes at least a generation for immigrants to become fully active in the home buying market.
  
  
• Children of Baby Boomers - This generation, the second largest ever, is now in their twenties and looking to purchase their first homes.
  
  
• Retirees - While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of diseases, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.

So if the current market can be explained primarily by the factors we just discussed, how do we know whether it will continue to thrive? Dr. Lereah says, "We are in the Golden Age of Real Estate." Even if the economy should slow and interest rates increase slightly in the coming years, the demand for houses is still strong. The biggest impact that such a change would have is to decrease the rate of price appreciation. The media likes to refer to the real estate boom in terms of bubbles and balloons. In keeping with that analogy, Lereah indicates that local markets may react to higher interest rates by letting some air out of the balloon. The double digit price appreciation we've experienced may decrease over the next year or two to a more typical 4-6% range. This is still a higher rate of return than found in the stock market, all things considered."
© Copyright 2006. All About News, Inc.

There's a Big Difference Between Word of Mouth Advertising and Referrals

Lot's of my colleagues complain they hear from their clients and referral partners "You're the best Kenneth, I'm going to tell my friends all about your great service.” But they never get a call from the unknown word-of-recipient, the lead dies on the vine.

That's great word-of-mouth advertising but ensures your superior mortgage broker zero business. It’s nice, but it’s no referral.

The subtle but significant difference between word-of-mouth advertising "Kenneth is the greatest mortgage broker I've ever met, you should call him Nancy." And "I recently refinanced with a professional like no other Nancy, I know you are looking into buying a new home, would you mind if I give Kenneth your name and number and have him give you a call?"

Did you see that…"have him give you a call." The main difference here is control. By providing a great testimony your client builds trust and credibility for you but without out sharing a name and number in a timely fashion many a deal can be lost in the shuffle.

It’s wonderful to earn the trust, respect and loyalty long term of a wonderful client. And the warmest thank you any client ever gave me was a referral to one of their trusted friends.

Make it a great day!

Kenneth Knapp949-294-0403 direct

“How to Get a CEO of a 100 Million Dollar Organization to Call You For a Loan and Win His Business Every time.”

First I wanted to share a neat little article Shawn Meldrum shared with me today. He’s a great marketing mind in the world of mortgage; check out his enewsletter for wonderful tips (retail mortgage focused not for consumers unless you’re are getting into the mortgage industry).

The meat of my post is “How to Get a CEO of a 100 Million Dollar Organization to Call You For a Loan and Win His Business Every time” in just a second…

-------------------------------------------------------------
`4 Criteria for prospects...`
-------------------------------------------------------------

Eliminate the frustration of wasting your time on rate-shoppers,
tire-kickers, `looky-lou`s` and other time-wasters. Don`t you
hate preparing presentations or even spending time on the
phone when the so-called prospect is NOT going to do business
with you? I do!

Mortgage marketing expert, Maria Esposito uses 4 criteria that
loan prospects have to meet before she`ll even talk to them.
(And if she does talk to them, she`ll make sure they meet
these criteria immediately.)

1. Pre-interested. Somehow, you`ve gotten them to `raise their
hand`and express their interest in what loan product you have.

2. Pre-qualified. They`re in your marketplace AND they have
the interest to go thru with the program.

3. Pre-motivated. The passion to do business is already there.
Trying to `motivate` it there for them is like pushing string uphill!

4. Pre-disposed. They want to do business with you. You`ve
positioned yourself as `the person` to get a mortgage from...
and they DON`T get it from their brother-in-law!

Notice that they all start with the prefix `pre`? There`s only ONE way to get people to contact you AND already have them meet your criteria: some form of effective lead generating advertising.

It`s the ONLY way to get maximum money in minimum time... which, frankly, is the only way to get rich and the only way NOT to end up hating your mortgage career.

Shawn Meldrum
HighProfitMarketing.com
shawn@highprofitmarketing.com
---------------END STORY--------------------
------------------------------------------------

Now that Shawn has said his piece let me tell you why I think he’s wrong… Advertising
(DEFINED: The activity of attracting public attention to a product or business, as by paid announcements in the print, broadcast, or electronic media.) may be a good and necessary component of most mortgage businesses. But working by referral only is exceptionally easier (if you are personable, professional and have the proper strategy).

The point of my title is to highlight one referred customer I recently had the pleasure to work with. I received a call late one night and low-and-behold it was one of my customers. I grade this particular customer an “A+” he knows me well, he has received Nordstrom care and he considers me part of his team (long term), we have mutual trust. The call was in regards to a co-worker who was shopping for a home mortgage (cashout refinance). He shared with me the name and number of the referral and explained this person would call me shortly.

Just minutes later I received a call from the CEO of my client’s organization. We spoke for a few minutes to define his needs and within ten minutes we had his complete file underway and I had won his confidence and business.

By the way this lead cost me nothing more than fantastic follow up and Nordstrom class customer service.

So as far as advertising goes my money is always on building a solid referral network and nurturing my client base and referral network with 100% of my focus.

Once you truly understand how your referral network can work for you; you train hundreds and perhaps thousands of business partners (referral network members) to know you are a mortgage expert, who strives to offer the highest possible level of customer care, comprehensive mortgage knowledge and competitive rates. When they hear a friend, colleague or family member mention the words mortgage they instantly think of you as the perfect solution to the problem.

Now this may take years for some folks to build but once you have a large network in place and you work hard to provide exceptional service and prove in execution you are well on your way to profitable career in home finance.

Four Questions To Ask Before Selecting a Real Estate Sales Associate

I loved these helpful tips and thought every potential home seller should be aware of them. I hope you enjoy and use them in the future.

The Coldwell Banker organization recommends opening any dialogue with a potential real estate professional with the following questions and guidelines on what information to look for in the responses.

-- What percent of your company's listings have sold in the last 12 months? Ideally a home seller will want to work with a sales associate who has a high percentage of completed transactions within the local market. While this number will vary depending upon how active the local real estate market is, a higher percentage is preferable.

-- What was the average amount of time it took to sell those listings? Comparing marketing times between real estate companies will provide the consumer with an indication of how well that company and sales associate market homes.

-- What was the average sales price? Look for a figure that is close to what you would like to receive for your home.

-- What was your company's list-price to sale-price ratio? Significant differences between original listing prices and ultimate sale prices can be an indication that the list prices quoted at the outset were unrealistic.

I'm never too busy for your call or your referral.

Best Regards,

Kenneth Knapp
949-294-0403 direct

Some Markets Are Softening Others Still Are Under Valued

I work with many investors to start and build their personal property portfolios across the U.S.. In recent years we have scene consistent growth in the Syracuse, NY area and many areas in Florida and Arizona. Today some markets have changed in certain states but still there are cities that remain under valued. These areas are some of the most exciting investment opportunities for new and mature real estate investors.

Here are some highlights from a recent National City Corp study as reported by CNN Money on market values across America. “National City arrives at its estimates of what the typical house in these markets should cost by examining the town's population densities, local interest rates, and income levels. It also factors in historical premiums and discounts for each area.”

Here are some of our favorite under valued areas:

College Station, TX -23%
Lafayette, IN -10%
Memphis, TN-MS-AR -9%
Buffalo, NY -5%
Fort Wayne, IN -5%

After having hundreds of discussions with customers and referrals I have noted that many homeowners have a desire to investigate and better understand property investment. Understandably there are many facets to prudent property investment, portfolio management and equity growth management but in certain cases it’s much easier than most would think to get in, properly manage and earn significant returns on quality investments.

One of the biggest obstacles first time buyers and investors will face is FEAR.

Change, it has been said, is what most people fear most – not because it is wrong, rather it is simply uncertain. Fear is often the result of what we do not know or cannot understand. A talented mortgage professional can alleviate fear by explaining important information that can impact your future.

It’s our goal to assist our clients in understanding the implications of property investment and how it can affect their ability to create wealth in their lives.

I’ll have more examples of this in future posts. Call me anytime if you have questions. I’m never too busy for any of your referrals or questions.

Best Regards,

Kenneth Knapp
949-294-0403 cell
1101 California Ave., Suite 102
Corona, CA 92881