Deciding on your financial goals for your real estate investments is your first step in starting a good business. Do you need steady monthly income? Are you preparing your nest egg for retirement? Are you building up a portfolio to use for your children’s education in upcoming years? To meet your goals, you need to choose the proper method of real estate investment.

One method to make some fast cash, even if you don’t have any money, is locating great deals and selling them to other investors. Real estate investors are always looking for profitable deals, and if you can help them find them, they will either buy the contract from you, or may pay you a finders fee. Check into local real estate investment clubs and organizations for possible partners.

If you are wanting to establish a steady monthly income, the most common investment strategy is buying rental properties. You will need to put on your accountant’s hat, and figure the price of the property and the rental income very carefully. Factor in all of your costs for the mortgage, insurance, taxes, and set aside a repair budget. You want to buy properties which will return more in monthly rental payments than the cost of owning the property. Many times buying less than prime properties and doing minor repairs and cosmetic touch-ups can make a single family home a great rental property. Your own local neighborhood may not be the hottest area for rental properties, so you may need to step into other neighborhoods, and communities to find the right mix of rental prices, and low cost properties.

Rental properties do come with one additional cost, which many investors overlook on their first purchase, their time. Some tenants can be demanding, others are slow to pay, and even others quit paying entirely and must be evicted. Choosing tenants wisely helps to reduce these issues, but you will always have some challenges. If you prefer not dealing with tenants, you may want to explore other options in real estate investing.

Another popular investment strategy is flipping properties. In this strategy you buy properties under market value, possibly because of the quality of the property, and you make the necessary repairs and renovations before selling for a profit. You’ll need a good calculator and a sharp pencil for your budget planning on these deals. You need to take into account all parts of your planned renovations, and all possible costs to make sure the investment is likely to return a sizable profit.

Some real estate investors are in for the long haul, and buy properties to hold onto for a longer period of time, counting on rising prices to increase the value of the property before selling for a higher profit.

Your choice of what real estate investment strategy is best for you can be based upon your available financial resources, income needs, and interests. You may even decide to work with a combination of these methods to fill your real estate investment portfolio. Combining buying rental property, with a long term strategy of selling for a higher price is a common combination investment. Welcome to the exciting world of real estate investment.

There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a “short sale.”

When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.
If you are considering buying a short sale, there could be drawbacks. For your protection, I suggest that all borrowers:

• * Obtain legal advice from a competent real estate lawyer
• * Call an accountant to discuss short sale tax ramifications

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

Call the Lender
You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the “real estate short sale” or “work out” department, you want the supervisor’s name, the name of the individual capable of making a decision.

Submit Letter of Authorization
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:

• * Property Address
• * Loan Reference Number
• * Your Name
• * The Date
• * Your Agent’s Name & Contact Information

Preliminary Net Sheet
This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.

Hardship Letter
The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.

Proof of Income and Assets
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.

Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it’s probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.

Comparative Market Analysis
Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:

• *Active on the market
• *Pending sales
• *Solds from the past six months.

Purchase Agreement & Listing Agreement
When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.

It doesn’t really matter what kind of investing you are participating in, it’s almost always a wise idea to have multiple streams of income in order to maximize your profits while spreading your risks. Even within the confines of real estate investing there are different types of investing that can help you spread your risks when markets meet turbulent times and this is a very good safety net for those who do not want to feel as though they are gambling away their investments on a real estate market that is fickle on its best days.

You really have two course of action when it comes to bringing in multiple streams of income when building your financial portfolio. The first is to spread your real estate wealth and investments across several different types of real estate investments. There are a few types that come immediately to mind. First there are rental properties. You have two options even with these. You can either choose to rent properties outright to families, students, singles, and the elderly in your town or you can offer a lease or rent to own situation for those who have struggled in the past but still have the dream of home ownership.

Other options for bringing in multiple streams of income through real estate is to have a few rental properties and couple those with a few flips in the works, perhaps a commercial property or two, and a pre-construction deal or vacation condo in the pipelines. One thing is certain you should always be on the lookout for your next real estate investment if you really want to make good money in this business while having a little added security. Rentals are passive income for the most part, especially if you have a solid property manager taking care of the details and the other investments are often icing on the cake.

If you want a truly diversified portfolio however, it is a good plan to include a few investments that aren’t related to real estate investing. While I firmly believe that real estate investing is the way to go for most people there is much money that can be made in other fields and it would be pointless to discuss multiple streams of income without mentioning a few that were unrelated to real estate investing. Retirement plans are a great option and you can now invest in a retirement plan of your own even if you are self-employed. It is definitely worth considering as yet another stream of income, even if it is income that you will need to wait a while to receive. Franchise businesses are often great money makers for those who need more immediate results from their investments efforts, and stocks and bonds are also great long term investment strategies.

The truth is that there are many things you can do to create even more streams of income to add to your real estate investments. From making money online through affiliate marketing, blogs, and direct sales you can also tackle brick and mortar businesses, though these tend to be just as time consuming as real estate. The point is that you want to bring in money from different avenues and real estate investing is one of many different routes to explore when deciding on your investment future and establishing those multiple streams of income.

Homeowners pursing a short sale are required to submit a short sale packet to the bank.  The hardship letter is just one of the required items that must be included in this packet but it may be the single item that can make or break a short sale deal.

The hardship letter details the financial difficulties the homeowner is facing and why the bank should assist them.  A loss mitigation loan officer at the bank will be tasked with the responsibility of reading the letter.  A successful hardship letter can result in a financial fresh start for the homeowner whereas an unsuccessful letter can result in credit ruin

From experience I think it is best if the hardship letter is handwritten instead of being typed.  Besides detailing the financial difficulties, it should include basic account information such as the property address and loan number.  There is no limit on how long a hardship letter can be but it is better if it is two pages or less.  The homeowner should sign and date the letter.

The letter should not contain any outright lies or excuses.  Instead the letter should ask for forgiveness and request that the bank work with them during their time of need. The letter should explain why the homeowner is unable to make the payment on their mortgage. The most compelling reasons are usually illness, unemployment or divorce. Trying to use poor financial management as a reason will almost always fail. Remember the letter will be read by a human being at the bank and if they can relate to your hardship the better you chance for success.

With the hardship letter being so instrumental on your success or failure, it is imperative that the homeowner spend sufficient time crafting a perfect letter.

The recent housing bust has impacted every corner of the housing market throughout America. Approximately 15% of all homes are currently underwater which means the value of the house is lower than the outstanding balance on the mortgage.  Homeowners are unable to sell because they would be required to bring cash to the closing table for the difference between the selling price and the mortgage balance.

An option for homeowners stuck in this situation is a short sale.  A short sale occurs when a bank allows a homeowner to sell the property for less than what is owed on the mortgage.  Banks are willing to consider a short sale because it is possible that they will loose less money than if they foreclosed on the property and then tried to sell it as an REO (real estate owned) property.  You must get your bank to agree to the sale since they will be forgiving part of the debt that you owe them.

Before a seller considers doing a short sale, he must be aware of these four items and what impact they will have.  They may determine whether or not you want to consider pursuing it.

Seller must prove to the bank that they have a bona fide hardship
Banks are in the business of making a profit and for that reason they are not willing to forgive part of the balance of the mortgage for sellers who are underwater.  If the bank knows that you can make the monthly mortgage payment then they will expect you to make the payment.  On the other hand if there is a financial hardship banks will be willing to work with you so they can limit their loss.  Banks will ask you to document your financial hardship by providing bank statements, pay stubs and tax returns. If you do not have a financial hardship, you will not be able to get the bank to agree to a short sale.

Your credit score will tank
When a bank performs a short sale, this action is recorded with all three of the major credit bureaus (Equifax, Experian and TransUnion).  The notion in your credit will show that the mortgage was terminated in a short sale.  It is not unusual to see your credit score drop anywhere from 100 to 150 points as soon as this notation shows up in your credit report.  This notation will remain on your credit report for seven years.  Future lenders will be wary of any application for credit with this notation on your credit report.  The only saving grace is that your score will eventually recover and it will recover faster under a short sale than if you let the property go into foreclosure.

You may be limited on your ability to purchase another house
Fannie Mae recently changed their lending requirements.  If you sell a property via a short sale, you will not qualify for a Fannie Mae financed loan for two years from the date your home was sold.  If you will be using Fannie Mae backed financing, there is no exception to this rule.  If you want to purchase another home within two years, you may have to seek alternative financing or mortgages that are not backed by Fannie Mae.

You may owe taxes on the amount the bank forgives
Banks use to send a 1099-C to any homeowner for the amount of the deficiency which is the difference between the selling price and the balance of your mortgage.  The IRS would treat this as income meaning you owed taxes on this income.  In 2007 Congress passed the “Mortgage Debt Relief Act of 2007.”  This Act allows taxpayers to exclude income from the discharge of debt on their principal residence. If you did a short sale on a second home or an investment property, you will be stuck with a nasty tax bill as a result of doing the short sale.

With the recent housing bust, homeowners may be tempted to do a short sale to get rid of their underwater property.  Before pursing a short sale make sure you understand the potential impact of this decision.