A property owner may choose to hold title in a limited liability company (LLC) if he/she files the necessary paper work with the secretary of state, in the state of the origin of the entity. Ownership of an LLC reflects a variation of an entity which has a few characteristics of a corporation, and a…
Author: Dan Harkey
You Can’t Hide Your Dying Malls
There is a phenomenon occurring that is changing the social and economic structures of communities across the USA. Thousands of malls are now on life support or have already been declared dead. The reasons are many, the obvious one that comes to mind is on-line purchasing with companies such as Amazon. However, one fact remains, on-line purchases…
Yes, they will subordinate? Fact or Myth?
The real estate lending business is full of factual representations from borrowers and mortgage brokers, but some of these “facts” turn out to be nothing but myths. The underlying question is whether some of these misrepresentations are out of ignorance, or intentional? A seasoned processor or underwriter is best to practice healthy skepticism. Good judgement comes…
The Concept of Depreciation in Real Estate
From the moment a building or improvement is completed, the value and “usability” of the improvements begins to decline. Physical deterioration, functional obsolescence, and even economic obsolescence reduce improvement value over time. Depreciation is the loss in property value from any cause. Why do we care? It leads to “successful transactions” in a lot of…
Fuzzy Math: Income Producing Real Estate
“Fuzzy Math” was first introduced to the public during the televised debates between George W Bush and Al Gore, in the 2000 U.S. presidential election. “This man has been disparaging my plan with all this Washington fuzzy math.” How many of you remember this humorous interface? Since then, these terms are frequently used by politicians…
Reciprocal Usage Easements? What is the Purpose?
Many buildings that were constructed prior to the 1960’s lacked adequate parking, and/or even on-site common usage with for ingress/egress of automobiles. In property law, ingress/egress referred to rights of a person to pass over real property for entry, leaving, and returning to a property. Walking, bicycles horseback, horse-drawn carriages were the planned sources of…
Why Real Estate Owners Chose Private Money Loans: Part 2 Examples 11 through 20
Borrowers, mortgage lenders, and trust deed investors should pay close attention; why? You may find yourself questioning why a borrower would choose a private money lender over a larger financial institution. While the reasons are numerous below, I have listed 11 through 20 micro case studies on why a private money loan could be the…
Friends Do Business with Friends
In my articles: “Are we allocating our work time effectively?”, and “Develop A Unique Ability” I discussed effective time utilization and the technology of the sales process. (These articles can be found on danharkey.com in the business article section.) Both prior articles are suggested for the student to master salesmanship.http://danharkey.com/develop-a-unique-ability/ A byproduct of this transition…
Reinventing Yourself and Your Business Enterprise Part II
Most of my examples will be related to the real estate lending business because that is the field I have been if for 45 years. The nomenclature may change with different industries, but the concepts will be similar. Review your Vendor Support relationships. The results of vendor(s) delegated responsibilities are always a reflection of your…
Reasons Why Borrowers Need Private Money
Loss of bank loans, for any reason, including denial of credit due to: Less than perfect credit Debt coverage ratios Use of cash out Property condition Borrowing entity such as trusts of single asset entities No deposit relationship with bank Borrower’s election to avoid the excessive loan conditions and hassle of processing a bank loan….
When Private Money is The Best Option
Borrowers, who own or want to purchase real estate, may need an alternative source of financing when their bank says “no.” That source for real estate loans is referred to as “private money” financing. Private investors who have capital will lend for a reasonable yield or return on their invested capital. The private investors essentially…
The Private Money Lending Industry Is Alive and Well
There are real estate borrowers who seek out financing from institutional lenders such as banks, life insurance companies, credit unions, and GSE’s such as Fanny Mae and Freddy Mac. Those lenders have regulatory requirements and usually have strict underwriting guidelines to follow in order to complete a loan transaction. An alternative industry referred to as…
Loan Purpose – Consumer vs Business
Do you remember a l950’s television series called “Dragnet”, reenacting the cases of a dedicated Los Angeles police detective, Sergeant Joe Friday? Sergeant Friday would demand from suspects and witnesses “Just the facts, ma’am, just the facts.” In today’s real estate lending environment, the Mortgage Broker and the loan underwriter need to identify “just the…
Some Lenders Deviate From California Real Estate Laws
There is a growing real property lending industry problem whereby mortgage brokers licensed by the Bureau of Real Estate, and non-Bureau of Real Estate licensees, use private offering securities exemptions to circumvent regulatory requirements. Some brokers, and non-brokers, use a California exempt offering to create a pool-type limited liability company. They raise capital from private…
What is a note purchase secured by Real Estate?
Investors who purchase real estate are looking for multiple benefits. These benefits include cash flow, appreciation, tax incentives, and other financial rewards. Eventually, they may sell, exchange, or leave the real estate to their children or heirs. Real estate is considered “real property,” as opposed to “personal property.” Property ownership involves active management, including, financing,…
What is a Note Hypothecation?
Real property owners’ usually sell to buyers’ who finance with a bank or institutional lender. The bank/lender records these documents at a municipal records office, referred to as a deed of trust or mortgage create a security interest in the property. The recorded instruments become a matter of public record, the property owner has fee…
Property Insurance “Lender Loss Payee” Endorsements
Property Insurance “Lender Loss Payee” Endorsements Dan Harkey, Business & Finance Consultant https://www.insurance.wa.gov/sites/default/files/documents/438-bfu-ns.pdf Evidence of insurance coverage on behalf of a real property lender that is placed on a binder, which states “additional insured, loss payee, or lender loss payee” does not provide adequate coverage to the lender under most circumstances. A binder is a…
The Objective of the Federal Reserve is to Maintain a Steady Devaluation of the Dollar Based Currency
The quiet objective of the Federal Reserve, the US government, and Wall Street is a steady decrease of purchasing power of the dollar. By use of mechanisms such as financial repression, calculated financial leverage, artificially lowered interest rates, structured massive loads of public debt, making false future promises of social benefits to citizens and non-citizens,…
What Exactly is Investing in Trust Deeds
What Exactly is Investing in Trust Deeds Most investors are aware that they can invest in hard assets such as real estate, diamonds, gold, collectables, fancy automobiles, paintings, etc. All can be held physically or by operation of law; for example, an automobile pink slip, or a real estate ownership certificate called a deed. Deeds enable…
Do I Purchase All or a Fractional Portion of a Trust Deed Investment?
The motivation for investing in trust deeds includes the desire to place one’s investable capital into financial instruments that yield greater than other traditional investments of equal or lesser risk. Annualized yield, monthly payments (cash flow), diversification, preservation and return of capital at maturity serve as the comparison characteristics. Investor(s) may purchase all or a…