A Wealth Equation

 There's an old-time wealth equation:

 "To have more than you've got, you must become more than you are".

Rich people have this figured out.

While many of us will read this aphorism and (rightfully) assume we need to start a personal development course or learn a new skill to achieve more financially in life, wealthy folks often just go get help.

Rich people have fiduciaries.  

They invest in trust relationships with professionals - fiduciaries- who look out for their interests and grow their money - for a fee.

Many people think these kinds of fees are a waste of money. Or they don't think they have enough money to spend on professional advice.

The rich know better.

High net worth folks (HNW) achieve more financially and multiply their knowledge and time by cultivating relationships with specialists  like attorneys, accountants, real estate brokers, and investment advisors. The government recognizes the value and protection provided by fiduciary relationships. In fact, the SEC wants to require more types of advisors to act as fiduciaries. In essence, a fiduciary places a  client's interests above all others, even their own. 

 Is this really such a big deal?

Does the average middle-class married couple really need to worry about their financial future, not to mention paying someone to handle tasks that one could learn from the Dummies Guide...?

The answer to the first question is "absolutely yes", and the answer to the second question is, " Get the Dummies books first, read them, and then see a professional".

 Consider retirement planning, for example...

 Retirement is one of the most important phases of life. 

It actually encompasses several phases of life, from an active lifestyle in the early years of retirement to a quieter, possibly assisted, lifestyle as a person ages. And for many of us, our retirement years may unfold over a third of our lifespan. 

This requires a plan!

Even so, half of your friends and relatives who are nearing retirement age have less than $10,000 saved for retirement and a third have nothing. 

HNW people don't make this mistake. They realize that retirement is too big to be left to chance. 

But they also know that they probably don't have all the skills, time, energy, or will power to do it alone.

So they capitalize on the expertise of their fiduciaries.

For instance...

• Attorney- Can you plan and write a legal will or trust that will not only pass your estate on to your heirs as you wish, but that will also allow you to continue to live as you wish, even if you become unable to look after yourself? Do you have the knowledge and time to follow the changing estate laws and rules, so that you can maintain and update your estate as laws change? 
• Accountant- Taxes must be paid and the rules are extremely complex.  Enough said.
• Real estate broker- Countless couples are finding out that their single biggest asset when they retire is the equity in their home. Selling the family home and buying a dream retirement home may seem impossible, but your real estate broker can show you how you may be able to purchase a nicer retirement home than you imagined, and make no payments. Will that help your cash flow?
• Financial planner- Where will your monthly retirement cash come from? Many people think that they'll need less money as they age, because they'll have fewer expenses. Not true. And most people are counting on social security and a retirement plan provided by their employer. But most workers don't have a defined-benefit retirement plan these days, so it's impossible to predict what you'll get from your boss. This means that, in order to make sure you'll have enough money in retirement, you'll have to save and build a nest egg on your own. And you will also need to make a plan to crack the nest egg open when it's time and manage your money as you spend it. This means staying away from sales people who promise fool-proof retirement plans and sticking with a qualified fee-based planner who will build and manage a plan with reasonable goals, risks,  triggers and stop-gaps and strategies to manage any changes in economics which may hurt your income as you age. Can you do this task yourself? 

And this is just the headache of retirement planning! What about wealth-building, running your business, managing your yearly taxes, or getting your kids through college?

Each of us has only so much time, energy, knowledge, and capacity. Spend a little now to make a lot and save a lot in the future.

Mid Year Sacramento Area Values

Three weeks until summer begins and 2015 is almost half over!

Time to check in on your balance sheet. Real estate values have been going up nicely - around a percent a month in most areas.

Here's what the Sacramento area market looks like this month for a three bedroom two bath home around 2,000 square feet in size:

We don't really think of Sacramento as one market, so we've broken the region down into several smaller snapshots. 

There are other small markets in the region, but these areas represent the Sacramento metropolitan area fairly well. There are many small markets in the region. I'll cover those areas in future posts.

Great 3/2 Family Home Near Good Arden Arcade Schools in 95821

Call ENTERPRISE REAL ESTATE at 916-893-1566 or click here www.SacramentoHomeSearch.net to reach a SACRAMENTO BUYER'S SPECIALIST

Are you interested in buying a home at a deep discount? Get latest complete search of short sales and search all foreclosures.

Excellent 3 bedroom 2 bath family home on a quarter acre lot in highly desirable area of Arden Arcade. Entertain friends and family in the spacious grass backyard

Edison Ave near Pasadena Ave
Great neighborhood of estate homes.
Great schools-nearby Mira Loma High School, Arcade Middle School, Whitney Ave Elementary School, and Pasadena Elementary School. 
Attached 2 car garage. 

Don't wait- this won't last. 

Probate sale- Administrator has full authority - no delays. 

Call 916-893-1566 with any questions we are probate real estate professionals. Visit www.CalProbateRealtors.com

Call 916-893-1566 today for a showing.

Enterprise Real Estate, Inc. is a Sacramento area real estate brokerage with real estate agents that help people buy and sell Sacramento single family homes, condos, and lots for sale. The Enterprise Real Estate website lists Sacramento, Placer, and El Dorado homes for sale. Key service areas are Elk Grove real estate, including Laguna West, Stone Lake, and Sheldon; Sacramento real estate, including East Sacramento, Midtown, River Park, Campus Commons, Pocket, Greenhaven, Land Park, South Land Park, Curtis Park, Woodside and Arden Hills; Enterprise Real Estate agents also sell homes in Rancho Cordova, Gold River, Mather, Orangevale, Citrus Heights, Folsom, North Natomas, South Natomas, Arcade, Carmichael, Fair Oaks, the Fabulous Forties, and Tahoe Park. Enterprise Real Estate, Inc specializes in probate real estate sales, family trust real estate services, and senior real estate services.

CA BRE# 01932381

Pitfalls of Owning Income Real Estate

I'm going to spend the rest of this year standing on my soapbox, singing the praises of investing in real estate as the best way for the average family to achieve the wealth part of the American Dream.

That said, I will stipulate up front that investing in real estate as a way to achieve financial independence is not a sure-fire proposition. In twelve years as a licensed broker, I've watched people make bad decisions and walk right off the end of the pier. Here's my short list of the risks of holding rental properties as a long-term investments.

1. Lower than Expected Rate of Appreciation - In 2005 many people became 'investors" by mortgaging their own homes and using the loan proceeds to buy other houses, with the idea of holding the houses for a couple of years and selling for a big profit. Many of these folks lost their shirts - but they weren't really investors and they weren't really investing; they were naive speculators who were playing against the basic rules of real estate investment strategy - the real return is the monthly cash flow from rents during the period of the investment. Intelligent investors were sitting tight or selling in 2005, not buying. The appreciation we seek is the annual increase in rents!
2. Increased Payments on Variable Rate Interest Loans - Investors in 1-4 units don't really need variable rate financing... fixed mortgages at competitive interest rates are available from just about any lender. Investors in apartment buildings use variable rate and short-term financing all the time. The trick is not to settle for a bad loan. If you can't comfortably achieve your investment goal while paying the highest possible rate on your loan, why are you using this financing?
3. Lower than Expected Rent - This usually happens as a result of the investor not doing enough homework about rent prices in the area and rent roll history of the investment. 
4. Damage to Property - Don't have any illusions... when you own investment real estate, you own a business. Businesses have to manage risk and minimize losses. This means choosing high-quality tenants, enforcing the rules, and maintaining adequate insurance. The great news about real estate investing is that there are lots of ways to invest indirectly, and avoid the hassle of running a business.
5. Tenants Who Don't Pay - See above. This is rarely a problem if you will take the time to properly screen tenants. The banker's axiom "a well-made loan is half collected..." applies here too. Many investors simply use the services of professionally-licensed property managers. Fees usually range from 6-10% of rents collected and are negotiable.
6. Eviction Costs- Avoid eviction costs by avoiding evictions (see pitfall #5). I've been a landlord since 1995, and I've never been forced to sue for eviction.
7. Maintenance Problems - If it seems too good to be true, it usually is.... buildings that first appear to be bargains on paper often turn out to be in need of repair and deferred maintenance. Avoid these problems by understanding what you are buying before you close the deal. You must do your due diligence and pay to have the property inspected by professionals - building, roof, pool - or else risk an unpleasant surprise once the place is your responsibility.
8. Vacancy - Would you buy a business that had no customers? Don't buy vacant properties. Landlords expect about 95% of units to be leased at any time - lower vacancy means rents are probably too low, and higher vacancy rates indicates that the landlord is asking too much rent. The simple fact is that vacancies are part of the landlord business - savvy investors know vacancy rates and factor them into their investment calculations.

The key thing to remember is that the factors on the list are all things you can control. Direct ownership of residential income property is a business. If you choose properties to meet a well reasoned investment plan and manage your business properly, you can create a substantial income and net worth. 

Getting Your House in Order

 It's financial spring -time to take advantage of all of the opportunities that are here and near to build wealth over the next business cycle.

So let's review the first rule of Investing 101. Rule Number One is Do Not Lose What You've Got. Whatever the Golden Goose is, protect that goose! And for most Americans, home equity is the biggest asset (the goose) in their finances.

So it makes sense to start getting your financial house in order by starting with the house itself.

How do you hold title to your home?        CONTACT ME

When I take my clients into escrow, the title company escrow officer always asks, "how do you want to take title to the property?" Next, they hand our client a list of twenty five choices without any advice about what to do. And you can understand why... the title company lawyers won't let the escrow officer run the risk of giving bad advice.

But we work with probate attorneys all the time  and they tell us that it's a big problem... nobody talks to buyers about how to take title when buying their home. Our favorite Nor Cal estate law specialist, Joel Harris gives these tips:

1. If you have an estate plan, consult your estate planning attorney. 
2. If you're a married couple buying a house and you have a living trust, take title as a Living Trust.
3. If you don't have a Living Trust, and you're married, you always want to take title as community property with right of survivorship. There is no better way unless you have a trust. For a single person, there is only one way to hold title.

Whatever you do, get some expert advice. Don't settle for whatever comes along. It may not work out well in the end.

Refinancing                       

Because of all the new rules about financing, banks don't want to have to look at customer's Living Trusts to make sure they have the power to refinance, so they ask customers to convey their property out of the Trust so they can refinance as individuals. Then many title companies simply neglect to advise clients to put their property back into the Living Trust after the refinance transaction.

As Probate Realtors, we talk to attorneys each year that are handling court cases trying to get property back into a Living Trust that people have refinanced out and never put back.

The Takeaway

Getting your financial house in order might not seem like the most glamorous way to start taking advantage of this financial spring, but remember the first rule of investing: Don't lose your capital. Carefully attend to issues of how you hold your real property.

It's Spring this Winter

Here is my recommendation for this year's New Years Resolution: make and start executing a strategic plan to achieve your financial goals over the next ten years.  And do it now.

Why Now? 

Because we're at the starting gate of the new business cycle. It's winter on the calendar, but it's financial spring right now, and it will be followed by financial summer, then autumn and winter. Guaranteed. Financial spring - now - is the time to start sowing economic seeds to nurture, grow and harvest in this next business season. Whether you want to start a new career or create a business, build wealth for financial independence or plan for retirement, you couldn't ask for a better time - financial spring- to get started designing the future you want. 

Is it really financial spring? 

Well, we look around us and this is what we see:

• long-term interest rates are at historic lows 
• real estate values have bottomed and regained value at a sustainable pace
• employment is rising and unemployment levels are falling to manageable averages
• GDP is rising to growth levels
• Inflation is low

What to do now

Make a Career or Business Plan: 

If you're planning on starting a new career or opening a business, the winds are at your back. Job opportunities are really starting to grow, and if you're starting a business, piles of capital are out there looking for a good investment. Get a detailed plan together and include the exact dollar amounts you expect your plan to create. Even if you're happy at your job (congrats!), write a plan down now detailing where you expect to be a year from now and what you need to do to hit your goal.

Financial Plan:

This is where you park all of the cash you create from your B plan. It's your personal budget and long-term investment plan. Wealth comes from growing cash after you create it. Contrary to popular belief, most rich people are not money-burning jet setters that inherited their money or won the lottery. Most wealthy people are the "millionaire next door", spending their days running small, but profitable, businesses and watching their money carefully. 

Estate Plan:

This is not just a subject for rich old people!  And even if the subject sounds mind-numbing, you have to do it. Estate planning is the part of your investing strategy that protects what you work so hard to build. The way you plan - or don't plan- your estate can affect your family fortunes not just in death, but you while you are still living. Do you own a trust? Is your home owned by the trust? If you need long-term care, will the trust provide the funds if you are incapacitated? If you don't have a trust, do you have a Will? As an SRES, I talk to people every week that are experiencing huge hassles because of poor estate planning. You shouldn't do estate planning yourself. You need expert legal advise from a competent attorney that specializes in elder law and estate planning.

That should get you started...

Don't the let opportunity of this business cycle pass you by. We each get only so many springs! Make your future happen by design. Write down your goals and plans to achieve those goals NOW

 It doesn't feel like spring outside today, but it is certainly early spring in this next business season. And the spring - now - is the time to start sowing seeds that we can nurture, grow and harvest in this next business season. 

4 Myths about Reverse Mortgages

  
Have you heard about reverse mortgages, but aren't quite sure if they’re legitimate or a scam? 
Reverse mortgages can be a useful financial tool for older homeowners, but they’re not for everyone. Before considering one of these loans, it pays to know the myths and facts.

Here are four very common myths about reverse mortgages:

1. "With a reverse mortgage, doesn't my lender really own my home?"
        No. The title to your home is in your name.

2. "When the last borrower dies, doesn't the lender take the home?"
      No. When the last borrower dies, the estate may keep the home by paying any balance owed. Typically, the estate sells the home, pays off the loan, and distributes any equity to the heirs, just as it would with a regular mortgage.

3. "Don't the heirs have to make up any shortages if the home is a short sale?"
       No. A major benefit of a government (FHA) insured reverse mortgage is that it is a NON-RECOURSE mortgage loan. That means that if the home ever has to be sold for less than is owed on the reverse mortgage, the estate cannot be held responsible for any shortage. This is a huge benefit that protects the estate from using other assets to satisfy the mortgage obligation.

4. "Aren't reverse mortgages for poor people?"
       They used to be, but not any more. Reverse mortgages used to be need-based loans for seniors who found themselves running out of cash. They were expensive and hard to understand. They were a loan of last resort. 
        Today, 98% of reverse mortgages are guaranteed by the FHA. They incorporate important consumer protections, have competitive interest rates and moderate fees. Financial planners advising seniors often use reverse mortgage as part of an overall retirement strategy to maximize cash flow and save capital for future needs.