Have you ever heard day to day kidnapping news revolving around events like
a mother kidnapping her own son from her businessman husband who abused their
child? Or maybe you have heard cases like this: about a stepfather who kidnaps
his step daughter then takes her out of the country to force his wife to pay
him a fortune in order to get her back?
These types of cases of kidnapping are known as Parental Kidnapping, to be precise.
While some people do it to free their children from abusive and tyrant spouses
others do it deliberately for financial gain. Other reasons for parental kidnapping
include neglecting the spouses needs, abuse of the children by the spouse, endangerment
of the child and injustice.
Some parents feel that they have been ill-treated during the legal battle for
the custody of their child. As a result they kidnap the child to satisfy their
ego or they cannot do without their children.
A survey by the National Center for Missing and Exploited Children (NCMEC) has
revealed that over 300,000 children are abducted every year. This huge number
reflects how laws are needed, and they must be made very stringent in order
to convict the offenders and instill fear in people who are planning similar
acts.
In addition, one of the worst parts of kidnapping attempts is the effect on
the children due to all this. It can cause serious harm for his future development
including emotional development, bad behavior in school, malnutrition and violent
tendencies.
Help and Resources
There is hope and help. Via the Internet, you can access the NCMEC site and
speak to a Call Center Specialist if you have speakers and a microphone with
your computer. You can also insert the NCMEC RSS feed into your feed reader
to keep abreast of missing children. Stay in tune with Amber alerts, too, either
via wireless or other channels. And you can also register to volunteer in your
area should a child ever turn up missing; handling out posters, handling phone
calls, etc.
Learn more and reach out by writing to: National Center for Missing & Exploited
Children, Charles B. Wang International Children's Building, 699 Prince Street,
Alexandria, Virginia 22314-3175 USA. Call them at: (703) 274-3900; or fax: (703)
274-2200; or visit them online at: http://www.missingkids.com . Report any information
about kidnapping attempts and parental kidnapping to their 24-hour Hotline by
dialing: (800) THE-LOST (1-800-843-5678).
Having a child abducted is the biggest fear a parent can face, and no parent
wants to even imagine this situation presenting itself. To assist the authorities
with locating a missing child, the use of a child identification kit can speed
up the return of a loved one. The first 48 hours are the most critical when
it comes to locating and saving a missing child. A preferred Child Identification
Kit usually contains the following vital information for your child, recent
photos, fingerprints, dental records, hair samples and other pertinent information
about your child in one secure and convenient location. This could save the
life of a child!
There are many benefits for doing an owner-carry installment sale as opposed
to conventional financing for both the buyer and seller. Sometimes the advantages
inure to the benefit of one or the other, but in most cases the transaction
is “Win/Win” for both parties.
Benefits for the Seller
Most sellers of real property insist on the highest price and all cash. Sellers
want a fast closing with little hassle. Sellers also want to pay as little taxes
as possible on the gains incurred. In many cases, the seller can have most of
his needs satisfied by an installment sale rather than a traditional cash sale.
Let’s look at these needs one by one.
1. Highest Price. There is no doubt that a seller can insist on and receive
the highest price when offering flexible owner-finance terms. In many cases,
the seller can receive more than the fair market value of the property by offering
these “soft” terms. People are always willing to pay a premium for
non-qualifying financing.
2. Cash. Nearly ever seller says he wants all cash, but few need it. What the
typical seller wants is the most net cash from the deal. Often, the seller has
to pay closing costs, title insurance, broker fees and the balance of the existing
financing. In addition, there may be capital gains tax due to Uncle Sam. In
many cases, the sale of a property by an installment sale (particularly a "wraparound")
will net the seller more future yield than any source from which the cash proceeds
were reinvested.
3. Fast Closing. Nothing holds up a sale more than new lender financing. In
some areas of the country, it can take months for a buyer to qualify and close
a new loan to purchase your property. Since most standard real estate contracts
contain a financing contingency, you may end up back at square one if your buyer
does not qualify. Furthermore, if your house is not particularly nice or unique,
it may take you some time to even find an interested buyer. Since you are competing
with all of the other houses for sale, you may need to spend thousands of dollars
in paint, new carpet and landscaping just getting the house ready for the market.
There are very few "assumable" loans and few sellers are offering
“soft terms.” Thus, an owner-carry sale makes your house unique.
Furthermore, an owner-carry transaction can be consummated in a matter of days,
since there is no appraisal, underwriting, survey or other nonsense involved.
In many cases, you will be able to sell the property yourself, saving thousands
in real estate broker’s fees.
4. Tax Savings. On an installment sale, so you only pay gains to the extent
you receive payments each year. This can be particularly advantageous if you
have owned the property for several years. Furthermore, you can combine the
installment sale with an I.R.C. §1031 Tax-Deferred Exchange for further
savings.
As you can see, the installment sale provides many advantages to the seller
of real property. Let us now turn to the advantages for the buyer.
Advantages for the Buyer
1. Easy Qualification. The buyer, in many cases, prefers an installment sale
to conventional financing because it does not require traditional bank income
and credit approval. The buyer may have poor credit because of a divorce or
recent bankruptcy. He may be self-employed and cannot prove income. He may be
new to his job and cannot meet strict lender guidelines. Even if he could qualify
for a loan, the rate will be astronomical if he has poor credit. Furthermore,
few conventional lenders offer fixed interest rate loans to people with a poor
credit rating.
As you can see, there are dozens of reasons why a buyer cannot (or will not)
qualify for a conventional bank loan. The installment sale becomes the perfect
solution for him.
2. Credit Rating. An installment sale may give the buyer a chance to improve
his credit rating by owning a home and making payments timely.
3. No Loan Costs. One of the biggest benefits for the buyer is not having to
pay the costs associated with conventional loans. Points, origination fees,
underwriting charges, appraisal, credit reports, title insurance and the plethora
of other "junk" fees charged by conventional lenders can amount to
thousands of dollars at closing. The buyer is free from these with an owner-carry
installment sale.
4. Fast Closing. A buyer can close and move into a property within days, since
there is no third party lender holding up the transaction.
Despite the elevated purchase price and interest rate, there are many benefits
to a buyer who engages in an installment sale transaction.
“Flipping” is the buzzword of the year in real estate – flipping
books, flipping articles in the newspaper, and even flipping shows on TV! What
is flipping, how does it work and how you can profit?
Flipping simply means buying a property and reselling it quickly, as opposed
to holding on to a property long term as a rental. Flipping comes in several
varieties, most of which are legal and profitable, some of which are not.
Flip Strategy #1: Buy, Fix and Flip
Let’s start with the most common form – the good, old “fix
‘n flip”. This process involves buying a property that needs work,
fixing it up, then selling on the “retail” market, that is, to a
person who will live in the property. This method is tried and true, and works
very well. You can easily make $15 – $50k on one deal, depending on your
market and how good you are at finding bargains.
The danger in fix and flips is either paying too much or underestimating repairs.
Be very conservative in your fix–up costs and length of time it may take
to resell. Also, make sure you include in your analysis the cost of paying a
real estate agent to sell the property.
Flip Strategy #2: Buy, Refi & Lease/Option
Rather than sell the fixed up property for all cash, sell for terms. Once you
have completed the rehab, refinance the property at its new appraised value.
If you did the math correctly, you should have little or no money in the deal.
Sell the property on a lease with option to buy. The rent payment from your
tenant/buyer should cover your mortgage payment (if not, consider an interest–only
or adjustable rate loan that is fixed for 3 years). When your tenant exercises
his option to purchase, you reap a larger profit, since you don’t have
to pay a broker’s fee. If the tenant exercises his option after 12 months,
you benefit from a lower capital gains tax rate.
Flip Strategy #3: Buy & Flip “As Is”
Don’t like to do fix–up work? Consider selling the property “as
is” as a light fixer upper. If the local real estate market is hot, you
should be able to sell the property in poor condition just a little below market.
This is especially the case with houses in “transitioning” neighborhoods.
Make sure, of course, that you acquire the property sufficiently cheap enough
that you can sell it below market quickly and still profit.
Flip Strategy #4: Wholesale
Strategy #1, the fix and flip, is very popular, which means there are a lot
of investors looking for rehabs. You can buy the property cheap and sell it
for just a few thousand dollars more to another investor without doing any work.
You won’t make nearly as much as the rehabber, but you will realize your
profit quickly.
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Flip Strategy #5: Pre–Construction
In very hot real estate markets, prices are appreciating as much as 2% per month.
If you time things right, you can put a contract on a pre–construction
house or condominium, then flip it to someone else when the development is complete.
If it takes 12 months for the development to be complete, and the condo price
is $500,000, you could make $100,000 or more in one year! Of course, the opposite
is also true – you could end up losing money if the local economy tanks
and you end up with a worthless condo that you can’t sell for more than
you paid. Use this approach very carefully…
Flip Strategy #6: Scouting
The Scout is an information gatherer, so not technically a property flipper.
He is the “bird dog” who finds potential deals and sells the information
to other investors. Many people get started as a Scout for other investors because
it does not take any cash or prior knowledge to look for distressed properties.
The Scout finds a property for sale, gathers the necessary information, and
then provides this information to investors for a fee. The fee will vary depending
on the price of the property and the profit potential. The Scout can expect
to make five hundred to one thousand dollars each time he provides information
that leads to a purchase by another investor.
Flip Strategy #7: Illegal Flipping
OK, I am not advocating this approach, because it is illegal. Illegal property-flipping
schemes work as follows: unscrupulous investors buy cheap, run-down properties
in mostly low-income neighborhoods. They do shoddy renovations to the properties
and sell them to unsophisticated buyers at inflated prices. In most cases, the
investor, appraiser and mortgage broker conspire by submitting fraudulent loan
documents and a bogus appraisal. The end result is a buyer that paid too much
for a house and cannot afford the loan. Since many of these loans are federally
insured, the government authorities have investigated this practice and arrested
many of the parties involved. As a result, the public perceives is flipping
to be illegal.
Should I use cash or credit? ARM loan or fixed rate? Ten percent down or twenty
percent? Should I pay down debt or keep a cash reserve? These are all good questions,
and here’s some of the answers.
Cash vs. Credit: The Concept of Leverage
In order to understand real estate financing, it is important that you understand
the time value of money. Because of inflation, a dollar today is generally worth
less in the future. Thus, while real estate values may increase, an all–cash
purchase may not be economically feasible, since the investor’s cash may
be utilized in more effective ways.
Leverage is the concept of using borrowed money to make a return on an investment.
Let’s say you bought a house using all of your cash for $100,000. If the
property were to increase in value 10% over 12 months, it would now be worth
$110,000. Your return on investment would 10% annually (of course, you would
actually net less, since you would incur costs in selling the property).
If you purchased a property using $10,000 of your own cash and $90,000 in borrowed
money, a 10% increase in value would still result in $10,000 of increased equity,
but your return on cash is 100% ($10,000 investment yielding $20,000 in equity).
Of course, the borrowed money isn’t free; you would have to incur loan
costs and interest payments in borrowing money. However, you could also rent
the property in the meantime, which would offset the interest expense of the
loan.
Taking leverage a step further, you could purchase ten properties with 10% down
and 90% financing. If you could rent these properties for breakeven cash flow,
you would have a very large nest egg in 20 years when the properties are paid
off. Balance that with what you could make by investing the cash flow on one
free and clear property for 20 years. And, of course, look at the potential
risk of negative cash flow from repairs and vacancies on ten properties. Finally,
consider the tax implications - if you have cash flow, you have taxable income;
if you have increase in equity, there’s no tax until you sell.
Cash Flow vs. Cash Reserve
On a similar note, the size of your down payment will affect your cash flow
on rental properties. Let’s consider two examples.
Example 1: $100,000 property with $20,000 down. $80,000 loan @ 6% interest,
including taxes and insurance is about $600/month. Assuming you could rent the
property for $800/month, you have $200/month cash flow or $2,400/year. Not bad.
Example 2: $100,000 with NO money down. $100,000 loan @ 8% (higher rate is generally
common for zero–down loans) would make your payments closer to $900/month.
With zero down, you have $100/month NEGATIVE cash flow.
Which is better? Well, it depends on what your goals are and what the rest of
your financial picture looks like.
Let’s say your goal was to hold the property for 10 years. In the first
example, you have $200/month cash flow, but no cash reserve. In the second example,
you would have $100/month negative cash flow, but you have $20,000 in reserve.
The knee–jerk reaction of some people is that example #1 is safer. But
is it really?
Think about it… in the first example, if your property becomes vacant
for one month, you’d be out of pocket $600. It would take three months
to make that up. In the second example, you have $20,000 in cash cushion to
make up the deficit. With $20,000 in the bank, you could handle $1200/year negative
cash flow for 16 years. If the property were in an appreciating market, you’d
come out fine, even with negative cash flow.
Another factor is the choice of loan. You could buy a property with nothing
down and an interest–only loan fixed at 5% for three years. If your exit
strategy is a lease/option that should cash you out within 36 months, why do
a fixed–rate loan?
The point here is that you should not AUTOMATICALLY go with a fixed–rate
loan. Nor should you seek positive cash flow as the ONLY goal. Likewise, you
should not buy properties with nothing down and negative cash flow and assume
that short–term market appreciation will be the only source of your profit.
Paying Down Debt
For years, our parent’s generation discouraged debt as a “bad”
thing. For some investors, the goal is to own properties “free and clear,”
that is, with no mortgage debt. While this is a worthy goal, it does not always
make financial sense.
If you have free and clear properties, you will make certain amount of cash
flow and pay a certain amount of income tax. If you need more cash, you are
forced to sell the asset, creating a taxable gain.
If you refinance a property, there’s no taxable event. And, since mortgage
interest is a deductible expense, the investor does better tax wise by saving
his cash. Think about it… the higher the monthly mortgage payment, the
less cash flow, the less taxable income each year. While positive cash flow
is desirable, it does not necessarily mean that a property is more profitable
because it has more cash flow. More equity will obviously increase monthly cash
flow, but it is not always the best use of your money.
On the other hand, paying down debt may make sense if you can’t get a
higher return elsewhere in the market. Also, if paying down debt can have other
rewards, such as bringing a loan below 80% LTV, you may be able to cancel private
mortgage insurance and save additional money.
In short, don’t rely on assumptions… do the math!
Bankruptcy is a process by which a debtor can obtain relief from his debts,
through the courts. This relief may come in a variety of forms, including full
or partial discharge of the debt, or the imposition of a payment program consistent
with the debtor's financial means.
The most common types of bankruptcy are:
Chapter 7 ("Straight Bankruptcy" or "Liquidation")
When people think of bankruptcy, they have traditionally thought in terms of
"Chapter 7" personal bankruptcy. In a "Chapter 7" bankruptcy:
o A trustee is appointed to oversee your property;
o Some of your assets will likely be surrendered to the trustee, who will sell
them to pay your creditors;
o Depending upon the laws of your state, you will be allowed to keep some personal
property, and probably an interest in your home (although perhaps not all of
your equity).
o Most debts are cancelled.
There are now also income restrictions on who will qualify for a Chapter 7 discharge,
effective as of October, 2005. Assuming those restrictions do not apply, you
will most likely be unable to file a "Chapter 7" bankruptcy if you
have filed and dismissed a "Chapter 7" petition in the last 180 days,
or if you were granted or denied a "Chapter 7" discharge in a prior
case within the past six years. You should discuss your case with an attorney,
as you may qualify for an exception.
Chapter 11
This is primarily used by businesses. Although it is available to individuals,
the increased cost and complexity of "Chapter 11" bankruptcy makes
it undesirable for most people. Most "Chapter 11" petitioners owe
debt in excess if the "Chapter 13" limits. This form of bankruptcy
allows a business to remain in operation, while sheltering it from some of its
debts.
Chapter 13 ("Wage-Earner Bankruptcy")
In a "Chapter 13" Bankruptcy:
o You will propose a repayment plan for your debts;
o If approved by the court, a trustee will be appointed to collect your payments,
distribute them to your creditors, and to supervise your compliance with the
repayment plan.
o You will have to pay the trustee's fee, which can be substantial.
Debtors whose debts exceed certain limits are barred from seeking Chapter 13
bankruptcy. (At the time of this writing, in order to file a "Chapter 13"
bankruptcy, you must owe less than $269,250 in noncontingent, liquidated, unsecured
debts, and less than $807,750 in noncontingent, liquidated, secured debts. You
will most likely be unable to file a "Chapter 13" bankruptcy if you
have filed and dismissed a "Chapter 13" petition in the last 180 days,
and should discuss any prior filing with your attorney. You should also take
care to propose a reasonable budget, as most debtors find themselves unable
to comply with the strict enforcement of their "Chapter 13" plans,
and end up dropping out of bankruptcy before their plan is completed.
This type of bankruptcy can be particularly useful when a debtor believes that
his financial crisis is temporary, and that his income will continue to grow
in the future. Corporations and partnerships cannot file a "Chapter 13"
bankruptcy.
"Chapter 20"
A so-called "Chapter 20" bankruptcy is the process filing of a "Chapter
7" bankruptcy to discharge unsecured debts, followed by a "Chapter
13" bankruptcy to allow the debtor to catch up on mortgage payments. Some
jurisdictions do not allow debtors to pursue this option. In jurisdictions that
allow "Chapter 20" bankruptcy, debtors should be aware that missing
even one mortgage payment after filing the initial "Chapter 7" petition
may cost them their ability to save their home in a subsequent "Chapter
13" filing.
After you declare bankruptcy, an "automatic stay" of your debts takes
effect. Your creditors will be served with notice of the bankruptcy, and, after
receiving notice, will be barred from taking certain actions against you while
the bankruptcy is pending. If you are contacted by a creditor after filing for
bankruptcy, tell your attorney -- it is important that your attorney know not
only of improper contacts, but of any possibility that a creditor was omitted
from the list of creditors you submitted with your bankruptcy petition, or of
the possibility that notice was not properly served.
What Is Reaffirmation?
Reaffirmation is a procedure by which you agree to pay a debt that would otherwise
be discharged in bankrutpcy. As was previously described, you may wish to keep
your car, and thus may agree with your lender to continue to be responsible
for the car loan. If you make the choice to "reaffirm" a debt, you
will file a reaffirmation agreement with the Court, which will evaluate that
agreement. It is up to the Court whether or not the agreement will be approved.
Before a Court will approve a reaffirmation agreement, it must believe that
the agreement:
* Is voluntary;
* Is in your best interest; and
* Will not create an undue hardship.
You may be able to cancel a reaffirmation agreement, within sixty days of filing
it with the court, or before your bankruptcy petition is approved. Be cautious
with reaffirmation, as you will continue to owe the debt as if you had never
filed for bankruptcy.
What is "Conversion"?
"Conversion" is the process of transforming a "Chapter 7"
petition for bankruptcy relief into a "Chapter 13" filing, or vice
versa. It may become apparent during the course of a bankruptcy that a debtor
will be better served through the "conversion" of his petition. However,
the debtor is not permitted to keep switching back and forth between chapters,
and should be careful about taking this step.
What is "Involuntary Bankruptcy"?
Under rare circumstances, creditors may petition a court to have a debtor declared
insolvent. If the court grants relief, as the bankruptcy occurs without the
debtor's consent, this is termed an "involuntary bankruptcy." Involuntary
bankruptcies occur only under Chapters 7 and 11, and not under Chapter 13. If
a petition for involuntary bankruptcy is denied, a debtor may be awarded attorney
fees and costs, and may even receive punitive damages, depending upon the facts
of the case.
What are "Preferences" and "Fraudulent Conveyances?
A "Fraudulent Transfer" is the exchange of property prior to the filing
of a bankruptcy petition for inadequate value, in an effort to shield the asset
from the bankruptcy. Pursuant to the "Uniform Fraudulent Transfer Act",
a Court may bring certain property back into the estate, if it was improperly
transfered. However, if property was sold for its reasonable market value, a
Court cannot recover the property.
A "Preference" occurs when a debtor treats one creditor more favorably
than another. For example, a debtor may choose to use all of its assets to pay
off the entire debt owed to one creditor, leaving a second unable to collect
any money at all. A Court will disallow a preference if payment is made for
the benefit of a creditor, for a debt owed prior to the intitiation of bankruptcy,
the payment is made while the debtor is insolvent, and the transfer is made
within 90 days of the debtor's filing the bankruptcy petition (or 1 year, if
the payment was made to an "insider" such as a relative or corporate
director). A creditor receiving a "preference" may be forced to restore
it to the debtor's estate.
Can A Court Refuse To Grant Bankruptcy?
While most debtors are granted relief, in certain situations a Court may refuse
to grant bankruptcy. Typically, denials result when the Court concludes that:
I Am Married -- Should My Spouse Join My Bankruptcy Petition?
This depends in large part upon whether your debt is individually or jointly
held, and upon the laws of your state. Be sure to discuss this issue with your
bankruptcy attorney.
How Much Does Bankruptcy Cost?
The cost of bankruptcy will vary substantially, depending upon the complexity
of your case and the type of bankruptcy you file. You may be able to obtain
a "Chapter 7" personal bankruptcy for a relatively small flat fee,
while the cost of a "Chapter 11" bankruptcy can easily exceed $15,000
in the first year.
Finding a U.S. Bankruptcy Court
The U.S. Bankruptcy Court for your jurisdiction, along with bankruptcy forms,
information about court procedures, and filing fees, can now be found through
an official online directory, at http://www.uscourts.gov/bankruptcycourts.html.