Jlproperties November Newsletter

Larry McCumber Nov ember 200 9

In this issue: Interest Rates Not Increased by Feds page 2 Learn to Get Zero Down Financing on Mobile Park page 5

HELP: Investors needed to buy 27 homes Socially Responsible Real Estate Investing to Improve Community Life For several months now we have been telling you about the investments opportunities here in Atlanta with “little” houses and using them in the Section 8 program. Yields on these houses have been running in the 25%+- range. Investors have been buying these houses as a complete package that includes the price of the house, closing costs, rehab, labor, and placement of a tenant in the property. Well things have changed, but they have changed for the better because when you purchase a property you are not only helping your investment portfolio, but you’re helping people who are in real need of assistance. We call this “Socially Responsible Real Estate Investing” that makes a real difference in the community by improving the quality of life for individuals in transition. The major change has been that Section 8 decreased their payments drastically and we have chosen not to put houses into the program. However, over the last 5 weeks we have found new and better programs to put the houses in, maintain the yields on the investments, and help many people that truly have a housing need.

We are now working with non-profits who need housing for their programs. These programs are ongoing and the demand is tremendous. The programs that we are presently working with and supplying houses for are Battered Women, Vets with drug and alcohol problems, Re-entry (people coming out of prison), HIV Positive, children aging out of Foster Care, and Social Security, just to name a few. To give you an idea of the demand, there are 973 people in the Re-entry program waiting for housing and this demand is not going away. The non-profits that deal with Battered Women have a constant need for housing as do all of the other programs. Here is how the program works: We find a property, the investor buys the property, we rehab it and turn it over to the non-profit. The non-profit then furnishes the house, adds cable for television and computer and provides a computer, and in some cases provides food for the tenants. The non-profit then gets the tenants from one of their sources and funding from another source. The owner of the property receives $400 per BEDROOM. Since all of the houses we offer are 4 bedrooms or more this gives the owner a minimum of $1,600 per month rent.

If you have interest in making a very good return on your investment and helping people that are in real need of housing, providing those in need with safe, affordable housing, please give us a call. Non-profit organizations are calling every day wanting additional housing. You can reach me at 678.985.2068 or 678.662.6514. --CONTINUED TOP OF PAGE 2

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Socially Responsible Investment Continued Sample House pictured on the right: 4 Bedrooms with 2 Baths Package Includes Purchase Price of Property Monday Closing Costs Today we are learning about dinosaurs. Rehab Cost & Labor Decide if your work of art will be stuck into the Tuesday Placement of Tenant ground or tied to a fence or be on your front Today we are learning about pets. Total Cash Outlay $60,400door.

Excerpt from Dave Ramsey’s newsletter: Real Estate

Wednesday

Estimated Monthly Rent $1,600 Cut a 10-foot stake or piece bamboo into two Todayofwe are learning about the solar pieces, one 6-foot piecesystem. (shorter if it is going on your front door) and the other about 3 feet long. Estimated Monthly Expenses Thursday • Property Tax $175 monthly Today wethe arelonger goingpiece on a field trip to the zoo. Place the smaller section across • Insurance $ 45 monthly Friday about 1 foot down from the top. Secure with • Mgmt Fee $150 monthly wire or twine. Today we have a special guest from the fire Total expenses $370 monthly department to tell us about fire safety.

Put a shirt on the cross piece and button it. NET INCOME Stuff it loosely with hay, dry leaves or rags. $1,230 monthly $14,760 yearly Cash-on-Cash Estimated Return: 24.44% This figure does not take into consideration depreciation, appreciation or tax credits Numbers based on current costs

Interest Rates to stay low, Bernanke says BY JEANNINE AVERSA (AP Economics Writer) WASHINGTON - Faced with lurking dangers to the budding recovery, Federal Reserve policymakers left a key interest rate at a record low to entice Americans to spend more and help the economic turnaround gain traction. The economy started to grow again last quarter for the first time in more than a year, although there are uncertainties about the strength and staying power of the recovery, especially after government supports are removed. Fed Chairman Ben Bernanke and his colleagues, wrapping up a two-day meeting noted the country's economic and financial improvements. But they also warned that rising joblessness and hard-to-get-credit for many people and companies will restrain the rebound in the months ahead. Troubles in the commercial real estate market, where soured loans are contributing to bank failures, also remain a concern. At its last meeting in late September, the Fed opted to stretch out into early next year a key program aimed at forcing down mortgage

rates and providing support to the housing market. The central bank did not veer from that course. Wanting to nurture the recovery, the Fed kept its bank lending rate at zero. Commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will likely stay at about 3.25 percent, the lowest in decades. "I don't think there is confidence at this point that the economy is firing on all cylinders by itself," said Bill Cheney, chief economist at John Hancock Financial Services. "It is not ready to be weaned off the extra fiscal and monetary support." Against that backdrop, many economists predict the Fed will maintain a pledge to keep rates "exceptionally low" for an "extended period." The hope is that superlow rates will spur consumers and businesses to spend

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JL Property Investments Newsletter Page 3 Classroom Open House Key Interest Rate at Record Low Continued Tuesday, September 6, 7:30 P.M. Page 2 JL Property Investments Newsletter

Your child will need the following the Faculty more, supporting the recovery. Ice Cream Social with Special thanks are due the following students:

supplies this year: Friday, September 9, 5 P.M. The Fed1.has leeway to do this because Jay inflation has low, Adams forbeen volunteering to clean up after backpack economists said. School Assembly the fall open house. 2. 3 spiral notebooks This week's school assembly is on 3. 1bankers box ofinpencils Kari Hensien for donating her checkers set to "The central the U.S. andcharacters. Europe are considering exit storybook Children maythe dress recess. strategies," said Sung Won Sohn, economist at California State 4. erasers up like a character on Thursday. (You University's Smith School of Business. thought an exitfor might want to "Even bring the a change ofof clothes rulers Alan Shen for baking strategy 5. could spook thethe financial markets and raise the bond and rest of the day.) Costumes can be as us his grandmother's chocolate chip cookies mortgage yields, hurting the economy." 6. compass simple as a hat or a small picture of your last week. shirt. Have fun. 7. lunch boxcharacter pinned to your Thank you also to Ms. Brown for bringing in

Still, there are differences of opinion within the Fed about when it might need to start boosting rates the travel posters to decorate for open house. and how aggressively - to fend off inflation. Inflation hawks, including the presidents of the Fed banks in Dallas, Philadelphia and Richmond, worry more about super-low borrowing costs and other special supports driving prices higher. But waiting too long could touch off inflation. If the recovery takes hold, many analysts think the Fed could start to raise rates in the spring or summer. Bernanke and other Fed officials would try to prepare investors, businesses and ordinary Americans of a shift in stance well in advance of any upcoming shift in stance. One clue would come when the Fed opts to drop its "extended period" language, analysts said. Whenever the Fed starts to boost rates, unemployment likely will still be high, analysts said. The worst recession since the 1930s caused companies to slash jobs and other costs to survive. They won't ramp up hiring until they are confident the recovery is entrenched. The unemployment rate - now at a 26-year high of 9.8 percent - is expected to keep rising, Bernanke and other Fed officials have said. Economists predict it will hit 9.9 percent when the government releases the latest snapshot on employment conditions on Friday. It could rise as high as 10.5 percent around the middle of next year before declining gradually, analysts said. Beyond rates, Fed officials in September were conflicted over whether to expand or cut back a program intended to drive down mortgage rates and prop up the housing market, according to minutes of the closed-door deliberations. They ultimately agreed to slow down the pace of a $1.25 trillion program to buy mortgage securities from Fannie Mae and Freddie Mac, wrapping up the purchases by the end of March instead of at yearend. So far, the Fed has bought $776 billion of mortgage securities. The central bank was not divided over another part of program to buy $200 billion worth of Fannie and Freddie debt. It has bought $141.6 billion so far. The Fed's efforts have helped lower mortgage rates. Rates on 30-year loans averaged 5.03 percent, Freddie Mac reported last week, down from 6.46 percent last year. Meanwhile, the Fed is moving quickly on plans to police banks' pay policies to discourage reckless gambles by executives, traders, loan officers and other employees. The nation's top 28 banks face a Feb. 1 deadline for submitting employee compensation plans to the Fed. The Fed isn't setting compensation, but it will have the power to reject pay plans - and call for changes in them. The Fed also will be encouraging - though not requiring - banks to revise this year's pay plans if they are

JL Property Investments Newsletter Page 4 WORDS TO LIVE BY: and Smart Agents Add Investing "A good player skates to where the puck is, a great player skates to where the puck will be." -Wayne Gretsky Management to Their Skill Set Think about this and apply it to your real estate investing. By John Adams

You will be more successful

Tax Credit Extension Passes Senate and House Feature First-time Buyer Amount of Credit First-time Buyer Definition for Eligibility Current Homeowner Amount of Credit

Jan1-Nov 30 2009 Rules as enacted February 2009 $8000 ($4000Married filing separate) May not have had an interest in a principal residence for 3 years prior to purchase No Provision

Effective Date Current Owner Current Homeowner Delinition for Eligibility

No Provision

Termination of Credit

Purchase after November 30, 2009 (Becomes April 30, 2010 on Date of Enactment) None

Binding Contract Rule

No Provision

Income Limits (Note: Increases income limits are effective as the date enactment of bill Limitation on Cost of Purchased Home Purchase by a Dependent

$75,000 Single $150,000 Married Additional $20,000 phase out

Anti-fraud Rule

None

None No Provision

December 1 April 30, 2009 Rules as enacted November 2009 $8000 ($4000 Married filing separate) Same $6500 ($3250 Married filling separate) Date of Enactment Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years Purchase after April 30, 2010

So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close $125,000 Single $225,000 Married Additional $20,000 phase out $800,000 Effective Date of Enactment Ineligible Effective Date of Enactment Purchaser must attach documentation of purchase to tax return

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Monday Today we are learning about dinosaurs. Tuesday Today we are learning about pets. Wednesday Today we are learning about the solar system. Thursday Today we are going on a field trip to the zoo. Friday Today we have a special guest from the fire department to tell us about fire safety.

With single-family homes, a legitimate zero down deal is about as likely as sleet in San Diego. However, with mobile home parks, they are as common as rain. Of the 25 mobile home parks I've bought, about five of them - or 20% were zero down. So how do you get a zero down mobile home park deal? Just watch the listings Many mobile home parks are listed for sale with seller carry at low amounts down. A 5% or 10% down

payment can easily be converted to 0% with a little negotiating. You'll find many such listings on large internet park listing services, such as Mobilehomeparkstore.com. The most common negotiating strategy is to identify capital improvements that would cost as much as the proposed down payment, and then tell the seller that you need to reserve the down payment money to make those repairs. After closing, you either skip the repairs, or find a lower cost alternative. Wrap the existing note It is often possible to wrap an existing mortgage when buying a mobile home park. What this means is that you do not have to get a new loan, and the seller subordinates his note to the existing first. Here's an example. A seller has a mortgage of $400,000, and he wants to sell his mobile home park for $500,000. Rather than put up a $100,000 down payment and obtain a new loan, you assume the loan of $400,000, and place a second of $100,000 in favor of the seller. You do not put anything down. Why would a seller do this? Often, it's for speed. It takes a long time to get a new mortgage on a mobile home park. Many times a seller, especially someone who does not have a very large profit coming their way, are interested in getting the park into someone else's hands as quickly as possible, and move on to the next deal. Lease/purchase the park This is another fairly common construction on purchasing a mobile home park for zero down. Instead of an outright purchase, you lease the park at a set monthly amount, with the option to buy it at a pre-set price in the future. This allows you to make the necessary changes to increase the net income prior to closing. This construction is especially attractive on parks that are not making sufficient net income to support a mortgage of the amount necessary to buy it. Conclusion Zero down deals are still alive and well in mobile home parks. They don't require that you buy bad properties or deals with no income or some other difficult blemish. They are just a standard construction of the affordable housing industry. As always, if there is any way we can assist you with your investments please let us know. We are here to answer questions, find you good investments, assist you in finding funding, and providing you with a team of professionals to help make you successful. Our only interest is your success. We only work with investors and understand that investors are motivated by the key real estate investment advantages such as timing, appreciation, deductions, leverage, tax write-offs, etc. Larry McCumber / J & L Property Investments LLC P.O. Box 642 Dacula, GA 30019-3110 / Phone 678.985.2068 / Cell 678.662.6514 / Fax 678.985.5342 Email [email protected]