Real Deal REInvestor Network

Why I choose to invest in Orlando investment properties:

If you live in an area like I do, where property prices are high, but rents are fairly comparable to rents in other large metros, you’ve probably been wondering how you can get into this gold-mine you keep hearing about on the news… where property prices are so low.  I wondered too.  So I checked out a few areas around the country that had been much more depressed than my home area…  areas like Nevada, Arizona, California and Florida.  Because, after all, I want to buy in areas that were hot and will be hot again; but that have had significant price drops that I can use to my advantage.

Here’s what I found. 

1.       Nevada’s major draw is legalized sin, basically – gambling and prostitution.  It’s not really an area where I would be comfortable owning rental properties.  After all, who is my renter going to be?  An empty eyed gambling addict pulling at the handle of the slot machine hoping for the “big one?”  Thanks, but no thanks.

2.       California’s prices are still crazy high compared to rents.  Even the bad areas are still expensive.  And the state itself is on the verge of bankruptcy.  While it is an attractive area, I found too many fundamental problems for my risk tolerance. 

3.       Arizona is a little too controversial right now with all the protests against their immigration law.  And it was so overbuilt that there is an awful lot of inventory to clear out – a lot more inventory than there is population.  I found that population there is dropping, which means that the rental markets there will be slower. 

4.       In Florida, I found that it was overbuilt in certain areas, but that population is increasing, even amongst young 20somethings, who are a perfect group for renters.  I found that although Florida has a high unemployment rate, companies are hiring there again.  Disney is putting a brand new billion dollar project in place in Orlando.

So, I thought, now that I have it narrowed down to Orlando, how do I buy properties there safely?  How do I know that these properties aren’t filled with mold, Chinese drywall, termites…. Or that the people selling them even own them?  If I don’t have eyes on the ground, how do I protect myself from scam artists?  Luckily, I know some people who happen to be investing in the Orlando area.  I researched them and by the time I was done, I was so impressed that I decided to become a Director in the company. 

Investors Alliance Asset Management Group, a division of HIS Real Estate Network, was formed specifically to take advantage of the phenomenal opportunities available in Orlando today, and to share these opportunities with other investors.  We started with $5,000,000 to purchase properties directly from banks – and we purchase the properties in bulk.  Our acquisition manager picks specific subdivisions that have fabulous amenities; subdivisions where you would like to live.  While that is not often a criteria for rental properties, I like it that I can get affordable properties in very nice areas.  After our acquisition manager purchases the properties, our construction crews get to work.  They fix up each property to like-new condition.  Once the properties are in excellent condition, we assign them to an expert property management company and they get the properties leased.  Then, and only then, we offer select properties to our VIP buyers list.

Let me give you some real-life numbers so you can see for yourself what we are talking about:

One condo in a gated, resort-like community has 3 bedrooms and 2 bathrooms.  It’s approximately 1260 square feet.  In 2006, this condo sold for $432,000 – so yes, it has granite countertops, crown molding, etc.  It’s a NICE place.  It would cost $150,000 to rebuild and the current tax appraisal is $125,000.  So, we bought the condo for about 10% of what it sold for in 2006, fixed it up, rented it out at $850 a month and sold it for $59,900.  It’s cash-flowing for the investor from the day of closing.  Now, we recommend that investors hold on to these properties for at least 3 to 5 years to take advantage of market recovery.  And when a property is cash-flowing, how many properties can you afford to hold on to indefinitely?  That’s right!  As many as you can grab.

To find out more about our investments, check my website at www.christinamellott.com.  On it, you will get immediate access to a free report about the Orlando Market.  I would also like to invite you to an upcoming live 2 day training event and property bus tour!  The first day, we will teach you how we manage our business and the second day, we will take you on a bus tour of our available properties, so you can meet us and see for yourself that we are the real deal.

I’d love to meet you in Orlando – come check us out.

Christy Mellott

Executive Director, Investors Alliance Asset Management Group

Today, I'd like to talk to you about the top 5 reasons to buy REOs, as opposed to foreclosures or properties directly from homeowners.  First, let me explain to you what an REO is.  REO means Real Estate Owned and it is real estate that is owned by banks.  It's generally been taken from the previous homeowner in foreclosure.

In today’s difficult real estate market, sometimes a short sale is the best option for a homeowner.  You’ve already tried a loan modification and that didn’t work for you.  Or you need to move but can’t afford to sell the house because you owe more than it’s worth.   And your financial state is such that you can’t bring money to the table to sell the house… or you can’t do the necessary repairs and maintenance  anymore, you need to sell your house for less than you owe on it and get the bank to accept that amount as payment in full. 

Sometimes you won’t qualify for a short sale.  For instance, if the house is worth less than the mortgage, the bank is unlikely to accept less than what you owe on it because you can sell the house and cover the mortgage.  Or if you have a ton of money in your bank accounts, the mortgage holder is not going to look kindly on your application for a short sale.  They will expect you to come up with the difference to sell it.

So, if you likely qualify for a short sale, here is what you can expect from the process.

1.       It will take time.  Short sales take longer than regular sales because we have to negotiate with the bank to get them to accept less than you owe on the house.   Some banks work much more quickly than others.  However, many are notorious for taking months to even assign a processor to the file.

2.       You will have to prove your financial hardship to the bank.  The bank basically requests all the documentation that they wanted when you got your loan – only this time, you are proving to them that you can’t afford it anymore.

3.       Once the bank decides that your financial hardship qualifies you to participate in the short sale process, they will order a broker’s price opinion or an appraisal on your house.  They want to be sure that the house is actually worth less than what you owe on it.

4.       You might need to continue to give the bank updated documentation and they might send you other documents to sign during the process.

5.       The bank will either accept the offer, reject the offer or make a counter offer on the sales contract.   You need to have a sales contract on your house in order to start the short sales negotiation process.  Because it can take so long, it’s often a good idea to work with an investor.  People who don’t understand the process, like first time homebuyers will often back out because of the time.

6.       If the offer is not accepted, you must negotiate with the bank and with the buyer (unless you are working with an investor who will take care of all this) to get their prices aligned.

7.       When a short sale is accepted by the bank, your buyer must close within 30 days of the acceptance letter.   Today, with a retail buyer this can be challenging.  Tight credit markets have made it much more difficult for people to find loans.

8.       If you are in the foreclosure process, you must keep on top of the bank to ensure that your house does not get sold on the sheriff’s steps while you are trying to work out a short sale.

When you are working with a Realtor to get a short sale accepted, there is about a 5% acceptance rate.  Realtors can’t start the short sale process until they have a contract on the house.  Buyer brokers do not like to show houses that are in the process of a short sale because they know that they are likely to lose a buyer who is ready to go if that buyer has to wait for the short sale to be processed.  And if they lose buyers, they can’t feed their own families.  And Realtors don’t necessarily enjoy spending hours on the phone with banks negotiating a short sale when they could go sell the house down the street and make the same money for a lot less effort.  Very few Realtors are actually trained to work short sales because, frankly, it’s just not as profitable to them as working normal house sales.

When you work with an investor who specializes in short sales, that investor will put your house under contract right away.  They will work with you to get the paperwork package together for the bank.  They, or someone on their team who specializes in short sale negotiations, will spend hours on the phone with banks checking up and following up on your file.  They will also do their best to ensure that if you are in foreclosure your house does not get sold before the short sale is completed.  When the short sale is accepted, the investor already has money lined up to purchase your house so it will not fall out of contract. 

So, your short sale is much more likely to be completed if you are working with an investor who specializes in short sales, than if you are working with a Realtor who would really rather just be able to list the house and find a buyer without having to deal with the headaches that come with short sales.

Christina Mellott

Millionaire In Training, MMMChallenge.com

www.housingheadaches.com

I read this article and it hit a nerve with me so I wanted to share it with you too!

Christy Mellott, 
Millionaire in Training, MMMChallenge.com
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Many people seem very busy and are always talking about how there's not enough time in the day, how they're overwhelmed.you've either heard it all or said it all before, right? But, what we've found to be interesting is that usually when this happens, your time isn't being spent wisely. 

For the most part, I've gotten really good at figuring out when I'm just being "busy" or putting something off rather than actually being productive. But, what I've noticed is that we have to constantly stay on top of this and monitor our productivity. Earlier this week was one of those times when I started getting sucked into my old ways again and I had to snap out of it fast. (You can see the sticky notes here on my lamp as my reminder to stay focused and check in on what I'm really doing.) Because, the the thing is that there are only two activities that are truly worth our valuable time during work hours: Marketing to Brides and Working on our Weddings. Nothing else. But what about all those time- wasters that eat up our days? How do you re-group and re-focus your efforts? Keep reading. I'll tell you exactly what works for me! 

5 Examples of how to take Busy Work and turn it into Productive Time! 

1. Busy Work :: Checking Email Throughout the Day Do you ever find yourself checking your inbox constantly to see if you have any new emails? Or, once you start checking your email, you're stuck in it for hours at a time? 

Productive Time :: We had this problem (big-time), so now we only check emails at 

11:00am and 3:00pm Monday through Thursday (we're usually off on Fridays). From our experience, we found that most of our emails came in prior to those two times, so it takes care of a chunk of our emails all at once. To make our clients and colleagues aware of this, we have our "vacation" autoresponder setup so that it also informs people of our email checking schedule so that they know when we'll get back to them (eliminating additional unnecessary emails). And, when I check my emails during these set times, I also allow myself 45 minutes at the most to check email, do the tasks at hand and respond immediately. 

This keeps me from getting sucked in like I used to. And, as an added bonus, I don't procrastinate on getting tasks done that are requested of me via emails. I receive the emails, add them to my immediate or future to do list (if needed), check off the task(s), and move on. It's quick, easy & fast . love that! 

2. Busy Work :: Facebook, Twitter and other Social Media Yes, we should of course use social media and networking to market and build our businesses, but it definitely can become a time-waster fast when we end up using it to catch up on gossip, eves drop on other "conversations," 

see what you-know-who is up to today, and see what Oprah's fan page is talking about this week (uh-oh, I'm busted). I've been guilty of all of these too, of course, so I created ways around these issues to monitor my own time and stay true to my focus. 

Productive Time :: Plan it all out! Everything that we do, say and post on these sites is planned out. Even when we seem spontaneous, it's planned. We have charts of what is to be done every day of the week, and then we schedule accordingly. 

When social media ended up seriously eating up large chunks of my time, I realized that I needed help, but didn't want to pay someone $50/hour to do it. So, we hired our two amazing interns to help us out and give them resume experience in the process. This alone frees up dozens of hours of my time weekly! They help me tweet, maintain our two Facebook fan pages, develop content and posts for blogs, and more. Plus, with the use of tools like Tweetlater, we're able to schedule tweets around the clock without having to be hand-cuffed to Twitter. (And you thought I didn't sleep!) For the other sites where we can't schedule ahead, we get in, do the tasks needed, and get out with the help of our handy digital kitchen timer to stay accountable. 

3. Busy Work :: Talking on the Phone We don't answer our phones live anymore...The volume of calls coming in started interrupting our work and we didn't want a receptionist on staff. In the middle of projects, the phone would ring, we'd get tied up or derail our focus and then projects would be post-poned, or would never get completed. 

Productive Time :: We found a new phone system. Now I realize that not everyone is ready to relinquish the live phone system, and I understand that. At the very least, turn the ringer off during projects, but here are a few things that we did that may work for you too. We use a phone system called Freedom Voice. It is a toll free line that can have multiple extensions and even be forwarded to live phones if desired. We receive email alerts when voicemails are left on our system, and during our scheduled phone time, we check them and get back to clients and inquiries. 

My cellphone also goes on silent mode all day while I'm working AND gets placed in a drawer so that I cannot even be tempted by seeing it on the desk! Before implementing this, I noticed that several hours - literally equalling almost one entire workday per week - was being spent chatting on the phone with vendors, friends and family about not much at all. WHAT?? Now, all personal calls are done after hours. 

Period. 

4. Busy Work :: Running Errands All Week Long! Driving all over town to pick up this, drop off that, get the groceries, and purchase more supplies is just not my idea of fun. And, it takes a LOT of precious time out of your day and week. 

Productive Time :: Get organized, and when possible, get help! Get a grocery delivery service and a personal assistant if you can. That will triple your available time to get more done and stop wasting time But, in our area, no one offers a grocery delivery service (if they did, I'd be all over that though!) and our personal assistant is back at her day job. So if you're like us, don't worry - there are other ways to reclaim that wasted time. Here are a few things that have worked miracles in our household Put together a spreadsheet of your most commonly purchased groceries and staple items. Set it up with a little checkbox to the left of each item so that you can mark it when it's time to purchase it on your monthly or weekly run, leave blanks next to other checkboxes to be filled in as needed, and organize the grocery into areas so that your list is grouped into sections, like deli, bakery, produce, meat, etc. 

Then, go at a time that's not so busy, like Tuesdays at 8am and it will be the fastest visit ever! 

For other errands, we make a list, group them according to location, and knock them out back-to- back in another morning (again a non-busy time of day). I always take my notebook with me too to brainstorm on the ride things like e-zine articles, blog entries and the like. All other shopping is done online. I don't like going to the mall anymore - I'm not a window shopper - and I hate traffic and lines. Amazon is always open and they never have a wait . love it! 

5. Busy Work :: Where to Begin Confusion and Chaos at the Desk Have you ever found yourself feeling like you're spinning your wheels at your desk because you don't even know where to begin and what to start on now? I'm sure you've been there too. It's like when you sit down and know there's about a hundred things to do today, but you just can't seem to focus and so you start doing one of the four time-wasters I mentioned above because you don't know what to do! 

Productive Time :: Something that I used to do in high school was to lay out my outfits for the entire week the Sunday before - ironed and ready to go, accessories and all (with two outfits to spare just in case my mood dictated a different ensemble). Yes, people joked about me being a little OCD when they found out about this (maybe that's why I'm a good planner too?!), but now as a business owner, these types of behavior come in very handy! 

At the end of my day, I'll go ahead and prioritize my list of things to do tomorrow and then schedule out my plan of attack accordingly. I know that a lot of people suggest getting high-tech with blackberries, pda's and programs that line it up for you digitally, but my favorite organizational tool to this day is my sprial-bound notebook (and I never have to worry about it crashing)! 

This way, when you walk into your office the next morning, there's no question about what's most important to get done, and what can be done on another day. It's right in front of me and so easy to follow along! 

Your Bride Attraction Assignment: Give a few or all of these a try in your own business. Put a note out as a gentle reminder to yourself to stay focused and alert on what's really important to you you'll catch yourself doing all sorts of time-wasting activities and soon you'll notice that your work days are shorter and shorter because you get more done in less time. I love this because it gives me that much more time with my family and to just enjoy my life and my business THAT much more! I'm sure you'll find the same thing in your own business and life! 

2008-2010 Soire! Ltd. 

Want to use this article in your E-zine or website? You can as long as you include this complete statement: Event Planning entrepreneur Natalie Bradley publishes the "Bride Attraction" 

weekly e-zine. Get your F*REE audio course: "5 Ways to Recession-Proof Your Wedding Business...Starting Today!l" at www.BrideAttraction.com

• About Natalie Bradley In 2003, Natalie Keene Bradley launched Soire! Ltd., now Natalie Bradley Events, and it has become a very successful and prominent company. We have planned and designed hundreds of weddings and other social events, as well as consulted for many others. Natalie has discovered the keys to unlocking our clients' dreams for their special occasions and have uncovered the essential tools needed to create fabulous events. 
  
  Many of our events illustrating fantastic event design and well-orchestrated weddings have been published in reputable magazines including Inside Weddings, Modern Bride Atlanta, The Knot Georgia, Lake Oconee Living, Weddings with Style, Brides.com Blog and Southern Distinction. From 2003-2007, Natalie penned the entertaining column for Southern Distinction magazine and has been the "lifestyle expert" on Georgia Living TV and Holiday Home. In addition, Natalie has been a special guest on BB Webb's Living Life with Style TV show as well as being featured on Elizabeth Dalton's and Barbara Dooley's radio shows! Natalie has planned, designed and most recently chaired the very successful Girls and Guys' Night Out Hope Haven fundraiser for the last three years, and is the President Emeritus for Athens Wedding Professionals. 
  
  We have worked with dozens and dozens of brides, grooms, hosts and families to create their dream weddings and other extraordinary events. Now, let me help you become a fabulous wedding professional too! 

You've all heard the news... Florida market dropping like a stone ....  unemployment is up, jobs are down.  Real estate prices are falling, falling, falling.  Loans are hard to get, the stock market is on its way down.  What's a reasonably intelligent investor to do?  

Well, I like to start at the top and take a page from Warren Buffet.  After all, if you're going to model success, he's a pretty good guy to follow.  And one thing that Mr. Buffet says is that you should get greedy when other people are fearful and be fearful when other people are greedy.  Following this advice would have saved a lot of people who sunk money into the real estate market at its top.  Guess where Warren Buffet is investing right now...  That's it -- real estate!  

Right now, we believe that the Orlando market has reached its bottom.  Prices are showing upward pressure and investors are moving back in.  That's why we've formed a fund and are purchasing properties directly from banks in Orlando.  

Here's why we picked Orlando:
1.  55,000,000 tourists visit every year.  It's one of the world's major attractions. 
2.  The city of Orlando is filled with beautiful parks, recreation facilities and has a world class international airport.
3.  The Mayor and city council of Orlando are working hard to attract new businesses and are using federal funds to improve Orlando's infrastructure.
4.   Disney is starting a new billion dollar development.  They're pretty smart -- and we like to follow smart money.
5.  Orlando businesses are hiring again.
6.  Orlando is attracting a young population.  Their influx of 20-somethings will provide an excellent base of renters for our properties.

There are 6 reasons that we are investing in Orlando.  We provide a turn key solution for investors.  The properties we purchase are in gorgeous communities.  We fix them up, rent them out and sell them to our investors at below-market prices with excellent property management in place.  If you'd like to learn more about investing with us, please contact me at 303-386-6732. 

Christy Mellott
303-386-6732
mmmchallenge.com
www.realdealcolorado.com 

There have been many times when I wanted to quit in life, but I just kept going -- in the final stretch to get my college degree and on my first completed wholesale deal are 2 big ones.  

It seems that I hear a lot of people these days who can get contracts on properties because sellers are desperate these days.  However, they have problems finding good buyers with money to purchase the properties.  Here are a few tips to find good buyers for your wholesale properties.

1.  Go to your local housing authority and get a list of the section 8 landlords.  Call the list.  Yeah, I know -- calling people out of the blue is hard.  But, you know what?  If you are going to be a success in this creative niche of the real estate investing business where you aren't using a lot of your own cash to buy and hold properties, you're going to have to do some things that take you out of your box.  Sometimes, you're going to have to cold call people.  You're trading your previous comfort level for success.  Get over it.  Get on the phone and make the calls.  Not only will you find some great cash buyers who want more rental properties, you'll find some landlords who HATE what they're doing and who will be willing to sell you their properties.  GREAT situation -- finding buyers and sellers from the same list!

2.  Get yourself to your local what is important to them and offer to help them with whatever it is.  Follow up!  I have met so many people at REIA meetings and hardly anyone actually bothers to Real Estate Investor association meetings and network.  Talk to the president of the group.  They will know who the players are and if you come across well, they will be thrilled to introduce you.  Be friendly.  Find out follow up.  That's great news for you.  If you actually follow up, you won't just be one of the herd, you'll be unique and you'll be building yourself a good reputation.

3.  Get a list from one of 3 places:  Your title company, your MLS or RealQuest.  Ask for a list that includes the following:

• People who have purchased in your area in the past 6-9 months.
• Non-occupant owners
• Loan balance = $0
• Purchase price = whatever price range you want to sell it at
• Get all the details that the list provider can give you

Realquest will be the most expensive of these options, but they include information that covers 97% of the properties in the U.S.  If you can't get the information through your title company or  your Realtor's MLS, they are a good option.  And, isn't it true that it's worth paying a few dollars to get a list of solid cash buyers who are purchasing right now in  your area?
Now, go buy a house!

Christy Mellott
Millionaire in Training, www.MMMChallenge.com
www.realdealcolorado.com 

I think we've all heard stories of shady investors who take home sellers for a ride and leave the sellers worse off than they were before.  

One time, I got a call from a former homeowner in Colorado Springs who had signed the deed of his house to an investor and let the investor take over the payments on his mortgage.  All seemed well until the market started tanking and the investor stopped making payments on the gentleman's mortgage, even though he was still collecting rent from the tenant.  Then, the first investor "sold" the house to another investor.  The second investor also refused to make payments on the gentleman's mortgage, though he was collecting rent.  To make matters worse, the tenants  had trashed the property, going so far as to smash in the garage door.  Because the homeowner had signed over the deed to his property, he felt as if he had no recourse.  Oh!  I forgot to tell you that the second investor told the old man that he was going to wait until the bank took the house in foreclosure and buy it on the courthouse steps.  Nothing like adding insult to injury.  

There wasn't much I could do for the gentleman, besides listening to his story and offering this advice:  The people who had purchased his house, collected rent from tenants and not paid the rent to the mortgage company were committing something called Equity Skimming.  In the State of Colorado, Equity Skimming is a crime -- not just a misdemeanor either, it's a felony.  I suggested that he go to the D.A.s office and try to get the bank's attorneys to do the same thing.  

That unethical and unkind investor deserved to have charges filed against him.  No one should do business like that.  Not only does it give a bad name to all the ethical investors out there, it's flat out wrong.

And here is some advice that I can offer you if you need to sell your house, but can't do it through traditional channels.  
1.  It's okay to let an investor take over payments of your house if you have the right protections in place.
2.  Make sure that the deed to your house is placed in escrow and that if the investor defaults on the mortgage, the deed reverts back to you, the homeowner.
3.  Rather than letting someone take over your mortgage, do a lease with the option for them to purchase the house. 
4.  If the investor insists that you sign over the deed to your house without any real protection in place, show that person the door.  

Now that I've told you the bad side, let me share why letting an ethical investor take over your mortgage can be a very good thing.  
1.  It is a great relief financially and allows you to move on with your life.
2.  The ethical investor will ensure that your mortgage is paid in a timely manner.
3.  The house will be well-maintained because the right investor will have processes in place to ensure that it is.
4.  It will help your credit report to have the mortgage paid in a timely manner.
5.  Someone who loves and can afford your old house will be living there.
6.  Letting the investor take over your mortgage payments saves all sorts of closing costs, allowing the investor to pay you more for your house than they could if they had to pay all cash.

The ethical investor has a big stake in making sure that your mortgage payments are made and that the house is well maintained.  After all the house they just purchased from you is an investment in their future.  

I hope this article helps you to protect yourself as well as to help you understand why you can and should work with ethical real estate investors to sell your house.

Christy Mellott
www.mmmchallenge.com
www.realdealcolorado.com 

I'm a wholesaler so I  need to buy houses very inexpensively so my buyers get a great deal.  I am in a real estate market where the MLS is very competitive.  Not only are investors bidding against each other, so are landlords and retail buyers.  Many well-priced listings will have 20 offers on them the day they hit the street.

In this market you have to have a way to find sellers that not everyone uses, so you don't have to worry about competition.  I have tried bus benches.  I had a dozen of them for a year on very busy streets in areas that I wanted to invest in, but they don't even get me one call a month.  That didn't work.  I tried pre-printed bandit signs and got a few calls, but there were no good leads that came of it.  One was close.  I tried magnets on my cars.  That didn't really work out very well either, though I did get one good call once.

So far, the best responses I have gotten have been from doing mailings and from direct referrals.   When I do a postcard mailing to absentee owners, I can expect to get between 1 and 2% of the people who I send it to to raise their hands and leave a message with my answering service to let me know they want to talk about selling their property.

I use a very simple white postcard with copy on both sides.  My first mailing was to 517 people and I got one deal out of it.  My next mailing was to 1045 people and I am still calling back the people who want to sell.  I will only do deals that are a win for everyone.  Luckily, there are so many different ways to structure a deal that I can offer many ways for the sellers to win.

Direct referrals come from talking about what you do and being excited about it.  I have 3 houses under contract this year because of direct referrals.   These are all short sales -- basically deals where you can name your own price!  They take longer and have more moving parts, but can be very lucrative and again, are a win for all involved.

Now, go get some seller to raise their hands and buy a house!

Christy Mellott
Millionaire in Training, MMMChallenge.com
www.realdealcolorado.com 

Renta are down, vacancies are up and banks are calling loans due even when payments are current.  The whole mess in the financial markets caused by highly leveraged CDOs.  These are packages of mortgages sold as investments, insured, re-sold as investments, re-insured ad nauseum until the coverage on the original package of mortgages might be at 2%.  

The frenzy to create more mortgages to create more investable CDOs directly contributed to the creation of instruments like option ARMs, those 0%, no principle low cost mortgages that re-set after a period of time.  When the loans started going bad because ARMs were resetting and people couldn't afford their mortgages anymore (mortgages which they should never have gotten in the first place), the insurance companies who were also investors couldn't pay out the premiums to cover the CDOs.  

When the mortgages went bad and insurance companies couldn't cover the bad loans, banks needed to have more deposits on hand to cover their reserve requirements.  And as there credit ratings got worse, their reserve requirements went up even higher.  A reserve requirement is the amount that a bank has to have on deposit compared to the amount a bank may loan out.  Like personal credit, the worse a risk the bank is perceived to be, the higher interest they have to pay and the more money they have to have in reserve.   Don't go thinking that banks actually have to have the same amount in reserve as the amount they loan.  They have to hold something like $5 to $15 for every $100 they loan.   

And, you guessed it, as they required higher reserves, they no longer were able to make new loans, thus creating the tight credit markets.  And, the government stepped in and created 387 different policies and procedures designed to "help" the markets.  Naturally, all this did was confuse the markets so they ground to a complete halt.  

Most commercial loans are created in such a way that they are amortized over a period of 20 to 30 years, but have a balloon payment due in a shorter period of time, say 3 to 10 years.  When the balloons were coming due and it would have been time to renegotiate the mortgage in normal credit markets, the banks were  actually unable to renegotiate and had to call the loans due.  While it didn't make a lot of sense on the surface, the banks were trying to raise capital to cover their reserve requirements & weren't allowed to make any new loans.

Therefore, the banking mess created an unprecedented opportunity for well-capitalized buyers in the commercial markets.  Because of these loans being called and owners not being able to find new loans, they were forced to either sell their properties in a great hurry, or had to give them up in foreclosure if the value of the property wouldn't support a sale or if a buyer could not be found in time.

I believe that this opportunity is fast reaching its end.  Banks are starting to be able to renegotiate their loans, so if you want to take advantage of this buying opportunity, now is the time.

Christy Mellott
Millionaire in Training, MMMChallenge.com, www.realdealcolorado.com