Tuesday, July 31, 2007

What Is An Earnings Run?

We often get a chance to put dollars in our accounts by looking for "earnings runs". What are they and why do they work? Well, the bottom line is that the market still runs on fear and greed. Earnings season brings out both.

The concept is really pretty simple. When earnings reporting season approaches, we get a lot of traders who get excited about what they "might" hear, so they start buying into the hope. If a stock hasn't come out to warn or preannounce any bad news, it gets really interesting as traders almost fall over themselves to get a piece of the action. So, just about 10 days before actual earnings start flooding the airwaves, we generally see stocks start inching higher.

But what happens when they actually report? More times than not the stock gets a smackdown, even if it's just temporary. Why would that be? Well the report is never as glowing as people want it to be. Even if a company beats their numbers they rarely do by a measure that gets everyone excited. Then of course there is the conference call to deal with. Remember earnings are posted for the quarter that just ended. Like yesterday's news. Traders want to know what's coming down the pike now.

We have watched earnings seasons for many years now. Almost every time, we get a lift into them and then we get a pullback when they are about done with as everyone looks around and says "that's it?" The most important thing we can tell you is do not hold a stock over its earnings report. Yes, you might miss a big gap open the next day and yes, you may be locked out when a stock gets upgrade after upgrade. We know. It's called "missed money".

But we have all seen the effects of a bad earnings report or a cautious outlook for the future. It's not uncommon for a stock that ends a day at 50 to open at 40 the next day on a poor report. Is the risk/reward worth that kind of pounding? Not on your life. In fact, the last time we did a comparison study, almost 74% of all the stocks that reported earnings sunk, even if they beat the estimates. That is a number we simply cannot ignore. So, yes it stinks when you miss a big spike, but it stinks considerably less than being down 12 bucks in a stock that got beaten!

The Onset of Any Investment

If you want to be serious in trading, you must look at trading as a business. Before you set up any business, planning is essential. Although tempting, before you pour your hard-earned savings into this venture, the first step is to establish your investment goals and objectives. It is best to have this written down because there will be moments that you will forget your goals and purpose of investing.

Keep your "mission statement" of this business as simple as possible. Each time you feel that you are losing your discipline; this is the time to refer to your goals that you have set.

As a guideline, decide on what you would like to achieve financially. Develop a plan, tactic or method to achieve your goals. The method that you choose or develop must have a proven track record for you to eventually arrive at your destination.

Your mission statement should contain, but not limited, to the below:

- What is your Target Net Worth (set a realistic goal)? - What is your target Monthly Residual Income? - What is your initial investment capital? - How much would you allocate a month from your savings in this new venture? - How much time will you allow for this investment to mature? - How much time per day would you allocate to achieve the above goals? - What type of investment vehicle would you specialize in?

When setting your target net worth, set a goal that is achievable. Of course, it is always in many of our dreams to be a multi-millionaire. Set an initial achievable goal as a stepping stone. Periodically, you can always review and revise your goal. For example, if you currently are starting out with $10,000, you may want to be realistic by setting an initial 3 year goal of $50,000, which would represent a 500% return on investment. After the initial goal has been accomplished, you may then set a bigger goal. If you arrive at this goal before the 3 years is up, you can always review and re-set a new goal. Setting achievable goals will keep you motivated to strive further with your investments.

Investing can be risky no matter how safe it looks. Always use only risk capital for all your investments. Risk capital is money that you can lose without affecting your lifestyle. If you need these funds for your next meal, your kids education, or to pay your house rent (you get the idea), then please refrain yourself from investing. Risk capital should only be a small percentage of your monthly savings. For example, if you currently save $1000 per month, you may want to allocate 20-30% of your monthly savings for investment purpose. It is prudent to be conservative while taking risk. You do not want any bad investment to ruin your current lifestyle.

Establishing the "big picture" before you start trading or investing will provide you a roadmap as a reminder of why you even bother putting your hard-earned money at risk.

Understanding Technical Analysis

Stocks need to be understood before making any major moves. This can be accomplished by a few methods known as analyses. Technical analysis is one of the most useful methods to understand the trends of the stock market. Technical analysis is a method in which the stock chart data is examined and the future moves in the market are predicted on their basis. Investors using technical analysis are not bothered about the kind of companies they are dealing in. These investors are playing for short-term. They will sell their stock as soon as they reach the limits of their projected profit.

Experts who study technical analysis presume that the stocks will move in certain predictable patterns. These would take into account natural disasters that could drastically affect the stock market. These experts consider both geographical and historical information to decide in what manner the stock market would move in the future. Technical analysis depends on such external factors, but it does not study the potential of the company itself whose stock is being considered.

For this reason, investors who rely on technical analysis do not play for the long-term. They are not interest in the growth potential of a particular company, because they will likely be gone from the market by then. The whole premise is based on the movement of the market as a whole, and the entry and exit points will be charted on the base of such market fluctuations.

It is possible for investors to benefit from upswings as well as downswings in the market by playing for either the long-term or the short-term. Orders such as stop loss and limit can be used to make the investments safe.

The modern technical analyst has several tools available at his/her disposal. Since the stock market has been playing for several centuries now, many stock patterns have developed. The basic concepts are still the support and resistance, which are applied to the lowest limit a downswing price can go to and the highest limit an upswing price can go to, respectively. Support and resistance are the limits from which the prices will bounce back, once they reach that level.

Charts are a very important tool used by the technical analyst. The most popular charts are the bar charts, which contain vertical bars representing the stock prices over a particular time period. The bar chart will show the highest and the lowest prices at both ends of the bar. If the bar is long, it means a larger price spread, while if the bar is short, then it means a smaller price spread. The position of the side bars would indicate whether the price increased or decreased and also the spread between the opening and closing prices.

Another popular kind of chart is the candlestick chart. Here solid bars (known as candles) are used to show the variations between the closing prices and the opening prices. Shadows are used from the candles to indicate the highest and lowest prices respectively. Color coding is used in this method. A black or red candlestick would indicate that the closing price was lower than the previous period, while a white or green candlestick would indicate the price closed higher. Apart from the color coding, shapes can also be used to indicate several things. A green candlestick with short shadows would mean a bullish market, while a red candlestick with short shadows is a bearish market. The candlestick pattern is a very sophisticated type of pattern, with about twenty different kinds of shaped in use.

Market Cycles: The Key to Trading Success

Every market goes through trading cycles. There is no exception to this. Be it the Stock Market, The Futures or the Forex market. They all go through different phases. Today, I want to point the different phases in the Forex market, identifying which will help the trader know when to stay in the market and when to stay out.

Range Days: Historically, it has been seen that nearly 80 of the time and when it does, it creates new trends and levels. Rally days usually happen when price breaks out of the range and establishes a new high or low.

Strange Days: Strange days are those days when the market hardly moves at all. It is as if the financial world is on a vacation and simply not interested in trading. This is a rare phenomenon, yet is one of the phases of the market. Usually, when a market is well below the usual daily range, it is classified as Strange Days.
Here is a bit of statistics to help understand the market phases better. I have listed below, the 4 major pairs and their daily average range.

GBPUSD - 122 pips Daily Range
EURUSD – 84 pips Daily Range
USDCHF – 96 pips Daily Range
USDJPY – 78 pips Daily Range

In the above examples, when a pair falls below the daily movement, it is considered to be ranging and when it is way below it, it is considered to have entered the unknown land. If analyzed over a week, Range days occur at least 3 times a week. Generally 70-80 of the time in a week. The best day in the week is Tuesday, followed by Wednesday and Thursday. Tuesday, historically has had the best rally days.
Again, strange days occur less than often, and when price stays well below the range and when there is little movement. They happen, once or twice a month and are times when one should stay out of the market.

Lastly, I should add that the best days to trade are Tuesday and Wednesday followed by Thursday and the days to avoid trading are Monday and Friday.

Sunday, July 15, 2007

Land Investing

One area of investing that is sometime s overlooked when thinking about areas to invest money in is land. Investing in real estate, that is developed land with homes and buildings is one of the most popular types of investing. But, ask those who do some serious investing and you will find that many of them invest in undeveloped land. As our country grows there is an ever-increasing need for new homes and services and land is a definite requirement for this to happen.


Typically investing in land is not as popular as developed real estate because of the amount of work that must be put into it. However as the need for land escalates this is changing. If you consider the tracts of unused land around your town, someone has to own them right? There is likely a large amount of available land in your area that can be purchased relatively inexpensively. The idea with land investing is to hold on to it and sell to a developer in future years. However, keep in mind that investing in land takes a bit more knowledge and research than investing in homes. One of the most important aspects of investing in land is knowing the zoning of the land you are buying and whether or not that is likely to change in the future. The zoning will, of course dictate who will likely be interested in property in the long-term.


Buying land that is zoned for commercial use is highly sought-after, but the most attractive land is that which is zoned for both commercial and residential. This land can be hard to locate but it is worth the effort and investment of time. This is really the investment that you want to be holding when your town starts a real estate boom. It's a vein of investing where a fortune can be made overnight if the demand is high. Don't forget to do your homework first. Educate yourself on the land that is available and the real estate trends in your town so you can make an educated guess at which way the industry is heading.

Property Disclosure

In real estate transactions there is a stage known as "disclosure." First time home buyers may not be familiar with the term but anyone who has purchased real estate in the past should be well acquainted with this step of buying or selling.

Essentially the process of disclosure is the step wherein the seller of the property "discloses" any issues with the property as it is. Now this can apply to a pretty wide range of things from issues with the actual home to problems with the neighborhood to things that have occurred in the home in the past. Either way, sellers are required by law to disclose all of these things when selling their home.


Let's have a look at some things that would need to be included on the disclosure paperwork for a home. The most common things you will find in a property disclosure are issues with the home itself.

Let's say there was a fire a few years back and an area of the home was rebuilt. Or perhaps at one point the basement flooded and there was resulting rot or water damage. Termite or insect damage must also be noted as well as any other issues in relation to the home or it's integral systems.


There are other things that should be included in the disclosure statement as well. Sometimes things like a particularly noisy neighborhood dog, or problem neighbors. Also there is usually a section that deals with the title to the home itself. If there are any claims to the title such as liens or easements, they must be noted in detail. Another things that should be detailed is any common property that is shared with adjoining properties.

Something that has become more of a concern in recent years is whether or not the home was ever utilized in any sort of drug operation. This is not saying that the current seller was involved in said activities, merely that if the home has been used for such purpose in the past it must be disclosed.


Failure to disclose information on the home that is important to buyers is punishable by law. As the property seller you have a responsibility to be honest and scrupulous in your disclosure regarding any property. Failure to do so can result in big trouble.


Austin Lansing is a representative of High Country Realty, specializing in the sale and purchase of North Georgia real estate. For info on homes in the Blue Ridge Mountains and other area of Georgia's beautiful high country, contact us today or visit us online at www.cbhighcountry.com

Remortage: Chase the Chance

To fail to get any chance may be bad; but to fail to do justice with a chance is certainly tragic. Thus, to fail to use the chance of getting away with your current burdensome financial obligation is really a pathetic matter.

Ignoring the chance of remortgage can be an example. If you find that you are overburdened with the repayment terms and condition of your current mortgage, it makes no sense in sticking to it any more.

Rather, it makes real sense if you search for a better deal and switch over to that. You can do so by going for a remortgage. It is quite easy but full of some assured benefits.

It will give you respite from he hassles you are facing now to deal with your debt obligation. At the same time, it will also give you scope to save money. You can save money on every month or in the long term; may be at the end of the repayment term.

For a remortgage, it is not always necessary to change the lender. You can talk to the current lender and take quotes from him. If you see that the deals offered by him are better then you can stick to him. If you find that there are other cost-effective deals available then you can switch over to other lenders.

For that you have to explore the market and make some comparisons.

While comparing remortgage packages, make sure that you consider all the fees attached to a mortgage. According to general belief, interest rate is the main thing to be considered while taking a deal. Well, it is true that the interest reflects the majority of the cost of the mortgage. But certainly it does not include the whole cost.

So, go beyond the interest rate and consider the APR. Most importantly, do not forget to keep the early repayment penalty under consideration. Compare the packages o the basis of all these factors and go for the package that suits your need best.

Saturday, July 14, 2007

Use The Power Of Niche Blogs To Generate Income Online

If your into internet marketing chances are you have a website or two, making you some money. You could increase your income dramatically by using niche blogs.

Many people have already discovered the power of using blogs to generate income online. They may use blogs to promote products as an affiliate, sell their own product, or monetize them with adsense.

If you want to create a decent income from using niche blogs you are going to need more than one or two sites. You will need to create your own little empire of niche blog sites. How would you go about achieving this?

It's not as hard as you may think. There are many resources out there which are free and some you will have to pay for to start your own empire. However, creating an empire of niche blogs mainly consits of three elements.

1. First off you need a niche site. That is you need to find a niche and then build a site around it. There are almost an unlimited number of niches out there waiting to be expoilted.

2. Content. You need content for your site. Original content is always the best. If you don't have original content there are other ways of getting some, outsourcing being one of them.

3. Promotion. You need people to visit your site. So you must start promoting your site which ever way you can. Through the search engines and pay per click advertising, other blogs, articles and any other means you can think of.

Once all the above is done and you have your first niche site up, just start over with another niche topic and repeat. Soon you will have your own empire of niche mini sites generating income for you month after month.

Sunday, July 8, 2007

Internet Banner Advertising Secrets

When the internet started banner advertising was one of the most popular ways to advertise. However, once this kind of advertising became popular it dramatically reduced its effect. People became blind towards it and click through rates become as low as 0.5%. However many of the top internet marketers still use banner advertising as one of their top producing strategies. You will reap the rewards with internet banner advertising once you know how to apply the correct marketing strategies.

One of the challenging aspects of banner advertising is to get people to actually click on your banner. With all the banners looking like adverts people have become oblivious to this. You need to make your banner not look like an advert. Make the background white because this makes it blend in and look like content. Then use blue text to denote the advertisement. People are conditioned by using the internet to associate blue with a hyperlink and this will make them click on it. Use a good attention grabbing headline for example "How To Lose 30 Pounds In 20 Days".

Once you have created your banner you need to find good places on the internet to advertise. I suggest you look for websites related to yours and you contact the owners directly. Use your negotiating skills and try to lower the advertising rate that a website owner may want until you are satisfied that you have a good deal. Also try to get at least a month or a week's trial to test the effectiveness of the internet banner advertising before you enter into a long term contract.

You need to create an appropriate landing page for your banner advertisement. This could be in the form of a squeeze page. I would strongly suggest that you do not send your visitor to a sales page as a visitor usually needs to see your offer at least 7 times before they will consider buying.

Follow these internet banner advertising tips and you will find that you can produce substantially more traffic to your website and increase your profits.

Would you like to know more about the traffic techniques have helped me to drive thousands of visitors to my website? I have just completed my new guide.

Financial Needs Analysis

Financial Needs Anaysis (FNA) is defined as a process to identify individual financial needs in order to strategise an investment plan that meet such needs and financial goals. Before I go into details about FNA process, let me explain the three broad categories of financial needs;

(i) Accumulation Needs It is defined as a future financial need that one desire to set aside. The motivation to accumulate a sum of money in future include children education, starting a business, property investment, buying a car, retire early or giving to charity.

(ii) Retirement Needs It is defined as financial need that provide fund to support our life after our retirement. When we retire, our pension or social security benefits begin but our earned income ceases. Our working expenses reduce but our leisure and medical expenses increase.

(iii) Protection Needs It is defined as financial obligations that we need to fulfil upon death, disablement, contracting critical illness, loss of or damage to property and/or when a personal liability arises.

Having a general idea about the three main categories of financial needs, let me go through the process of Financial Needs Analysis:

(1) Fact finding --> (2) Identify and quantify financial needs --> (3) Identify investment products that meet financial goals --> (4) Periodical review of financial needs

1. Fact Finding

Gather personal details, employment details, number of dependants, financial information, existing insurance policies, retirement needs, saving goals, objective and investment preference. Personal details such as age, gender, martial status and smoking habits will offer us a preliminary assessment of the types of financial products that will likely suitable for us. Employment status enables us to determine if income protection is needed for high risk job, and the ability to commit long to medium term investment product. The number of dependants will determine the amount of additional financial support. The more dependant we have, the greater the number of years we have to support them, which means we need more life insurance and income protection. Financial information such as monthly income will help to determine the continuing income needed in the event of death, disability or retirement. Expenditures information will help to determine the level of income needed for the family to survive in the event of premature death of the breadwinners, and to estimate the funds available for investment. Assets and liabilities information helps to determine net worth, which enable us to decide on the amount of funds for investment or to adjust our lifestyles to reduce liabilities. Existing insurance policy will serve as a starting point for any further insurance products. The objectives and investment preferences will help to determine our attitude towards investment risk, which classified into Risk Averter, Cautious, Balanced and Risk Seeker. Retirement needs information enables us to determine the monthly amount in today's dollar that we and our dependants need to live on retirement. Generally, most singles need about 50% to 60% of their pre-retirement income to maintain same living standard after retirement. The percentage increase to 60% to 70% for married couples with one retiree. Saving goals information helps to determine if the funds earmarked for various financial goals are adequate.

2. Identifying and Quantifying Financial Needs

After we have gathered all the data through facts finding, the next steps of FNA process is to analyse the data to identify and quantify the financial needs. We should pick up weaknesses that can negatively affect the financial objectives. For examples; amount of debts, investment portfolio, existing insurance products, living within means, investment time horizon, liquidity need, children education and risk profiles. Determine which objectives should be given higher priority. Three factors should be considered when analysing objectives:


Establish if the objective is short-term or long-term. Short-term objective is more appropriate for retired person who may wish to increase income produced from investment capital. Long-term objective is more suitable for someone who want sufficient fund to send his new-born child to university in future. However, objectives can be both long and short term.
Establish if the objective is for the benefit of us or for others, such as dependants. For example, the objective may be passing our estate to our grandchildren in the event of death. Alternatively, the objective may be to retire early.
Prioritise the objectives. For example, we may want to invest a second property but to achieve this objective; it may detriment a reasonable income in retirement. It is important to tackle each financial need and uncover those needs that need immediate attention.
Once all the financial needs are identified and prioritised, each need must be quantified. The ways to quantify retirement, protection and accumulation needs are different. There are two methods to quantifying retirement needs, namely the replacement ratio method and expense method. As for protection needs, the method include determine the sum of total liabilities and immediate expenses required at the time of death and the amount needed for dependants as long as needed. Multiple approach and needs approach are two common approach used to quantify the amount needed for dependants. For accumulation needs, the approach is to find the future value of the target amount taking into consideration of inflation. After we have quantified the data, proceed to next step to identify investment products that meet financial objectives.



3. Identify Investment Products that meet Financial Objectives

Points to consider includes investment objectives, product suitability, affordability, taxation, tax relief, rick tolerance, pension schemes, prioritisation and effect of inflation and time value of money. Investment Instrument that meets accumulation and retirement needs includes Money Market Securities, Fixed Income Securities, Equity Investment, Derivative Instruments, Property, Unit Trusts, Whole Life Insurance, Endowment, Investment-Linked Products and Annuities. Investment products that meet protection needs include Term Insurance, Whole Life Insurance, Endowment Insurance, Investment-linked Life Insurance, Riders, Critical illness Insurance, Long Term Care Insurance, Medical Expense Insurance and Managed Healthcare Insurance and Disability Income Insurance. General Insurance products that meet protection needs include Fire Insurance, Household/House owner Insurance, Personal Accident Insurance and Personal Liability Insurance.

4. Periodical Review of Financial Needs

The process of identifying financial needs does not stop with implementation. Our financial needs may change over time. It affects our initial investment plan, as they may no longer be adequate. For example, a steep fall in price of equities would signal that a review of our investment portfolio and saving is required if we invested substantially in equities. Regular review of financial needs ensure we stay on course to our financial goals.

For more information about Financial Needs Analysis, go to http://growmoneytree.com

Financial Needs Analysis

Financial Needs Anaysis (FNA) is defined as a process to identify individual financial needs in order to strategise an investment plan that meet such needs and financial goals. Before I go into details about FNA process, let me explain the three broad categories of financial needs;

(i) Accumulation Needs It is defined as a future financial need that one desire to set aside. The motivation to accumulate a sum of money in future include children education, starting a business, property investment, buying a car, retire early or giving to charity.

(ii) Retirement Needs It is defined as financial need that provide fund to support our life after our retirement. When we retire, our pension or social security benefits begin but our earned income ceases. Our working expenses reduce but our leisure and medical expenses increase.

(iii) Protection Needs It is defined as financial obligations that we need to fulfil upon death, disablement, contracting critical illness, loss of or damage to property and/or when a personal liability arises.

Having a general idea about the three main categories of financial needs, let me go through the process of Financial Needs Analysis:

(1) Fact finding --> (2) Identify and quantify financial needs --> (3) Identify investment products that meet financial goals --> (4) Periodical review of financial needs

1. Fact Finding

Gather personal details, employment details, number of dependants, financial information, existing insurance policies, retirement needs, saving goals, objective and investment preference. Personal details such as age, gender, martial status and smoking habits will offer us a preliminary assessment of the types of financial products that will likely suitable for us. Employment status enables us to determine if income protection is needed for high risk job, and the ability to commit long to medium term investment product. The number of dependants will determine the amount of additional financial support. The more dependant we have, the greater the number of years we have to support them, which means we need more life insurance and income protection. Financial information such as monthly income will help to determine the continuing income needed in the event of death, disability or retirement. Expenditures information will help to determine the level of income needed for the family to survive in the event of premature death of the breadwinners, and to estimate the funds available for investment. Assets and liabilities information helps to determine net worth, which enable us to decide on the amount of funds for investment or to adjust our lifestyles to reduce liabilities. Existing insurance policy will serve as a starting point for any further insurance products. The objectives and investment preferences will help to determine our attitude towards investment risk, which classified into Risk Averter, Cautious, Balanced and Risk Seeker. Retirement needs information enables us to determine the monthly amount in today's dollar that we and our dependants need to live on retirement. Generally, most singles need about 50% to 60% of their pre-retirement income to maintain same living standard after retirement. The percentage increase to 60% to 70% for married couples with one retiree. Saving goals information helps to determine if the funds earmarked for various financial goals are adequate.

2. Identifying and Quantifying Financial Needs

After we have gathered all the data through facts finding, the next steps of FNA process is to analyse the data to identify and quantify the financial needs. We should pick up weaknesses that can negatively affect the financial objectives. For examples; amount of debts, investment portfolio, existing insurance products, living within means, investment time horizon, liquidity need, children education and risk profiles. Determine which objectives should be given higher priority. Three factors should be considered when analysing objectives:


Establish if the objective is short-term or long-term. Short-term objective is more appropriate for retired person who may wish to increase income produced from investment capital. Long-term objective is more suitable for someone who want sufficient fund to send his new-born child to university in future. However, objectives can be both long and short term.
Establish if the objective is for the benefit of us or for others, such as dependants. For example, the objective may be passing our estate to our grandchildren in the event of death. Alternatively, the objective may be to retire early.
Prioritise the objectives. For example, we may want to invest a second property but to achieve this objective; it may detriment a reasonable income in retirement. It is important to tackle each financial need and uncover those needs that need immediate attention.
Once all the financial needs are identified and prioritised, each need must be quantified. The ways to quantify retirement, protection and accumulation needs are different. There are two methods to quantifying retirement needs, namely the replacement ratio method and expense method. As for protection needs, the method include determine the sum of total liabilities and immediate expenses required at the time of death and the amount needed for dependants as long as needed. Multiple approach and needs approach are two common approach used to quantify the amount needed for dependants. For accumulation needs, the approach is to find the future value of the target amount taking into consideration of inflation. After we have quantified the data, proceed to next step to identify investment products that meet financial objectives.



3. Identify Investment Products that meet Financial Objectives

Points to consider includes investment objectives, product suitability, affordability, taxation, tax relief, rick tolerance, pension schemes, prioritisation and effect of inflation and time value of money. Investment Instrument that meets accumulation and retirement needs includes Money Market Securities, Fixed Income Securities, Equity Investment, Derivative Instruments, Property, Unit Trusts, Whole Life Insurance, Endowment, Investment-Linked Products and Annuities. Investment products that meet protection needs include Term Insurance, Whole Life Insurance, Endowment Insurance, Investment-linked Life Insurance, Riders, Critical illness Insurance, Long Term Care Insurance, Medical Expense Insurance and Managed Healthcare Insurance and Disability Income Insurance. General Insurance products that meet protection needs include Fire Insurance, Household/House owner Insurance, Personal Accident Insurance and Personal Liability Insurance.

4. Periodical Review of Financial Needs

The process of identifying financial needs does not stop with implementation. Our financial needs may change over time. It affects our initial investment plan, as they may no longer be adequate. For example, a steep fall in price of equities would signal that a review of our investment portfolio and saving is required if we invested substantially in equities. Regular review of financial needs ensure we stay on course to our financial goals.

For more information about Financial Needs Analysis, go to http://growmoneytree.com

Why Use Escrow In Real Estate Investing?

Which is engagement? Engagement is when two people or more or parts enter a legal agreement which envisages the placement in third for certain properties, instruments, or capital of guard, and the release of these properties, instruments, or capital is contingent on the execution or the realization of certain conditions or acts. An account of setting in third hand is an account which is specifically established to spend only funds for a reason or a specific use.

In transactions of investment and other real of this type, accounts of setting in third hand are normally employed to hold the funds which are planned for the premiums of insurance and the taxes on buildings which were paid in advance and can be only released with these aims envisaged. In real estate, the collections of engagement are quantities which were recovered of the borrower by the supplier of loan to put in engagement for specific expenditure. This expenditure is insurance of owners of a house of risk, taxes on land, mortage insurance, and all the other amounts which are paid on an annual or sémestrielle basis.

When money is released from an engagement to explain the envisaged use, this is called a disbursement of engagement. To employ engagement for these types of expenditure protects the borrower and the lender. The borrower obtains the peace of the spirit knowing that the lender can only reach the funds for the goal envisaged. This guarantees that the lender will not take the monthly payments for this expenditure and will not apply them towards the envisaged use. The lender can rest easy knowing that the borrower cannot remove the funds or spend the money in other things. The two parts have a assurance which these invoices are met.

The lender can be particularly interested by the payments of insurance, because if something arrives at the house and the premiums of insurance were not met, then the lender is held to loosen much. If the taxes on land are not paid, the property can be seized for back taxes, costing the lender or the borrower more money. This is why it is important to employ engagement for monthly payments of this type. Certain expenditure is paid each year or twice a year. The majority of the borrowers of time pay a sixth or a twelfth of this expenditure on a monthly basis, and these funds are put in engagement until the expenditure comes due. To take guard always of no matter whom who refuses to put these payments in an account of setting in third hand. Any investor or lender real legitimates will be more than wanting to put these amounts in engagement, and if they seem uncomfortable with this which should be a red flag on the subject at least of their procedures of management, if not their ethics of businesses. An account of setting in third hand should indicate that it is an account of setting in third hand.

The funds in an account of setting in third hand always belong to the borrower until the expenditure which the account is established for is paid. It is important to employ engagement so that the two parts are protected, and the funds are held for specific expenditure. This is protected from the fraud, as well as to guarantee that certain expenditure like taxes on land and payments of insurance is made per hour protect the interest from the lender for the property. The purchaser at the house with the safety of knowing that the money will go exactly where it would have, and cannot be removed for any other reason.