The Relationship Between Insurance and Finance

Insurance and finance are closely interwoven fields of business, not least because they both involve money. They also often both involve speculation and risk, and often where one goes, the other will follow. Take property investment for example, it involves a large amount of capital out lay, swiftly followed by insurance to protect the capital investment. It would be ridiculous to spend such a vast sum of money on a venture and not protect it against possible damage. It therefore makes sense to store information on these two subjects together, as the relationship is so logical.

Insurance is a form of risk management used to protect the insured against the risk of a loss. It is defined as the equivalent transfer of the risk of a loss from one entity to another in exchange for a premium. There are different kinds of insurance for just about every conceivable event. The most common insurance is probably life insurance, which provides a monetary benefit to a decedent’s family or other designated beneficiary.

It can cover funeral or burial costs and can be paid out to the beneficiary in either a lump sum or as an annuity. Property insurance is one of the more necessary insurances as property is extremely expensive and if it is lost or damaged for some reason (fire, earthquake, flood) it can be very difficult to replace without adequate reimbursement. Travel insurance used to be seen as an unnecessary expense and is still viewed as such by many. Its importance is, however, being increasingly recognized by the public at large. It is cover taken by those who travel abroad and covers certain unforeseen events such as medical expenses, loss of personal belongings, travel delays etc. There are numerous other types of insurance, too many to mention, all vital if you want to protect something of particular importance to you or another.

In the world of finance there are many sub-categories, also too numerous to mention but a few will be included here. Forex, or the foreign exchange market where one currency is traded for another. It includes trading between banks, speculators, institutions, corporations, governments, and other financial markets. The average daily trade in the global forex is over US $ 3 trillion.

Tax consulting usually involves CPAs and tax lawyers in addressing any tax issues that you may have. There may also be Professional Strategic Tax Planners and Enrolled Agents, depending on the company that you hire. They will help you reduce your tax debt, eliminate tax penalties, an innocent spouse claim, tax liens, bank levies, and preparing unfilled tax returns, as well as any other tax resolution problem that you might have.

Property investment is usually when an investor buys property with an eye to generate profit and not to occupy it. It is an asset that has been purchased and held for future appreciation, income or portfolio purposes. In some instances an investment property does not have to be held for profit, as some landlords in New York lease office buildings to non-profit organizations for tax purposes. Homeowners consider their homes to be investments but they are not classified as investment properties. Sometimes if you’re buying your second or third home, it can be considered an investment property, especially if you plan to rent it out to help pay off the home loan.

Business networking is a marketing method, which is as old as business itself. It’s been around since ever since people learned to hold a glass of whiskey and schmooze. In fact, its probably been around a lot longer, Cro-Magnon man probably gathered around the newly discovered fire and showed each other their collection of animal teeth and traded them. Creating networks of crocodile teeth owners and saber toothed tiger owners, who tried a take over bid against the saber toothed leopard owners. Business networking is designed to create business opportunities through social networks. It helps if the people involved are of the same frame of mind.

These days a very handy way of business networking is via the Internet on the various social media available. But it must be said that very little can beat the intimacy and trust created by face-to-face relationships. Also, where would our businessmen be without their whiskeys and weekly schmooze?

Source by Sandy Cosser

How to Finance Seemingly Un-Financeable Properties in Real Estate Investing

Some houses or multi-family properties in real estate can seem un-financeable. This could be for a number of reasons including the perspective buyers or title issues with the properties. Unfortunately, these problems seem to occur after an investor buys a property and then can’t sell it.

Let’s examine the usual reasons that properties cannot be financed and what can be done. The most common issue is likely that the appraisal on a property isn’t sufficient to cover the costs and expenses of a rehab. The investor often only finds this out after he has completed the rehab and has a ready and willing buyer who has to get a conventional bank loan to buy it.

On this same vein, the appraisal may come in but the buyer can’t get financing because of more stringent lender requirements – such as credit scores, time on a job, recent foreclosure history or bankruptcy to mention a few. It may not be as simple as going on to another buyer or just getting another appraisal, especially if this buyer had been declined by FHA in the first place as the investor’s property is “tainted” as to appraisal in the FHA system for at least six months.

The simplest solution to the credit issue and appraisal issues is to get private lenders or portfolio lenders to finance the sale. Private lenders are individuals who are willing to loan money that they would normally have in a bank earning a couple of percent interest. The investor should offer this individual a 10% interest-only loan secured by a first mortgage on a property with a two or three year balloon note. This private lender could also receive 2% to 5% as closing points on the loan and have a pre-payment penalty of three months interest.

The following is an example of what the private lender would get on a $100,000 mortgage: The buyer should be able to put down 20% of the purchase price to secure the mortgage in case of a market decline. A lot of current home buyers have large deposits because they went through foreclosure and haven’t paid mortgage payments for extended periods. 10% interest on $100,000 = $833.33 per month versus perhaps $83.33 in a local bank at a 1% interest on a savings account.

At closing, the lender would get cash of $3,000 to $5,000 as closing points. If the homeowner refinanced during the term of the loan and paid the pre-payment penalty, the private lender would additionally receive $833.33 x 3 months pre-payment penalty = $2,500.

The appraisal should be done by a reputable appraiser and a title policy and insurance should be provided to the private lender. An attorney should draft all the mortgage documents and do the actual closing to protect the investor/seller and the lender.

Using a private lender allows a buyer with blemished credit to purchase a home. It also allows the seller to not have to be dependent on the whims of a local or national bank which may be afraid to lend money in that neighborhood or at that time in the market. The investor should also contact portfolio lenders in his area to see if his buyer(s) qualify. Portfolio lenders are smaller private lenders who do not have the stringent lending requirements of national lenders. Most notably are credit unions.

Another major cause of being unable to finance is because of a title issue and the inability of a buyer to get a conventional loan on the property. If necessary, the investor may have to do what is called a “quiet title action” to do what the courts call quieting any claims. This can take from a few months to a few years but is worth the effort to be able to sell a property at full market value and get conventional financing at that time.

In summary, no matter how impossible it may seem to get funding for a buyer of a property, there are multiple ways to get this done, a couple of which have been mentioned in this article. Looking for properties with defective titles is a great way for investors to get great deals – you just need patience and fortitude.

Source by Dave Dinkel