Investment-Money-Loan

What is a Phase II?

Phase II is an invasive assessment of real estate property to identify any physical
contamination or hazard. Phase II consists of actual sampling and lab testing of soil, soil
vapor, groundwater, building material or any other hazardous substance. Phase II is
performed when RECs are identified in Phase I, and as part of an ongoing due diligence
or monitoring program mandated by regulatory agencies, and/or to set conditions for
depositive subsurface baseline report.

Scope of Work Involves:

§ Geophysical survey of subject site (Optional)
§ Drilling and sampling of soil, soil vapor, groundwater

(if necessary or applicable)
§ Laboratory Analysis of contaminants of concern

Other Services Include:

§ Level D Health and Safety
§ USGS Soil Classification and Boring Report
§ Cross Section Investigation and CAD Drawing,

Vapor Well, Piezometer, Monitoring Well

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What is Phase III Site Remediation?

Phase III Environmental Remediation is actual mitigation (cleanup) of the hazardous
material contamination caused by abandoned waste sites, underground fuel tanks,
industrial facilities, dry cleaner, hazardous material impact, etc. There are numerous
technologies for site remediation. No one technique is applicable for all sites due to type
of contaminants and subsurface variations with different feasibility.

Phase III Remediation Techniques:

§ Remedial Investigation and Feasibility Study
§ Injection of micro-organisms (Bugs)
§ Excavation and Off-site Disposal
§ Groundwater Pump & Treat
§ Soil Vapor Extraction or Soil Venting
§ Dual-Phase Extraction
§ Catalytic Oxidation
§ Activated Carbon Adsorption
§ Air Sparging or Stripping

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Consulting and UST Closure

“Environmental due diligence has emerged as vital part of real estate transactions over
the past decade due to legislation and court cases creating unlimited financial liability for
cleanup contaminated sites. Parties to real estate transactions cannot afford to take the
risks associated with inadequate due diligence.”

§ Remedial Investigation and Feasibility Study
§ Environmental Risk Assessment & Compliance Audit
§ Liability Assessment, Purchase/Lease Agreement Review & Consulting
§ Chemical Inspection & Monitoring
§ State UST Cleanup Fund Application & Consulting
§ Underground/Aboveground Fueling Tank Removal
§ Permitting, Closure Reporting
§ Clarifier Removal & Closure Reporting

RECS – Recognized Environmental Conditions
USGS – United States Geological Survey
UST – Underground Storage Tank
ESA – Environmental Site Assessments
RUL – Remaining Useful Life
PML – Probable Maximum Loss

56



CHAPTER SIX


Things to Consider
Before
Making Any

Real Estate Investments



City Capital Realty 310-714-5616

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Issues to Consider Before Making a Real Estate Investment

Corner shops always have the highest rent.

The shops located in the corner of shopping centers enjoy the highest popularity and
profitability. That is why; the fast food shops and restaurants are mostly located in the
corner of shopping centers. The following shops are good examples for showing this
fact.

Subway, Coffee Bean, Seven-11, Pizza Hut, El Pollo Loco, Burger King, Del Taco,
Baja Fresh, Numero Uno, La Salsa, Churches Chicken and Chilies.

There are some other companies with several stores sprawling across the greater Los
Angeles area. These stores include:

CVS, Rite Aide, Starbucks , Coffee Bean , Walgreen’s and The 99 Cent Stores.

Market shares of the banks In California

1. Bank of America 20.7%

2. Wells Fargo 14.6%

3. Chase 13.5%

4. Citi group 5.40%

5. Union Bank 5.00%

6. World saving 3.00%

7. Comerica Bank 2.60%

8. City National Bank 1.70%

The larger Californian banks try to gain a greater share in the financial marketplace by
purchasing the smaller banks.

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Bank Consolidations in Recent Years

Nation Bank Merged with Bank of America
Wells Fargo
First Interstate Bank “ Hawthorne Savings
California National Bank
First Fidelity Bank “ California National Bank
US Bank
Peoples Bank “ Comerica Bank
Jackson Federal Bank
First Fidelity Investment “ Silvergate Bank
California Trust & Bank
Santa Monica Bank, Western Bank “ United California Bank
Bank of the West
Imperial Bank “ California Federal Bank
California federal Bank
Highland Federal Bank “ Washington Mutual
Washington Mutual
Capitol Bank “

Sumitomo Bank “

Tokai Bank & Sanwa Bank “

United California Bank “

Glendale Federal Bank “

Citi Bank “

American Savings, Coast Savings “

Home Savings, Great Western Merged with

Reasons for Bank Consolidations

Larger metropolitan banks and some of the larger regional banks focus on having more
customers. They try to downsize their structure to cut their cost. Once banks merge, the
larger branches located in better areas, remain active, while those with low profitability,
will be vacated. The banks get merging authorization from State Regulation, Federal
Regulation and FDCI.

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Things to Consider Before Making Real Estate Investment

When there are vacant shops in a shopping center, exceeding the current standard of
10%, the other shops nearby will be deeply affected in terms of having considerable
customers. The tenant mix can play a vital role in a shopping center area. Therefore,
these combinations of the different chain companies could yield a huge success for your
future financial picture. Here is a list of some chain companies located across California.

1. Century 21 24. Bank 47. Subway

2. Prudential 25. Market 48. Quizno’s
3. Coldwell Banker 26. Liquor store 49. Jumbo Juice

4. Remax 27. Budget Rent a car 50. Pharmacy
5. Sprint 28. Car Enterprise 51. Fantastic Sams

6. Radio Shack 29. Dollar tree 52. Auto Zone
7. Farmers Insurance 30. Supercuts 53. Trader Joe’s

8. Allstate 31. Baskin Robbin 54. Panda Express
9. AAA 32. Koo-Koo-Roo 55. Checks Cashed

10. State Farm 33. Pizza Hut 56. Jiffy Lube
11. Kinko’s 34. Jack in the box 57. Yoshinoya

12. Post office 35. Del taco 58. EZ Lube
13. Starbucks 36. El Pollo Loco 59. UPS

14. Coffee Beans 37. Mc Donald’s 60. Save-on-drugs
15. Donut shop 38. Carl’s Junior 61. Coin-laundry

16. Dry cleaners 39. Jumbo juice 62. Winchell’s
17. Skechers 40. Vons 63. Pier 1 imports

18. Shoe pavilion 41. Albertson 64. Firestone
19. Payless shoes 42. Pavilions 65. Smart & Final

20. 7-11 Store 43. Whole Foods 66. Mailboxes ETC
21. BlockBuster 44. Bristol Farms 67. Quick Lube

22. Hollywood video 45. Rite Aide 68. Just tires
23. Fitness centers 46. Goodwill

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Dry Cleaners

Those shopping centers with Automotive Centers, Mechanic Shops, Body Shops, Dry
Cleaning, Gas Stations, Tire Stores and Oil Change Services are subject to pollution
free regulations. As previously mentioned, the report must be prepared in two phases
when applying for a property loan.

Rental Agreement

The commercial rental agreement is usually for a five-year period. The tenant is entitled
to renew or cancel the agreement at the end of lease period.


Lease Cancellation

In cases when a tenant decides to leave a commercial property, the landlord will suffer
heavy losses because it takes him at least three months to find a new tenant. The owners
should appreciate good paying tenants.

Security Guard

To maintain law and order, the small shopping centers hire a full-time security guard
whose average rate ranges from $10 to $12 per hour. In which case, the tenants and the
landlord have to share security costs.

Parking Supervisor

To keep order in a parking lot, the small shopping centers need to hire someone to take
care of the customers’ vehicle movement since there isn’t sufficient parking space. In this
case, the tenants agree to pay the parking supervisor or the owner has to pay?

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Gas Stations

The major oil companies, in Los Angeles County are Chevron, Shell, Exxon, Arco,
Mobile and Union 76 .Gas stations are located mostly on the corner of crowded
intersections. Statistics show that businesses located on the street corners are more
successful.

Supermarkets

In recent years, the chain supermarket stores tend to occupy huge spaces with at least
40,000 square feet of a building: Vons, Whole food, Bristol Farms, Albertson,
Ralph’s, Pavilion, The small supermarkets are frequently moved to large spaces. The
profit of a supermarket is calculated on annual sale and the square feet of occupancy.
There are different options to realize if such a business could generate considerable
profits. The following chart shows the process:

Annual sales of the supermarket

Square feet of the building = sales based on square feet

$12,000,000

40,000sf = $300psf

$15,000,000
40,000sf = $375psf

$20,000,000
40,000sf = $500psf

Therefore, the various shops and chain companies prefer to have their businesses in a
thriving shopping center, where as the big supermarkets are situated. Shopping centers
enjoy a spacious parking lot, which are frequently controlled by law enforcement.
When it comes to a loan, the banks will review the profit and loss of a supermarket over
the past three years.

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Our Recommendations for Property Owners with Vacant Shops
You may encourage new tenants to rent vacant shops by:
1. Offering three months free rent.
2. A three months free lease is virtually a must for a tenant to get the legal process done.
3. A real estate broker receives commission for bringing tenants and landlords together.
4. You may need to have the vacant shop remodeled for a new tenant.

Public Tenants

If there are public tenants whose annual rental payments are funded by the government or
city hall, read their lease agreement carefully.

Department of Motor Vehicles
Police department
City hall
Libraries
Colleges
Public hospitals
Fire departments.
Social security services
Immigration services

It is good to have such tenants in your building. The value of these properties will go up,
but remember that there is an exceptional provision, which gives the right to cancel by
public tenant, when facing an annual deficit of fifteen percent. Consult your financial
advisor before proceeding to lease your property to one of the above-mentioned tenants.

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Few Words about Different Types of Tenants

These tenants include the following:

Non-profit organizations
Churches
Synagogues
Family planning
Research and development
Red Cross,
Adult day care
Pre schools

It should be noted, that there would be legal consequences, once they make a late
payment, or the payment is neglected entirely.
Here is some advice to help you judge whether or not prospective tenants have good
character and capability of meeting the terms of your rental agreement. If your tenant
occupies over twenty percent of the property, you will need to obtain complete
information on his gross sales values, and also check their credit. If your tenant is among
those major companies, whose stock share is exchanged in the New York stock market,
you can check his or her credit score through your computer system. You can also make
an inquiry on their credit score through these companies.

1. Dun & Bradstreet credit services
2. Experian .com.
3. Equifax.com
4. Credit bureau.com
5. Free credit Report.com
6. Standard and Poor’s rating

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Business Failures

Are you aware that several major companies with multi million dollar investments and
with the most experienced economic strategists can end up in failure? Major chain
companies may leave the property once they face the following conditions:
1. Miscalculation regarding the amount of sales volume
2. Inability to compete with other similar companies.
3. Adversely affected by the adjacent discount stores.
4. Losing popularity whenever a new shopping center with better facilities emerges
nearby.
5. Financial problems when having their shop remodeled.

Income Range

The chain companies take into consideration the financial status of families living within
a three miles radius.

Population Density

The chain companies also focus on the number of individuals’ movements.



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Traffic Count

Some intersections are equipped with a special device, which could record the number of
vehicles that cross within twenty-four hours. If the device shows figures ranging from
35,000 to 45,000 in a twenty four-hour period, they could be judged for a successful
business.

Finally, it should be noted that tenants constantly move. That is why; the owners of

commercial properties and the real estate brokers install the sign “For Lease” so
they can get new tenants. If you want to purchase a retail center in Los Angeles
County you need to be very careful.


Contact us for evaluation and appraisal of the commercial properties

If you want to purchase a retail center or car wash and you don’t have any idea about the
price or other aspects of this type of investment, you may contact us to find out all related
information as well as your initial capital investment and rate of return. This way you can
make the deal with much more confidence. Shawn Rabban 310-714-5616
[email protected]. www.citrycapitalrealty.com

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CHAPTER SEVEN

What steps should you take in order to prevent problems, when
purchasing or selling real estate?

Take appropriate steps before making final decisions.

City Capital Realty 310-714-5616

69

When The Seller Accepts Your Offer, pay attention to the following points:
1. Generally speaking, Office, Hospital, Apartment, Medical building, Industrial,
Warehouse are called commercial properties.
2. Get a clear perspective of the subject property and ask the seller to provide you with
property’s profit and loss statement over the past three years.
3. By clicking on WWW.LADBS.org, you can check the zoning.
4. Obtain a copy of the building permits.
5. Request a copy of the certificate of occupancy.
6. Obtain copies of all the rental agreements.
7. Ask the seller to fill out a property information sheet.
8. Ask the seller to fill out the seller’s mandatory disclosure statement.
9. Have the roof of the subject property checked by a licensed inspector.
10. Make sure that the property’s air conditioner is fully functional.
11. Get a copy of the property tax bill.
12. Check the parking lot and the back area to make sure they have a good lighting.
13. Check the quality of the parking lot surface and asphalt.
14. Check the property’s doors to ensure that they are equipped with safety devices.
15. Make sure that the tenant security deposits are credited to you before closing.
16. In order to minimize your commitment, it is recommended that the property must be
purchased under the sponsorship of a family trust or limited liability company.
17. Each individual tenant should fill out Tenant estoppels certificate, so that you are
able to apply for a loan.
18. If you are going to invest in apartment building consisting of 5 to 200 units, try to
use the contract prepared by the California Association of Realtors. The contract
consists of ten pages and forty-five provisions.

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19. Use the Commercial Property Purchase Agreement prepared by the California
Association of realtors for purchasing commercial properties.

20. Use the American Industrial Real Estate Association Form to purchase
commercial properties and industrial warehouses.

21. Make sure all of the tenants have a written rental agreement. A month-to-month
rental agreement is acceptable.

22. A property occupied by fifteen tenants with short-term lease agreements, could be
risky for your future investment. It would be wise to ask the seller to have them convert
to a long-term lease agreement.

23. You need to get a report prepared by one of the following companies when
purchasing a commercial property:

LGS report: 800-814-5599

Property Id: 800-626-0106

The computerized report includes: A comprehensive data report based on the condition
of the property. Another report offering relevant threat information regarding earthquake
epicenters, flooding and fire. It should be noted, that the computerized report includes
other disclosures that should be carefully reviewed by the buyer.

24. A full report, relating the property’s environmental hazards is considered vital in the
purchase of commercial property. The first report is commonly known as phase I, as
mentioned in previous chapters.

25. If the phase I report carries a positive result, then the phase II processes would be
applied. When the two phases are completed, then is the time to make the final decision
of whether or not to proceed with the closing.

26. The real estate broker will help you get the list of expenses, including: water,
electricity, telephone, gas, gardening, repairs/maintenance, and insurance over the past
three years.

We are willing to assist you when investing in real estate. The strategies and guidelines
mentioned in this book will hopefully help you take the right steps in real estate
investment. As a financial and real estate advisor, I wish to offer you my personal
expertise and experience, in any way that I can.

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CHAPTER EIGHT

How to prepare a Contract?

How familiar are you with Real Estate Laws?
Are you aware of your future obligations?

How much risk can you take?

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How to Prepare a Contract

There are terms to negotiate the purchase of a real estate property. The first important
step is the acceptance of both buyer and seller. This will result in the writing of an offer
and a presentation of the conditions of the buyer. These appear in this order:

1. Buyer’s 1st condition is to obtain the loan on the property according to the
designated down payment mentioned in the offer.

2. Buyer’s 2nd condition is that the price of the purchased property is equal to the
appraised price.

3. Buyer’s 3rd condition is that a building inspector inspects the property and
prepares a fully illustrated report on the general condition of the building
including electric panel, pluming, stairs, doors, windows, roof, walls, air
conditioner, heater, garage, pool, water pressure, and the kitchen. The inspector is
requested to estimate the probable expenses to fix or replace the items mentioned
in the report, which need to be taken care of. This way the buyer is sure that
everything is in good condition.

4. Buyer’s 4th condition is to have the property inspected by a Termite
inspector. Since most of the American residential properties are made of wood,
termites are likely to infest the property. The seller must take care of any
probable termite damage before the closing of escrow.

5. Buyer’s 5th condition is to have a copy of the preliminary title report
before closing the escrow. It is very important to know, that banks need a Title
Insurance Company to approve any residential loan. The Preliminary Title Report
should be transferable before closing the escrow.

6. Buyer’s 6th condition is to have a copy of the disclosure forms, which gives a
general information about the property, its environment, and the area.

There are 10 disclosure forms:
Buyers can accept or reject the deal after reading all disclosures. He may also ask the
seller to take care of the items that need to be repaired or replaced in the property. If the
seller doesn’t accept, the buyer has the right to cancel the deal.
*All of these steps have time limitations, which are mentioned in the offer.

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Liquidated Damages

There are two clauses on real estate transactions, which should be carefully reviewed by
the buyer.
The first one is liquidated damage, or in other words, the damage compensation by the
initial money deposit.
The second one is arbitration, or the process in which someone tries to help two
opposing sides settle a dispute.
*It is recommended to put initials on the marked places in the contract to pay only the
three percent of the properties purchase price, as deposited in escrow. We advise that
buyers do not get the initial deposit released to the seller, prior to closing.

Why you should not pay part of your initial deposit to the seller?

1. In some cases, the seller would change his/her mind and the purchaser will have a
problem returning the money.
2. When the buyer changes his/her mind, they could suffer a heavy loss in canceling the
contract.
3. A portion of the property may have had a fire prior to a formal contract, and you will
not be able to close the escrow.
4. The seller may pass away or go bankrupt prior to the closing. The buyer would have
legal problems returning funds.

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Here, I would like to share some of my personal experiences during many years of real
estate transactions and financing. A friend of mine made an offer to purchase a shopping
center for $6 million dollars. A condition was spelled out in the contract, requesting the
buyer to pay $180,000 to the seller before the close of escrow. Sometime later, the buyer
changed his mind and lost his initial deposit. In addition, he spent some $ 30,000 in
hiring a lawyer.

Another case relates to a foreign businessman who came to Los Angeles for the purpose
of investing. He was not a legal resident and had no work permit and lacked any credit.
He purchased a single-family property for $5,000,000, with an initial deposit of
$150,000. When he consulted our office he realized that the contract had not been
properly executed. Unfortunately, the rest of his funds did not arrive in time for his
closing date and he lost his initial deposit.

The third case relates to a customer who made an offer to purchase a mansion for
$3,000,000 with an initial deposit of $ 400,000. Prior to closing, he left the country for a
business trip. After returning, he found that he had to hire an attorney, in order to have
his deposit refunded to him. Eventually, he won the case, but not without having to
spend some $100,000 in legal fees.

Before ending this chapter, I would like to give more information on special forms called
disclosure forms. When purchasing residential properties, these forms are highly
considered by the two dealing parties, as well as the real estate brokers, to avoid any legal
problem in the future. The two parties (buyers-seller) will determine the time for using
the disclosure form in their contract. Purchasing and selling residential properties is a
legal action and demands consulting a licensed and experienced broker to avoid any
probable future legal or financial problem.

Remember, all negotiation should be documented. A copy of all documents should be
forwarded to the escrow.

It is necessary to mention that all above-mentioned points are summaries of the most
important real estate laws and regulations relating to selling and purchasing properties.
We would like to inform you about your rights in order to prevent any future financial
loss. But, keep in mind that you need to consult your accountant, legal attorney and your
real estate broker before making the final decision.

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CHAPTER NINE

How you can improve
your credit score?

How can credit scores affect
the price of your loan?

What is a FICO score?

City Capital Realty 310-714-5616

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The Best Guide to Your Credit Score!

1. YOUR PAYMENT HISTORY
What is your track record!

About 35% of your score is based on your payment history. A lender would want to
know if you have paid on your credit cards on time. This information also works into
your credit score.

2. DO YOU OWE TOO MUCH?
How much is too much?


About 30% of your credit score is found here. Simply because you owe money on your
credit accounts does not mean you are a high-risk borrower with a low score. But you
may be considered overextended if you owe a generous amount of money on your
accounts. This could mean you are likely to make some late payments or none at all.

3.CREDIT HISTORY LENGTH

Are you established?

About 15% of your score is based in this category. The good news is a longer credit
history will increase your credit score. However, even people who have not been using
credit long may get high scores, depending on how the rest of the credit reports look.

4. AQUIRING NEW CREDIT

Are you collecting more debt?

About 10 % of your score is based on acquiring new credit. It is a known fact that people
own more credit today and shop for credit more than ever. However, there is a greater
risk for those who do not have a long established credit history. Research indicates that it
is wise to establish good credit first, before acquiring new credit.

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5. A VARIETY OF CREDIT IN USE

More than one credit card

Approximately 10% of your score is based on the variety of credit cards you own. Your
mix of credit cards will be considered. If you do not intend to make use of an account, it
is wise not to open it!
HOW CREDIT SCORING WILL HELP YOU
Lenders look at credit scores to determine credit risk.

♦ Loans are easier to obtain today. Credit scores help speed up loan approvals so
that a decision can be made in minutes.
♦ Decisions based on fact. Lenders can focus on the facts related to credit risk by
the use of credit scoring.
♦ Greater credit is available. Credit scoring helps lenders approve a greater amount
of loans due to the precise information found.
♦ Lowering overall credit rates. Because of the availability of credit, the cost of
credit to borrowers decreases. To make credit-granting process more efficient,
automated credit processes, including credit scoring, help.
♦ Does scoring work? Based on the information in the report, lenders can also buy
a credit score. This score is mathematically equated, so as to evaluate many types of
information from your credit report.
FICO scores change over time. The new score, based on your credit report, will affect
your data and cause it to change at the credit-reporting agency.

HOW DO PEOPLE SCORE?

Below 620 620-690 690-745 745-780 above 780
20% 20% 20% 20% 20%

Based on the general population

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Your credit report reveals your FICO score. When making a credit decision, lenders
look at many different things. Your length of employment is taken into consideration, as
is your income and the kind of credit you are requesting.

Positive and negative information affects your credit score.
A high score can be adversely affected by late payments; however, making payments on
time will raise your score.

Below is a break down of your credit score:

1-35% payment history
2-30% amounts owed
3-15% length of credit history
4-10% new credit
5-10% types of credit in use

How much do you owe on your credit cards?
Your credit report may show a balance on those cards even if they are paid in full!

Act responsibly!
Making small payments on your account is better than missing a payment. At least you
show that you have managed credit responsibly.

Balances on your account.
If you are over extended, it may reflect a high risk.

Is your credit line being overextended?
If your credit cards get “maxed” out, you may have trouble making payments in the
future.

Establishment of your credit account.
The credit score will consider both the age of your oldest account and the average age of
all your accounts.

Do you have several new accounts?
The type and the number of newly opened accounts work themselves into your score.

How long do credit inquiries remain on my credit report?
Inquiries remain on your credit report for two years.

How many credit card accounts do you have?
The score will take into account the total number of accounts you have. The amount of
different credit profiles will determine how many is too many.

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TIPS FOR RAISING YOUR FICO SCORE

♦ Are you paying your bills on time?
Your score can be affected in an adverse manner by delinquent payments and
collections.
♦ Get current and stay current!
Your score will be greatly improved on the consistency of your payments and the
length of time in which you remain consistent.
♦ Trouble making ends meet? Contact your creditors or see a legitimate credit
counselor. Your score will improve over time if you begin to manage your credit
with timely payments.
♦ “Revolving credit.” Keep those balances low!
High outstanding dept can affect your score.
♦ Rather than moving dept around, pay off that credit!
To be more effective and improve in this area, pay down your revolving credit. Owing
the same amount, but having fewer open accounts, may lower your score.
♦ As a short-term strategy to raise your score, it would be unwise to close
unused credit cards. Opening a number of new credit accounts to increase your
available credit would not be a good idea.
♦ Don’t open a lot of new accounts too rapidly, if you have been managing
credit for only a short time. If you don’t have a lot of other credit information, new
accounts will lower account age. If you are a new credit user, rapid account build up
can look risky.
♦ Shopping for a good rate should be done in a specific time period. Fico scores
distinguish between a search for a single loan and a search for several new credit
lines. The length of time of the inquiry does count.
♦ If you have had problems, re-establish your credit history. Your score can be
raised with timely payments on new accounts.
♦ You have a right to request and check your own credit report. Ordering your
credit report directly from the credit reporting agency will not affect your score.

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♦ Open new credit accounts only as needed. Your score will not improve simply
because, you open new accounts to better the credit mix.
♦ Manage your credit cards responsibly! In general, having credit, installment
loans and timely payments, will raise your score.
♦ Think closing an account will make it go away? Your score may be affected by
a closed account, as it will show up on your credit report.

EVALUATING YOUR CREDIT REPORT
♦ Simplifying Credit Reports

Key Concepts
Ø Credit bureau reports have four key information zones:

- identifying information
- trade lines inquires
- public record
- collection items
♦ Risk Taking is a Bad Picture
Key Concepts
Ø The strongest indicators of risk are past delinquencies, charge-offs and defaults.
Ø Evaluated delinquencies in terms of:
-severity
-current
-frequency
Key Concepts
Ø Predictors of risk include:
-great outstanding balances
-high ratio of balances to credit limits

85

Key Concepts
Ø A shorter credit history indicates some risk:

- The length of credit history can be affected by other factors
Key Concepts
Ø As part of the total picture, inquires and new account openings indicate greater

risk
-These factors will count more for credit files with short credit history.

Key Concepts
Ø This category is important, but is still considered a “tie-breaker”
Risk indicators include:

-too many bankcards and company trade lines
♦ Push for a perfect rating!
In order to negotiate your credit rating, the creditor should list your credit rating after
your settlement is “Paid as Agreed” or “Account Closed/ Paid as Agreed.”
Anything outside of this listing will have a negative effect on your credit report.
♦ Negotiate your credit rating!
It is important to negotiate with your creditor and take note of what appears on your
credit report after you settle your depts. Paying the creditor may become pointless if your
credit report shows no improvement.

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Here are some terms you may negotiate before final payment

“PAID” ONLY

Rather than delete it altogether, you may want to counter-offer the creditor with the
account as “paid.” The word “paid” is a true evidence of the account status and many
creditors will concede and agree to this wording. But a “paid” status is still considered
negative for a collection account or an account that will show “paid charge-off” or “paid
repossession.” You should insist that the account show “paid” only if all other negative
notations are deleted.

“SETTLED” ONLY

Rather than “delete” why not “settle?” “Settled” is inherently a negative listing, but not
as negative as “paid charge-off.” But don’t agree to a “settled” listing until you have
exhausted all other possibilities. “Settled” will still trigger a credit denial. It is best to
agree to have your account show “settled” with all other negative notations showing
deleted.

PAID CHARGE OFF AND PAID COLLECTION

Once you have paid, this will be the creditor’s first choice and your last choice. But these
notations are almost as damaging as showing the same dept unpaid.

MAKE SURE IT’S IN WRITING!

Before you pay anything, it is wise to get your agreement in writing. Make sure, up front,
that the creditor will delete the entire negative listing as a term of the pay-off. Before the
pay-off takes place, the agreement to delete the listing and consider the dept settled must
be documented in writing and signed by the creditor

HOW LONG DO NEGATIVE ITEMS STAY ON YOUR CREDIT REPORT?

Delinquencies .............. 7 years Bankruptcies ........................10 years
Collection Accounts ........ 7 years Chapter 7, 11 & 12
Child Support Judgements: 7 years
Charge-offs ........................ 7 years Civil & Small Claim
Closed Accounts ................ 7 years Judgements ......................... 7 years

Lost Credit Cards .............. 7 years Inquires .............................. 2 year
Tax liens ............................... 7 years

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STATUTES OF LIMITATIONS
Getting an Oral Contract
Although agreeing to pay money owed by way of a verbal contract (i.e. no written
contract – “handshake agreement”) it is still considered a legal contract. It is simply
tougher to prove in court! A statute of limitation is 4 years in California.
A Written Contract
This is the documented agreement that you and your debtor agree to sign indicating your
willingness to pay up on your existing loans. The statute of limitation is 4 years in
California.
Promissory Note
The big difference between a promissory note and a regular written contract is that the
scheduled payments and interest on the loan are also spelled out on a promissory note. A
mortgage is an example of a promissory note! The statute of limitation in California is 2
years.

Open-Ended Accounts:
Keeping open accounts, as a revolving line of credit with varying balances is the best
example of an open – ended account. The best example is a credit card account. The
statute of limitation is 4 years in California.

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CHAPTER TEN

Home Loan
Condominium

Townhouse

Residential

Duplex

Four-Unit Apartment

City Capital Realty 310-714-5616

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Secured Credit Card

A secured credit card is a way for you to improve your financial life. Basically, you
deposit $1,000 to $5,000 in an account that acts as collateral for your charge account. If
you do not already have credit, I advise you to apply for a secured card.

Timing is Everything
Time is a dominant force in the American economy, hence the saying “timing is
everything”. For example if you are going to negotiate a loan, try to take action on time,
before the opportunity is lost. One of our customers intended to refinance his commercial
property, which he was highly qualified for, but he did not act in time. Ultimately his
application was turned down because by the time the appraiser appeared on the scene,
three of his tenants had evacuated, resulting in delayed refinancing of the subject
property.

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Right of Recession

If you have signed the loan documents regarding refinancing your house or
condominium, and thereafter, you change your mind, there is a provision that allows you

the right to cancel the loan agreement contract within a 72-hour period.

Note that holidays do not count.

The following chart shows the legal process:

Thursday Friday Saturday Monday

If loan documents are You must wait until Monday
Signed up on Thursday
In order to finalize
the legal procedure

This legal provision is only applied for your residential home or condominium.
However, this exceptional provision cannot be applied in cases of ownership to properties

other than your residential unit that you reside in it.




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How to Obtain a New Credit Card

Consider the following:
1. Are you a California resident? Do you have at least one credit card?
2. Are you among those who are showered with several offers of credit cards each week?
The offers are usually enclosed with an application form in block and colored letters
reading ‘pre-approved’ or ‘guaranteed.’
3. Do you know that the credit bureaus exchange their customers’ mailing address?
4. Having good credit brings you more available credit from other credit rating bureaus.
5. Having bad credit can damage your ability to get new credit.
6. If you are turned down when applying for a new credit account, it should be an alarm
to you for your future. You must ask the creditor, ‘which credit reporting bureau prepared
your report.’ Call that bureau and ask for a copy of your credit report.
7. If you already have open and active credit in several places at the same time, your
application for a new credit might be turned down.
8. If you are listed as an individual with huge debts, you may not be qualified for new
credit.
9. If you receive different credit offers at the same time, you must proceed with only one
credit at interval periods of time. In other words, you should not apply for all of the
credit cards at the same time.
Remember that many inquiries made on your credit report could also lower your credit
rating score, therefore, when obtaining a new credit card act sharply to improve your
credit.

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How to Maintain Your Credit Rating

Here are some steps you need to take while applying for a home loan, line of credit,
commercial mortgage or business loan:
1. If you have a joint credit account, and your spouse and children have credit problems,
it could become your credit problem too. Therefore, we advise you to split your credit
from your family.
2. Do not lend your signature (co-sign a loan). If your partner, friend or relative makes a
late payment, you and your credit could be in trouble.
3. Avoid getting a new credit card because another inquiry will be listed in your credit
rating.
4. When applying for insurance policies, they may check your credit rating, causing your
credit to decrease.
5. Avoid purchasing new cars and cellular phones because your credit rating will be
checked at the time of the transaction.
6. Pay your normal monthly payments including water, electricity, gas, phone and
medical bills on time. Otherwise your past due payment bills will go to collection, which
can easily reflect a negative point on your credit rating for seven years duration.
7. Avoid paying monthly installments when purchasing furniture and household
appliances such as refrigerators, computers, air conditioners, and water heaters. These
credit checks will also affect your credit rating.
8. If you are traveling, make arrangements to pay your monthly statement while away.

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Advantages of Five-Year Fixed Rate Mortgage
In accordance with the latest data, during the first five years, some eighty percent of
mortgages are subject to change for the following reasons:

1. The interest rates fluctuate according to the financial index or benchmark to
which they are tied. A five-year fixed rate mortgage is always 0.75 percent below a fixed
thirty-year mortgage.

2. The value of your property increases, as well as the amount of money you borrow.
3. Your business site changes and you have to move to a new location.
4. Marriage and children are among the reasons to need a bigger house.
5. Your children are grown and leave; now you need to purchase a small house.
6. Divorce comes along with inevitably having to sell the home so as to split the

equity.
7. One spouse may pass away, and the other prefers selling the home and moving to

a smaller place.
8. Retirement income would not allow you to live in a big home and cover all of the

expenses, necessitating a change in lifestyle.
9. Income may decline and you are no longer able to pay your mortgage obligation.

Generally speaking, the real estate market is constantly making new plans and strategies,
which deeply affect the type of mortgages available to the consumer.







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Methods of Making Mortgage Payments for Purchasing Properties

When you rent a house or place of business, you have to pay your monthly rent payment
at the start of the month. The following chart shows the monthly rental process:

Jan. 1 Jan. 31

Duration of using the property

Date of payment

It should be noted that when you obtain a new mortgage, you should pay your monthly
mortgage payment at the end of the month. For instance, if you have closed the mortgage
contract on the 15th of the month, you must pay the remaining fifteen days, while your
first payment will need to be paid for the next month. So you have a forty-five day grace

period before your first payment is due.
The following chart shows the monthly mortgage payment process for purchasing a new

property:

Jan 15 days Feb. 1 March 1

Sign up date of Using the property
The loan documents Your first payment would be
March 1st. 45 more days

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Process of Making Mortgage Payments when Refinancing

Refinancing has become so simple and popular that when you pay off your debt to the

previous bank, your new monthly mortgage payment will be paid under new conditions.
The following chart shows the process:

Jan 15 days Feb. 1 March 1

Debt to previous bank Debt to new bank using the property

Sign up date to the first monthly mortgage
The loan documents payment would be paid

45 more days

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Factors Causing Higher Interest Rates

Mortgages come in different types, and you have the choice to select a loan that suits
your particular financial needs. The following terms are options you can choose from:

Non-owner

When you purchase a rental property with investment intentions, you should consider
using a Non-owner occupied loan. Its interest rate, of course, is slightly higher than your
residential home.

Cash out

Today, with cash out loans, you should consider refinancing your residential home with a
relatively higher interest rate.

No Point

If you are not going to pay the related fees of the loan, you should consider a ‘No Point’
loan with a higher interest rate.

No Cost

No Cost loans are created to help the people who do not have enough cash to pay the
miscellaneous loan related fees. The interest rate of this type of loan increase as you
would not pay for the fees.

Receiving mortgage without submitting tax return

Are you qualified for a housing mortgage without submitting a tax return?
The response would be positive, but the interest rate would go up a bit higher.

Mortgage for condominiums in the high-rises

When you are going to reside in a high-rise condominium unit, you can apply for this
type of loan. Its interest rate is slightly higher than a regular home.

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Interest Only Loan

Let’s consider and examine the conditions you will face when you applying for a loan.

When you take out a loan, you pay the lender monthly installments of principal and
interest. In the beginning of the loan, you pay almost all of the interest. Every year your

payments are relatively balanced portions of principal and interest. The fixed five-year
mortgage loan is arranged as an “Interest only loan”, which means, you pay only the

interest on the loan and owe the entire principal, at the end of the loan term. This type of
loan carries a lower interest, rather than the regular amortized loans. It is worth noting

that your annual interest payments for this type of loan could be deductible up to
$1,000,000, from your personal income tax.

The following chart will illustrate the calculation of the interest only loan program:

Loan Amount Int-Rate Yearly Payment Monthly
Payment

$750,000 X 5% = $37,500 :12 =$3125

$1,000,000 X 5% = $50,000 :12 =$4166

$1,500,000 X 5% = $75,000 :12 =$6250

$2,000,000 X 5% = $100,000 :12 =$8333

$2,500,000 X 5% = $125,000 :12 =$10416

$3,000,000 X 5% = $150,000 :12 =$12500

• The above figures are even lower than a rental home
• The interest only loan is a good option to reduce your monthly payment

obligation

• The interest only loan tends to carry 26 percent payment below other types of
loans. While your home’s value tends to steadily rise, you enjoy a happy life with
your family.

• Before proceeding to apply for a loan, consult a financial advisor that you trust.

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CHAPTER ELEVEN

Insurance provides financial securities for

business affairs.

Insurance in today’s global economy, guarantees your

investment.

Insurance Benefits:
§ Financial planning
§ Risk reduction
§ Minimize taxes
§ Family protection
§ Protection of assets

§ Automobile
§ Health
§ Home
§ Business
§ Commercial
§ Life
§ Workmen

Compensation

Shawn Rabban 310-714-5616

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Lloyds of London

During the early 17th century, English coffee houses played a significant role in English
life and were regularly visited by intellectuals, businessmen, and brokers who exchanged
daily hot news and discussed socio-economic issues over cups of coffee. In the
meantime, Lloyds Insurance people carried out their operations in the western corner of
the second story of the London Stock Exchange building.

Today, Lloyds Insurance Corporation comprises of three structurally distinct bodies:

The Information Body

Lloyds Underwriters

Lloyds Representatives

Members carry out insurance transactions independently of each other with Lloyds acting
as an intermediary. They also contribute a percentage of their net profits as reserves
capital to the Committee Fund, which can be used to salvage and pay off the loans of a
member company that faces bankruptcy.

The first and foremost vivid economic fortress of insurance activity involves
safeguarding individual and government property. All insurance policies require that the
insured pay their premium when a policy contract is signed, allowing the insurance
companies to receive their premiums before they may have to pay out the insured and
cover their loss.

Reinsurance

Reinsurance is the universal distribution of risk. In this kind of mechanism an insurer
agrees to take on a certain amount of risk that it can accommodate considering its
financial capacity. Therefore, all underwriters either turn down overwhelming policies or
cede them, in part or in full, to another insurance company, i.e. reinsure. In such a case,
it is natural to assume a percentage of the original premium corresponding to the ceded
value, must also be paid to the insurer.

An insurance policy is made with good will and mutual confidence between the insured
and the insurer. Therefore, the binding of temporary insurance policy, i.e. binder, is
synonymous with immediate liability of the insurer until a final insurance policy is made
out. It is, however, possible that some insurance policies do not become effective once
they are bound, though it is basically assumed that allocation of credit and binding of an
insurance policy must concur.

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An insurance policy must be eligible and in writing. Risk is central to the existence of
insurance without which the latter becomes irrelevant. In a zero-risk society there is little
need to establish insurance. As to how to handle risk, individuals adopt their own
method. For instance, death can be a terrifying risk to most people. It is however
inevitable and will eventually happen, though the timing cannot be pinpointed.

The youth would usually accept the risk of death and treat it as if it would never befall
them.

Let's review different risks:

• Inevitable risks which are relatively terrifying.
• Terrifying risks, which are not essentially inevitable.
• Exciting risks, which are thoroughly avoidable.

Risks can be managed in at least five ways:

1. Maintenance: when an individual does not transfer the risk to another.
2. Evasion: is not a recognized risk management technique.
3. Avoidance: when an individual or a corporate quits activities involving risk.
4. Reduction

• Prevention: when adequate safety measures are adopted to minimize risk
• Protection and maintenance: immediate recovery measures taken following the

infliction of damage/loss

5. Transfer: transfer of risk is done to relieve anxiety against possible risks whereby
loss is transferred to another, either in part or in full.

The Law of Big Numbers

The interaction between empirical mathematical probability and theoretical mathematical
probability has given birth to the Law of Big Numbers. Empirical probability eventually
approximates theoretical probability when the experiment is repeated enormously. In this
way it becomes possible to calculate the probability of accidents by means of the Law of
Probability and Law of Big Numbers.

Insurance is an agreement/contract that intends to cover the loss/damage inflicted upon
the insured's property. According to the Law of Compensation, insurance must not
provide the insured with money they could use to their discretion that is, compensation
must not be greater than the value of the lost/damaged property so much so that it
improves upon the situation of the insured prior to the loss.

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Insurance

For us who live in the industrial country of the United States of America and wish to
make the best of whatever means is available to us, it is important to be aware of proper
ways to protect and utilize our property and belongings. It is thus vital that we safeguard
our health in the first place and our hard-earned life-long achievements in the second. We
would therefore, introduce different kinds of insurance in an order of importance:

1. Health Insurance: It is the first and foremost insurance that covers medical expenses
generated by accidents, treatment, hospitalisation, and medicine which individuals
may find difficult to afford.

2. Insurance against Fire in Residential/Commercial Premises: This is an obligatory
insurance required by banks when giving out loans on residential/commercial
properties.

3. Car Insurance: This is an obligatory insurance as road accidents are likely to cause
tremendous damage.

4. Business Insurance: This insurance is required by the law to protect and safeguard
businesses.

5. Mortgage Insurance: It is an essential insurance to protect our properties in
America. You can insure your home's monthly instalments to the bank against very
little money and make sure that in case of accidents the insurance company will pay
out your debts to the bank. This is the least we can do to safeguard the happiness and
safety of our families.

The best time to apply for mortgage insurance is when you are still young and enjoy
good physical health. We would especially like to address women as the real family
managers.

Ladies, it is important that you inspire fortitude in your husbands and make them realize
that they who spend most of their time outdoors to earn a living for their family need to
protect the outcome of their hard work. In case of death or other contingencies they can
make sure that their bank debts are paid and that their wives and children shall live
unscathed in the dream home they have bought for them. Needless to say that any step
taken to secure the financial and intellectual values of your family will eventually bring
forth health and peace of mind for the household. Fortitude is the means to protect
values and it is our principal objective to maintain and secure our family's health and
peace by making the right decision at the right time.

To understand the point let’s consider the following example

If you are a 45-year-old non-smoking male and enjoy good health and wish to apply for
an insurance policy worth $500,000, your annual premium will only be $1,000, which
shall remain fixed for a ten-year period.

In response to our respectable clients and friends who have requested life insurance our
company is pleased to inform you that this service is now available with us whatever
your budget is. Please note five factors will be taken into account when calculating the
life insurance premium:

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1. Age (date of birth)

2. Being a non-smoker

3. Health

4. Sex (male/female)

5. Occupation

You may ask yourself why you may need health insurance. But you need to remember
that your income is by far your most important asset that provides you and your family
with your essentials. It is an unfortunate yet probable possibility that you may be
overcome by death and leave the fate of your dear family to life. It is in such critical and
decisive situations that your well-mediated life insurance will be available to provide
your family with their needs.

If you are married,

If you have children,

If you possess numerous estates, and

If you own your own business in the State of California, we urge you to make a sound
financial plan and apply for life insurance for your family. We pray that you, our fellow-
countrymen, will lead a long healthy peaceful life and that you will never have to use
insurance compensation.

Generally Americans select one of the following three methods for estate planning:

1. Method One __ no action is taken

Individuals who opt for this method will have their property divided between their heirs
under the direct supervision of the court in accordance with the State of California
Probate. The court will appoint an executor to undertake division of property.

Disadvantages of Method One:

• Heirs will have no control over division of the deceased's property
• The executor will claim 7% of the total value of the property as court expenses
• The procedure will take a minimum nine months to complete
• The court will oversee and supervise all details relevant to the case
• Probation proceedings will be public
• Tax exemption will only be available for one of the heirs
• Creditors will be able to oversee division of property

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2. Method Two __ formulation of a will

Absence and presence of a will have similar disadvantages with the only exception that in
the case of the latter the property will be divided to accommodate the deceased person's
wish.
Some people use a proxy for their estate planning. A proxy however, becomes void
posthumously and is not legally binding. Moreover, many financial firms do not
recognize proxies.

2. The Third and the best Method __ forming a Trust

By setting up a trust, individuals can settle all their financial issues in one single
document and benefit from Trust’s guaranteed advantages:

• Inheritance tax is either reduced or exempted
• Trusts involve far less expenses
• Division of property is speedy and private
• Individual’s properties are safeguarded
• Trusts remain valid and binding posthumously
• Trustees can be appointed for non-US individuals who wish to enjoy

maximum tax exemption

In the inheritance tax table the amount of levied tax is calculated with respect to the size
and value of the deceased’s property. As individual’s properties differ from one another
in value and size, judges need to seek specialist legal advice to issue a verdict.

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