A high rise in the price rates of gas has been known to be an alarming problem for the world consumer market. For families who own more than one car, it poses a difficulty with their daily expenses. However, a solution has been developed for these types of dilemmas. Still, it would require a hefty amount to convert your car motor to an electric one, especially if you hire professionals. The good news is, a new alternative to this has been developed, the DIY electric car conversion.

Click Here For Electric Conversion Made Easy Instant Access Now!

It’s no rocket science to work on a simple DIY electric car conversion. All you need to start off with is to find a suitable place to work in. I’m pretty sure that guides and manuals are available; it is up to you on choosing one that you can really have a grasp on. Remember, it is all you who is going to work on this process. Once you have these settled, you can work away without having to pay other people to do your dirty job.

So how does it work? Well, the whole process involves the replacement of several parts in your car like the combustion engine with an electric motor. You also need to get rid of other parts like the radiator, the fuel line and the gas tank itself. You should place enough space in order to put the battery racks that will hold the lead batteries in place, these batteries will be the main source of supply for the power that will run your car.

Having to do a DIY electric car conversion will allow you to control your acceleration and speed of the electric car. This is though the variable resistor that needs to be installed between the electric motor and the batteries. It all depends on the push of your foot how fast or slow you will need to go.

Before thinking of finally having your car to undergo a DIY electric car conversion, you have to think and rethink of ways to save up on gas. There are other alternatives to have the gas burn easily and reduce the amount of fuel that your car will need. If you still find it impractical, then the ultimate alternative of converting your car must be a solution.

Click Here For Electric Conversion Made Easy Instant Access Now!

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

Going to work in 2030. A commuter gets into a car and turns the key. There is a faint noise of auto parts pumps and compressors. The dashboard comes to life. The motor does not actually turn over, though, until the driver presses on the accelerator. Then the vehicle moves out into heavy traffic.

Looking much like their forerunners from the twentieth-century, cars are moving so quietly that the swish of tires is louder than the purr of their electric motors. No fumes spew from exhaust pipes, just wisps of pure water vapour. No smog spoils the view of the mountains. Environmentally friendly transportation has arrived.

This journey began back in 1975 in Arizona cactus country when Geoffrey Ballard, a 43-year-old Canadian geophysicist, poked his way through a small, unkempt cement-block motel just a short walk from the Mexican border. He was looking for a cheap laboratory in which to pursue his dream of finding an alternative to the petrol-driven internal-combustion engine.

He bought the motel for $1400 and burned the filthy mattresses, but the building still stank, so he persuaded the local fire department to come for a training exercise. Watching their hoses blast the place clean, Ballard thought about the world’s overconsumption of fossil fuels. Reducing it would be tough, but he’d always been tenacious.

In the energy crisis of 1973 he was called to Washington to direct research into energy conservation. His wife, Shelagh, and their three school-age sons stayed in Arizona. For six months he supervised studies of virtually anything that did not depend on oil, coal or petrol. But disillusionment soon set in. Only ideas that promised results within a few years would be funded. On a visit home in early 1974, he told Shelagh that he wanted to return to Arizona and resume his quest for a better energy technology.

Ballard thought battery-powered electric cars were the best energy alternative. A big problem was the weight of lead in storage batteries. Could lithium, the lightest metal, be substituted? He had a friend, Ralph Schwartz, a quirky engineer who had been working with lithium and sulphur dioxide.

Needing an electrochemist, they went to see Keith Prater at the University of Texas at El Paso. Prater said he lacked experience with batteries. “I don’t want someone who knows about batteries,” said Ballard. “They know what won’t work. I want someone willing to try things that others might not.”

Within six months Prater was able to isolate a key ingredient, lithium dithionite. They mixed it in a  beaker with solvents, added copper strips and charged it with electricity. Then they hooked up a torch bulb – and it glowed! Prater was ecstatic. However, a practical battery would take money to develop.

Just at that time an acquaintance was refitting a submarine in Vancouver for oil exploration. Needing a package of instruments designed, he tracked down Ballard, hired him as a consultant and soon agreed to finance a lithium battery.

That’s when Ballard and Schwartz bought the rundown motel in Arizona and started to run experiments. On the weekends, Keith Prater flew in from El Paso, landing his two-seat Piper in an adjacent field. Living on pizza and beer, they worked until exhausted, taking naps on patio furniture, then getting back to the chemistry.

After two years, Schwartz bowed out. Ballard was still committed to alternative energy, but he and Shelagh were feeling the pull of Canada. Prater had met and married a Vancouver woman. So they moved operations to the submarine warehouse in Vancouver.

The project’s backer eventually pulled the financial plug. But his cousin, Horace Koessler, had money. He owned a seaplane and wanted a companion on an Arctic tour. “You will have a month to persuade me to invest in the battery project,” he said. Desperate for financing, Ballard took a flying course.

Their trip was a near disaster. Engine trouble and deteriorating weather forced them down on an isolated pond, and for three days they sat out torrential rains. Radio calls brought no help. Finally, Ballard hung a tarp over the engine, located the problem, straightened a carburetor linkage and got them home. Koessler put up $200,000.

Next, a smoke-detector firm injected money. By now a big, jovial engineer named Paul Howard had joined Ballard. Late on a Friday in 1979 he took a phone call. The smoke-detector firm had filed for bankruptcy, meaning Ballard’s company was now in receivership.

That weekend, Prater, Howard and Ballard agreed to form a new company. Ballard was the eldest by 11 years, with a track record and excellent business contacts, but he offered them equal partnerships. “There’s lots of responsibility to go around,” he said. They rented a small office and called themselves Ballard Research.

For the next four years they scrambled to pay the bills, mainly selling single-use lithium batteries. The rechargeable version worked, but each recharge was weaker than the previous one, like the spring of a watch running down. Then an exciting alternative appeared.

In 1983, the Canadian military wanted a fuel cell with a proton-exchange membrane (PEM) for silent power. A fuel cell is like a battery, but better. It requires no overnight charging. It reverses the familiar secondary-school science experiment in which electricity is put through water to produce hydrogen and oxygen. In a PEM cell, a polymer plastic membrane coated with platinum separates two flat electrodes. Hydrogen flows in on one side, oxygen from the air on the other. They combine to form water and generate electricity without combustion and nasty emissions.

“A fuel cell is electrochemistry,” Prater told colleagues. “It’s right up our alley.” Ballard got the contract and hired a technical team. Engineer David Watkins set up the lab. Danny Epp, a sailor who had worked on the submarine, did most of the day-to-day building. Ken Dircks did the testing. They bought a sample of a costly DuPont membrane developed for the US space programme. But their budget was so tight that Epp scrounged materials from rubbish bins. When he needed to make grooves on the electrode plates to channel the gases, he begged a company that sold trophies to lend him an engraving machine. In three years they had the most powerful PEM cell, for its weight and size, in the world. Watkins set up a display at an international conference in Phoenix. Hardly anyone had heard of Ballard Research, but scientists noticed the impressive results. Soon they were visiting the lab.

In 1987 entrepreneur Michael Brown read an article on fuel cells in his dentist’s surgery. A few weeks later he got a tip about Ballard. Excited by the fuel cell’s promise, he persuaded the Business Development Bank of Canada to join his firm, Ventures West, in a syndicate that raised $880,000.

Progress continued. The Ballard team replaced the DuPont membrane with one from Dow Chemical and left it running. To their amazement, it generated four times the previous power. As they watched, a finger-thick electric cable got so hot that copper strands began to melt and fuse. They yelled and jumped around. With this second, drastic boost in power, the electric car suddenly seemed feasible.

By 1998 Ballard Research needed additional financing. Brown and his partners decided that before they would commit more money, the Ballard founders had to bring in new leadership with more business skills.

Brown introduced them to Firoz Rasul, a 36-year-old engineer who had been marketing vice president of MDI Mobile Data. Recognizing their limitations in the world of megabusiness, Ballard founders gave Rasul an equal share of stocks as well as making him president. Rasul and Brown wrote a new business plan and raised $5 million.

To refine and market the fuel cell would mean enormous growth and at least ten years with no net earnings. Employees increased from 37 in 1989 to over 450 today. The company, now called Ballard Power Systems, changed headquarters. To raise the needed hundreds of millions of dollars, they had to establish annual targets for greater power, improved reliability, reduced cost – and meet them. And they did.

One key advanced, led by polymer specialist Alfred Steck, was a cheaper membrane, the heart of the fuel cell. Mixing novel polymer plastics, Steck’s group spread them to form films, dried them in a “clean room” and put them into cells. The first membranes turned brittle and failed after 300 to 500 hours, not good enough for a commercial vehicle. The “third generation” membrane, however, just kept running. When it passed 1000 hours, they broke out a bottle of champagne. At 5000 hours, another bottle. Then 10,000 hours. More champagne. When Steck had a  shelf of empty bottles, Ballard Power Systems had its own durable, affordable membrane.

By mid-1990 Ballard wanted to put the cell into a small bus to show that it could actually make wheels turn. He had been playing tennis with British Columbia’s Energy Minister Jack Davis, who said, “Give me a ‘green’ photo opportunity for the premier and I will get you the funding.” The province provided $2.7 million of the $4.1-million cost.

They unveiled the project in June 1993 outside Vancouver’s Science World. Premier Mike Harcourt waited with Ballard and the media. Suddenly Paul Howard, who was in charge, got a walkie-talkie call from the bus. “The compressor just stopped.” A small bolt – not part of the cell, but crucial – had broken.

After a stunned moment of horror, Howard orchestrated a comic-opera charade. Six Ballard workers, hidden from view, pushed the bus until it rolled silently down a slight incline towards the podium. Harcourt made a speech, then said, “Now let’s go for a ride.” But the crowd milled around. Reporters asked Howard one question after another. He just kept talking. There were too many people to move the bus safely, so the ruse worked. Harcourt left for another appointment. “Come back this afternoon for a ride,” Howard told reporters. By then the problem was fixed.

Government and motor-company officials began to visit for test runs. Vancouver and Chicago have even put in orders for city buses. Meanwhile, California has passed laws requiring that ten per cent of all cars sold starting in 2003 be zero emission vehicles. Other American states have followed suit, creating a potential market for fuel-cell cars.

Germany’s Daimler-Benz, the first major car company to experiment with a Ballard cell in the late 1980’s, seized the initiative. In 1996 it rolled out a minivan powered by Ballard cells. In a series of multi-million-dollar deals, Daimler-Benz bought a 20-per-cent share of Ballard in 1997, while Ford acquired a 15-per-cent stake the next year. The three firms formed two new joint companies to manufacture and market fuel cells and drive trains for electric vehicles.

“The starting pistol in the race to produce the first fuel-cell car has been fired,” says Juergen Hubbert, head of Daimler’s car division. “A new era in transport is dawning.”

“It’s an astounding leap,” says David Scott, professor of mechanical engineering at Canada’s University of Victoria. “The fuel cell will have an impact on transportation comparable to that of the microchip on communications.”

Ballard can barely keep up with the invitations to speak at universities. He advises students: “Do not be patient. All things do not come to those who wait. Dare to be in a hurry to change things for the better.”

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

Electric car engine conversion has been a very popular method of saving money for people nowadays. People are becoming more aware of the possibility that our oil reserves would probably one day just run out, as foreseen through the recent increase in oil prices. Aside from which, we have become more conscious of the negative effects that carbon emission has on the environment and on people’s health.

Click Here For Electric Conversion Made Easy Instant Access Now!

There are actually different types of electric car engine conversion. The first one is that you would have to replace the gas engine with an electric drive system and the second one is installing the electric drive system without having to remove other parts of your car. Both processes would involve the use of a control mechanism. These are the battery and the electric motor. You can either use the present gas engine to charge the battery of you may opt to plug in onto a wall outlet.

It is, however, a fallacy that electric cars are slow and inefficient. Many people have also believed that it is not advisable to have cars run on electric power. What they do not know is that electric cars are easy to maintain since they are very efficient and clean. The speed is also very satisfactory and it can also save you a lot of money. The technological advancements have made all this possible for all of us.

Electric car engine conversion can give us the one thing that everybody is pleased to have: savings on fuel costs. These cars are also able to help out with the environmental problems that we are facing. Try to install the whole system without having to remove your gas engine and this can work wonders for you. You can use each one alternately if you run out of power on either one.  

Make sure, however, that you have enough knowledge on installing and maintaining an electric car engine conversion. You will need to know what parts you should and should not remove, more so if you are really planning to take out your gas engine. Still, you do not need to worry if you are not that aware of these things. There are professionals that can help do the job for you.

Click Here For Electric Conversion Made Easy Instant Access Now!

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

Investing in Shuswap real estate takes more than just paying money and acquiring the ownership. When you are purchasing property in Shuswap you are investing in a place that is one of the favorite tourist hotspots. There may be different reasons of buying property. Some people want to be permanent residents of the place, some tourist buy for short term basis for to spend their vacation comfortably, others buy property to lease out to the tourists and earn money. Whatever, be the reason, while investing in Shuswap real estate you are spending your hard earned money and you should make the best buy. If you have less idea about the place, you can take help of the real estate agents. But, the prime concern about the real estate is what to look for while investing. Available Space You should consider about the available space based on the number of members who are going to live there. How many rooms or how many square feet of living you require are an important matter. Your preference of space depends on people you will live with. If you are staying alone, you may not require much space. Again, if you are sharing the house with others, you have to consider the conveniences. Amenities Most of the Shuswap real estates are available with modern day equipments. If you prefer an already furnished house ask your real estate agent to look for one that can satisfy your requirements. For people ho own vehicles, it is crucial to have a parking space with the house. Water and electric facilities are essential for anyone. Above all, look at the condition of the house and check the floor, roof, walls and doors. Make sure that you don’t have to invest much in repairing after purchasing the house. Neighborhood If you are looking forward to be a permanent member of that place, ensure that you have a good neighborhood. Try to know about the people living in the nearby area. Make sure the hospital, schools, shopping malls are accessible easily. Moreover, look for the communication facilities around the area. Price and Budget Like any real estate price, the prices of Shuswap real estate are volatile. The tourists to the places may get confused about the prices. Even, the prices of the Shuswap real estate is determined by many factors such as locality, condition of the real estate, size, types of houses, etc. If you don’t have adequate idea about the prices, you should take help of agent services that can provide you relevant information about available property and their prices. Again, don’t ignore your budget which is your prime consideration. Your Purpose of Buying Shuswap Real Estate While investing in Shuswap real estate you might have a purpose. If you are buying it to become a resident of the area, you can select it according to your preferences. But if your purpose is to lease out the property to the tourists, you have to consider it from the tourists’ point of view.

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

These days, many people are starting to turn to electric powered cars to save more money. This is one of the reasons why more and more people are searching for information on electric car conversion kits. With the continuous increase in oil prices, it is no surprise that there is also an increasing number of people who are turning away from gas powered vehicles.

Click Here For EV Secrets Instant Access Now!

Aside from the increasing gas prices, people are also starting to grow more concerned about the harmful effects of carbon emissions. The present financial crisis is another factor that continues to make people consider owning an electric powered car.

If you are thinking about having a copy of electric car conversion kits, you must know that there are generally two kinds of kits. One kind of kit will require you to replace your traditional gas fuel engine with an electric drive system. The other kind will require you to install an electric drive system without having to completely remove your gas engine.

It helps to take note of the benefits and disadvantages of having to completely replace your gas engine with an electric one and not having to completely replace your traditional gas engine with an electric drive system. You must also remember that every conversion kit comes with a control mechanism, an electric motor, and a battery.    

While there are still quite a number of people who do believe that electric cars are not really efficient and they tend to be very slow, it is without a doubt that electric powered cars is a new trend in alternative forms of transportation. Electric car conversion kits make it possible for us to build and own an electric powered vehicle. They also help us realize reduced costs in fuel and they also help us do our share in helping Mother Nature.

Click Here For EV Secrets Instant Access Now!

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

There are several ways of making hydrogen in the UK. The cheapest way is to convert natural gas into hydrogen by a process called reformation. Reforming natural gas into hydrogen produces CO2 but no more than burning it. However, using the hydrogen in a hydrogen fuelcell or using the natural gas itself in a natural gas fuelcell produces at least twice as much useful energy for a given amount of natural gas than burning it (in a natural gas fuelcell the natural gas is ‘reformed’ inside the fuelcell).

Therefore to get the best use from natural gas we should endeavour to use it in fuelcells, either directly or after reforming it into hydrogen. Natural gas fuelcells will be a good bridge technology to a hydrogen-powered world.

Natural gas, i.e. methane, is a powerful greenhouse gas, 10 times more effective than CO2, so we should use up all the natural gas on Earth by burning it or using it in fuelcells before it escapes and adds to global warming. Commercial pressures are achieving this anyway and in due course natural gas will become scarce so we need to develop alternative ways to make hydrogen.

We should not rely on converting coal into hydrogen because obviously coal is not a greenhouse gas so to create CO2 as a by-product of converting coal into hydrogen is not justifiable on greenhouse gas priorities. However to convert coal into a gas suitable for use in fuelcells is better from a minimising the production of atmospheric CO2 point of view than simply burning coal as we used to. This technology may be a good way ahead for India and China to use some of their vast coal deposits.

But the UK and Europe cannot go back to increasing our reliance on coal because most of the CO2 emissions savings to date have been achieved by switching from coal to natural gas! If we did go back to coal we would be back to where we started in 1990. Nuclear power is not acceptable. So we do need to get on with developing alternative ways of making hydrogen. In the UK and Europe we are becoming dependent on natural gas which because of increasing use is going to become progressively more expensive and will eventually run out.

There are four main alternative methods available at present for producing hydrogen without producing CO2 or adding more CO2 to the atmosphere:

1) The electrolysis of water using electricity from renewable resources such as wind power, hydro-power and solar photo-voltaic cells. This method produces no carbon dioxide.

2) The chemical or thermal reformation of biomass feedstocks such as SRC (short rotation coppice) wood chips or methanol manufactured from biomass. This method releases carbon dioxide but it is all recycled by the growth of more biomass.

3) The biological reformation of biomass using micro-organisms. This method releases carbon dioxide but it is all recycled by the growth of more biomass.

4) The direct splitting of water using light with special catalysts or extreme heat, this method produces no carbon dioxide.

Of these four processes only the production of hydrogen by the electrolysis of water using electricity generated by offshore wind power is viable on a large multigigawatt scale in the UK.

Offshore wind power is the only large (ie multigigawatts) UK resource of clean renewable electricity that is likely to be available in the near future. Sufficient onshore wind power capacity is unlikely to get planning permission and the other renewables do not have sufficient capacity. The hydrogen will be manufactured in factories at the coast.

The hydrogen produced will be used for road transport applications, initially urban buses and, later on, cars.

In due course if solar-photo-voltaic (PV) electricity generation in North Africa becomes established, hydrogen, manufactured by the electrolysis of water, using the solar-PV electricity in North Africa, could be transmitted by gas pipelines across the Mediterranean Sea and throughout Europe and north into the UK. The hydrogen could then be used as a transport fuel or it could be converted into electricity and heat in fuelcell based cogeneration systems. Production could start in S. E. Spain and then expand into North Africa.

Assuming these developments take place then as a first step, the hydrogen from North Africa could be injected into the existing natural gas pipelines supplying the existing UK natural gas grid to enhance the energy value of the natural gas. This already occurs in the USA. Before we changed over to North Sea natural gas, we used town gas made from coal which was over 50% hydrogen.

The enriched natural gas will continue to be burned in existing central heating systems and cookers but new domestic systems will be based on fuelcells for the cogeneration of electricity and heat.

If hydrogen injection into existing natural gas pipelines is adopted, then only a small proportion of hydrogen can be injected because all of the gas appliances running on natural gas are sensitive to the proportions of different gasses in the gas mixture supplied. However, the volume of hydrogen to be delivered using this technique will be quite small relative to the volume of natural gas being delivered and so the gas mixture would be acceptable. It would not be possible however to keep increasing the proportion of hydrogen injected as hydrogen production increases.

What gas injection offers is an early route to market for the initial small scale production of hydrogen before separate hydrogen pipelines are built. When hydrogen becomes the main energy carrier, then sections of the natural gas grid will be changed to 100% hydrogen and the existing gas appliances in the area served will have to be adjusted to burn hydrogen. This is what happened when we changed from town gas – which was over 50% hydrogen – to North Sea gas.

Hydrogen injection is a way of integrating hydrogen into the existing natural gas system. It enables existing appliances to be used to burn the hydrogen and so provide a market for early production. The enriched natural gas can also be used to run natural gas fuelcells or can be reformed at the point of use to give hydrogen for use in hydrogen fuelcells. This enables fuelcells to be introduced alongside existing appliances all using the same fuel supply system.

Eventually the whole country will go over to 100% hydrogen, the gas grid will be increased in capacity and it is possible that the national electricity grid will no longer be required as the generation of electricity becomes locally based, using hydrogen fuelcell cogeneration systems.

The hydrogen-powered cogeneration systems will range in size from less than 1 kW up to 100s of MW. These systems will be located in single homes, large buildings or serve whole communities from a cogeneration centre.

Another likely route of hydrogen supply to the UK will be as liquid hydrogen delivered by ocean tanker from Canada, where hydroelectricity will be used to electrolyse water, or from Iceland where electricity from geothermal power may be used to electrolyse water.

In the early 1990s the EEC developed at the Joint Research Centre at Ispra in Italy the concept of the Euro-Quebec Hydro-Hydrogen Project for transporting liquid hydrogen across the Atlantic in special ship mounted barges. And in Iceland there is now an Icelandic government project to change the whole country over to a hydrogen-based energy system.

In due course there will be a world-wide trade in liquid hydrogen that will underpin each individual country’s pipeline based systems. Liquid hydrogen supplies will provide security of supply and boost availability in winter by moving surplus summer production of hydrogen around the world. If there is an accident with a hydrogen tanker the hydrogen will boil away with no pollution. The process of liquefaction dissipates about 30% of the energy in the hydrogen, so pipeline distribution of hydrogen as a gas will always be the preferred option for bulk distribution.

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

Do you want to give up on paying too much on gas because you realized that you are actually spending a lot of money on it? Do you want to convert your car because you’ve heard that it can really save you more money? If you are planning to convert your car and make it an electric one, then what you need is electric car conversions kits. This kind of kit will do the job for you when it comes to converting your car. Before you buy the kit, you must keep in mind these tips:

Click Here For Electric Conversion Made Easy Instant Access Now!

Tip # 1: Know The Kind of Kit You Need

There are tons of electric car conversions kits available in the market, if you want to have your car converted successfully then you must really know what kind of kit will be the one that you need. Try to do some research about the kit so that it will be much better for you to choose the one for you.

Tip # 2: Read Customer’s Reviews

If you want the kit to be the best among the rest, then what you need to do would be to read the product reviews that can be found on the internet. There are several car conversion kits that are for sale, so if you want to get the best from the bunch, all you got to do is to read the reviews and decision making about buying the kit will be much easier for you.

Tip # 3: Ask The Experts

If you know anyone who already have converted their car, then it will be much better if you talk to them and ask them some questions. This will really help a lot because these people are considered experts and they know already what to do. Their advices will surely help you big time.

In this kind of economy, it is really important that we know how to save money. If you would be able to know more information about electric car conversions kits and have your car converted, you will surely help Mother Nature and you will surely save a lot of money. Good Luck!

Click Here For Electric Conversion Made Easy Instant Access Now!

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars

Every investment vehicle and financial program under the sun has some sort of risk attached to it. Whether it is stocks, bonds, stock options (deep in the money/out of the money) puts, arbitrage, stock shorting, derivatives, mergers, Real Estate Investment Trusts, etc. The key is managing the risks within suitable parameters while superimposing an investment template and guidelines over the investment.

Many have used the Option Adjustable Rate Mortgage for consumer home purchases and some are in deep do-do for never understanding exactly what the downside held for them. Many wealthy people have used the Option ARM in combination with financial planning, as they knew exactly what to do with the payment difference between the fully indexed payment and the option payment. They put it to work to more than offset any negative amortization and have benefited. A well-known lender proponent of this vehicle structures the deal with an 80% or lower LTV (Loan To Value) and offers a biweekly payment schedule. This allows the borrower to pay the loan off in 21 to 22 years by making one extra payment per year thereby shortening the term and saving 8 to 9 years of payments. This can make for tremendous savings while working within the program guidelines. The problems started when the Option ARM became morphed by new players in the game by allowing Piggy-Back Second mortgages behind the potentially negative ARM thereby putting more pressure on the borrower to keep up with the adjustments during the current mortgage upswing. Typically the monthly payment has a 7.5% built in escalator per year for the first five years with an additional limitation of the amount of negative amortization (original mortgage amount goes up) 115% of the original loan amount. During an accelerating real estate market the appreciation has kept ahead of the negative amortization. For example: If a borrower had an original 80% LTV loan of $450,000.00 and the difference between the fully indexed rate (fixed margin percentage and the variable index used) and the minimum payment amount was say 6% less and neighborhood prices per appreciating say 11% per year fine. Even with say 3.5% inflation a borrower would be ahead of the game in this scenario. Keep in mind, the 11% appreciation is taking place on the total value where the negative amortization is effecting the mortgage amount only. As long as this scenario carried forward for say five years the borrower could be still be ok. However, when the market turns suddenly, the borrower could be upside down (owe more than the property is worth) in short order.

The best evidence of the sudden turn of events is in monitoring the foreclosure rates of ARMS versus Fixed rate mortgages. In many areas, there are steep rises in these programs. To complicate things, hybrid OPTION ARMS have found there way into ALT A market with borrowers demonstrating less than stellar credit, employment, assets, etc. or a combination of all the aforementioned. With this combination and perhaps a Piggy Back Second Mortgage making for an initial 95% to 100% Combined Loan To Value the handwriting has been on the wall for major problems when a downturn occurred in property values. There will be foreclosures, short sales (lenders settling for less than what is owed) and much agony experienced by borrowers, but eventually it will work itself out. Regulators are already touting closer regulation of Option ARM and other mortgage hybrid products that may pose a danger to the consumer.

So do we through the baby out with the bath water, or is there a way to make this program work?

Let’s then look at a four-unit residential investor property acquisition using an OPTION ARM mortgage vehicle. This is a scenario and discussion of buying property in a softer market as is found in many areas of the country. If the goal in any investments is to make something in the range of 10% plus or minus in other investments then how would this four unit stack up. First of all if you are a professional property manager, great. If not, spend a lot of time to locate and interview a licensed professional property manager perhaps with a Certified Property Manager Realtor designation. Proper management is a must. A street smart Realtor who is not afraid to make lots of low offers is another. Like stocks, a margin account can get you about 50% leverage. Likewise real estate has that and more. Our goal then would be to buy an undervalued property with seller help on costs. The property will be structurally sound with a good roof but may be tired looking and dated with tenants paying less rent than the market. After negotiating a stellar price and term deal the financing will need to allow us CASH FLOW while we tune up the exterior and interior including updated baths and kitchens, carpet and new decorating. The existing tenants will be given the opportunity to stay and pay the higher rents or move and bring in new rental customers who can appreciate the amenities of the new digs. The key to this deal is the OPTION ARM mortgage, which will allow for a low starter payment while the property is being rehabbed. When rents stabilize-full payments can be made at the indexed rate. This will be on a 75% Loan To Value basis to make the numbers work. On a $500,000 property a mortgage of $375,000 at a start rate of say 2.75% or a payment of $1,530.90/month. Rents would be $4,400 per month with a vacancy factor. Taxes are $5,200 or $433.33/month and hazard insurance is $291.66/month. The units have separate meters for water, electric and gas. The owner pays the garbage and lawn maintenance and snow removal. The property was the dog on the block so there is excellent appreciation opportunities over time. Rents will move up annually. In this instance, the property has a Net Operating Income of $33,000 before debt service giving a Cap Rate of $33,000/$515,000(including costs) = 6.4%. With the 2.75% payment rate on the Option ARM the cash flow would be $33,000-$19,000=$14,000 in Cash Flow. The initial investment is $125,000 down + $8,000 cost + $35,000 fix up totaling $168,000. So with $14,000 in cash flow the return on equity is $14,000/$168,000 = 8.33%. Now with the interest and depreciation factored in of some $13,636 plus an interest deduction of $26,250 totals (fully loaded) = $39,886 giving a tax loss of $39,886-$33,000=$6,886 but with a before tax cash flow of $14,000. The Federal Tax savings would be some $2,065 for a 30% tax bracket. The total return on equity would $2,065 + $14,000=$16,065/$168,000= 9.56% in After Tax Return. To compare to fully taxed investments we would then allow for the 30% tax bracket or 9.56%/. 70 = 13.66% before tax rate for investment comparison purposes.

Option ARMs can make sense for a discounted value property at a value below market that will appreciate with upgrades and improvements to make for a more desirable rental space. In this niche with 80% LTV or lower using this program can make a lot of sense. A borrower does not HAVE to go negative; it just cuts down on the positive cash flow. The Option ARM gives lots of flexibility to an investor where cash flow is king. It’s not for everyone. The property has to be acquired at the right price and there must be the potential for a greater value with improvements and higher rents. If that is not the case, pass; bring on the next property. Make lots of offers and bargain for your terms. The blush on this rose (current market) will be returning sooner than not. Market opportunities do not last in this dynamically changing climate. Option ARMS can be used as a useful cash flow tool. Compared to other investments, the depreciation and interest deductions are huge for sheltering investment dollars with the opportunity for appreciation and increasing rents to keep up with rising operational costs. Take a closer look. This can work for good or bad credit. Give it a shot and complete your due diligence.

Dale Rogers

www.brokencredit.com

Electric Vehicles | Street Legal Electric Vehicles | Street Legal Electric Cars