The Real Estate Investor's Handbook The Complete Guide for the Individual Investor

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By Steven D. Fisher

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The Real Est

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THE

REAL ESTATE

INVESTOR’S

HANDBOOK:

The Complete Guide for the

Individual Investor

By Steven D. Fisher

The Real Estate Investor’s Handbook: The Complete Guide for the Individual Investor

Copyright © 2006 by Atlantic Publishing Group, Inc.

1210 SW 23rd Place • Ocala, Florida 34474 • 800-814-1132 • 352-622-5836–Fax Web site: www.atlantic-pub.com • E-mail sales@atlantic-pub.com SAN Number: 268-1250

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. Requests to the publisher for permission should be sent to Atlantic Publishing Group, Inc., 1210 SW 23rd Place, Ocala, Florida 34474.

ISBN-13: 978-0-910627-69-6 ISBN-10: 0-910627-69-X

Library of Congress Cataloging-in-Publication Data

Fisher, Steven D., 1944-

The real estate investor’s handbook : the complete guide for the individual investor / Steven D. Fisher.

p. cm.

Includes bibliographical references and index.

ISBN 0-910627-69-X (978-0-910627-69-6 : alk. paper) 1. Real estate investment. I. Title.

HD1382.5.F57 2006

332.63’24--dc22

2006012577

Printed in the United States

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TABLE of CONTENTS

Foreword

13

IntroductIon: AdvAntAges &

dIsAdvAntAges oF reAl estAte

15

Advantages of Real Estate Investment .................................................. 16

It Offers Good Returns ........................................................................16

It’s Relatively Easy to Begin ...............................................................16

It Provides the Ability to Use Leverage ............................................16

It Provides Long-Term Appreciation ................................................16

It’s Stable ...............................................................................................17

It Provides Tax Benefits.......................................................................17

It Allows You to Build Income and Wealth ......................................18

It Rewards Sweat Equity ................................................................... 18

You Can Live in Real Estate ...............................................................19

Disadvantages of Real Estate Investment ...............................................19

It Requires Capital ...............................................................................19

Transaction Costs Can Reduce Your Returns ..................................19

It Ties Up Capital .................................................................................20

Returns May Vary ................................................................................20

Taxes Can Slash Profits (If You Are Unprepared) ...........................20

The Important Question: Is Real Estate Investing Your Game? ..........20

Does the Prospect of Investing in Real Estate Truly Excite You? .... 21

Are You Prepared to Sacrifice? ...........................................................21

Do You Have the Personality and Time to Deal

with People and Problems? ................................................................21

Get and Stay Financially Healthy! ...........................................................22

Check Your Credit Rating ...................................................................22

Eliminate Debt .................................................................................... 23

Get Complete Insurance Coverage .................................................. 24

Keep Your Current Job ........................................................................26

chApter 1:

InvestIng wIth lIttle Money

27

Your Credit Rating .....................................................................................27

Options for Obtaining Down Payment Money .................................... 32

Option 1: Save the Money ................................................................ 32

Option 2: Increase Your Income ....................................................... 32

Option 3: Tap Into Your Home Equity ..............................................33

Option 4: Individual Retirement Arrangement (IRA) ....................34

Option 5: Scale Down ..........................................................................34

Option 6: Find a Partner .................................................................... 35

Option 7: Use a Bank or Credit Union ..............................................35

Option 8: Mortgage Brokers ...............................................................35

chApter 2: types oF MortgAges

39

Fixed-Rate Mortgages ................................................................................39

Adjustable-Rate Mortgages (ARMs) ...................................................... 41

Length of Mortgage .................................................................................. 47

Other Fees....................................................................................................47

Mortgages to Avoid .................................................................................. 51

Balloon Loans .......................................................................................52

Interest-Only Mortgages .....................................................................52

chApter 3: InvestIng In resIdentIAl

And coMMercIAl propertIes

57

Single-family Residential Investments .................................................. 58

Multi-family Residential Investments .....................................................60

Recommendations on Residential Properties ........................................61

Commercial Properties ..............................................................................62

Undeveloped Land ................................................................................... 63

Real Estate Investment Trusts ................................................................. 64

chApter 4: FlIppIng

69

Common-Sense Flipping Guidelines ..................................................... 70

Guideline #1: Know the Markets ..................................................... 70

Guideline #2: Prepare and Plan .........................................................70

Guideline #3: Form a Team ................................................................71

Guideline #4: Expect Problems ........................................................ 71

Guideline #5: Think Long-Term ........................................................71

Types of Flippers ........................................................................................71

Scouts.....................................................................................................71

Dealers ...................................................................................................72

Retailers .................................................................................................73

The Flipping Process ..................................................................................73

chApter 5: Foreclosures And reos 79

Types of State Foreclosures .......................................................................81

The Four Steps to Foreclosure ..................................................................82

The Pre-foreclosure..............................................................................82

Notice of Default (NOD) ................................................................... 82

The Foreclosure Sale ............................................................................83

Redemption Period .............................................................................84

REO Opportunities ....................................................................................85

The Lease Option Strategy ........................................................................86

Seller Advantages ................................................................................86

Advantages for Buyers .......................................................................87

Real Estate Auction and Probate Sale Opportunities ..........................89

Real Estate Auctions ............................................................................89

Probate Sales .........................................................................................90

chApter 6: the teAM ApproAch

95

The Tax Advisor .....................................................................................97

The Lender or Mortgage Broker ..............................................................98

Lenders ..................................................................................................98

Mortgage Brokers ............................................................................... 99

The Real Estate Broker and Agent ........................................................ 100

Compensating the Broker or Agent ............................................... 101

Finding a Great Broker or Agent .....................................................102

The Appraiser ...........................................................................................104

The Real Estate Attorney ...................................................................... 106

Contractors or Repairpeople ................................................................. 106

chApter 7: FIndIng And

evAluAtIng propertIes

115

The Region ................................................................................................116

Population Growth ............................................................................117

The Five Categories .................................................................................117

Category 1: Location .........................................................................117

Category 2: Type ................................................................................118

Category 3: Property Worth .............................................................119

Category 4: Population .....................................................................120

Category 5: Job Growth and Levels of Income..............................120

The Local Area ..........................................................................................122

Building Permits ................................................................................123

Cost of Renting Versus Cost of Buying ......................................... 124

Levels of Occupancy ........................................................................ 124

Rental Rates .........................................................................................126

The Path of Progress ..........................................................................126

The Benefit of Problems ....................................................................127

The Governmental Climate ..............................................................128

Neighborhood Comparisons ..................................................................129

The Real Estate Market—To Time or Not To Time ............................ 133

chApter 8: understAndIng

leAses And vAlue

137

Transferability of Leases ..........................................................................138

Residential and Commercial Leases ......................................................139

The Principles of Real Estate Valuation ................................................142

The Highest and Best-Use Concept .......................................................144

Fair Market Value Versus Investment Value ....................................... 144

Standard Value Guidelines .................................................................... 146

Replacement Cost .....................................................................................150

chApter 9: ensurIng A

return on your InvestMent

151

Net Operating Income .............................................................................152

Get Real Numbers ....................................................................................155

Vacancies .............................................................................................156

Concessions ...................................................................................... 156

Delinquencies and Collection Losses ............................................ 157

Additional Income Streams ..............................................................157

Operating Expenses .................................................................................157

Utilities ................................................................................................158

Management Fees ..............................................................................158

Insurance .............................................................................................158

Additional Operating Costs .............................................................159

Cash Flow ..................................................................................................159

Debt Servicing ....................................................................................160

Capital Improvements ..................................................................... 160

Commercial Property Lease Options ....................................................161

Common Area Maintenance Charges .............................................162

Which Type of Lease Is Best? .......................................................... 163

The Three Basic Methods of Determining Real Estate Value............ 163

Comparable Sales (Market Data) Method .................................... 164

The Income Approach .......................................................................164

The Cost Approach ............................................................................165

Reconciliation .....................................................................................167

Advanced Valuation Techniques .....................................................168

All the Research Is Done—Now What? ................................................169

chApter 10: negotIAtIons

173

Common Sense Guidelines for Negotiation .........................................174

Guideline 1: Prepare for Negotiations ............................................174

Guideline 2: Determine the Seller’s Motivations ..........................176

Guideline 3: Bring the Power of Facts

to the Negotiation Process ................................................................177

Guideline 4: Be Patient and Objective ............................................177

Guideline 5: Create a Win-Win Atmosphere .................................178

Putting Together an Offer .......................................................................178

Contract Basics .........................................................................................179

The Purchase Agreement ..................................................................185

More On Contingencies...........................................................................188

Presenting the Purchase Agreement in an Effective Manner ........... 192

chApter 11: escrow, due dIlIgence,

And other vItAl MAtters

193

Escrow ........................................................................................................193

Formal Due Diligence ..............................................................................196

Review Books and Records ..............................................................196

Property Inspections ................................................................................200

Different Forms of Inspection ..........................................................202

Getting a Qualified Inspector ..........................................................209

Credit Negotiation .............................................................................210

The Title Holding .....................................................................................211

Sole Proprietorship ............................................................................212

Joint Tenancy ......................................................................................212

Tenancy in Common .........................................................................215

Partnerships ........................................................................................216

Limited Liability Companies .......................................................... 219

Corporations .......................................................................................221

Closing Escrow ........................................................................................... 223

Closing Statement ..............................................................................226

Recording of the Deed ..................................................................... 227

the lAndlord pAth

233

chApter 12: choosIng

the rIght lAndlord pAth

235

The Professional Management Option ................................................ 237

The Landlording Option .........................................................................241

Types of Housing .................................................................................... 242

Advertising for Tenants ...........................................................................248

Ways You Can Advertise Your Property ....................................... 248

Finding Good Tenants............................................................................ 253

Moving In Your Tenants ..........................................................................257

Retaining Good Tenants ..........................................................................258

Collecting Rent .........................................................................................262

Eviction Procedures .................................................................................265

Maintenance and Repair .........................................................................267

Protecting Your Investments ................................................................. 268

Landlord Forms ........................................................................................271

chApter 13: KeepIng records

287

Record Keeping ........................................................................................288

Overall Accounting Skills .......................................................................290

Accounting at the Rental Level ..............................................................292

Accounting Software .........................................................................294

chApter 14: tAx AdvAntAges

And exIt strAtegIes

297

Optimizing Tax Advantages ...................................................................298

Passive and Active Activity..............................................................301

The Active Path—Qualifying as a Real Estate Professional ........303

Exit Strategies .......................................................................................... 304

Selling Outright ........................................................................................304

The Installment Sale ..........................................................................309

Tax-Deferred Exchanges ...................................................................309

Boot .............................................................................................. 312

Capital Gains Exclusion ....................................................................317

Lease Options .....................................................................................320

Gifts and Bequests .............................................................................322

conclusIon: the secret

to buIldIng reAl estAte weAlth

327

Maximizing Return on Your Properties ................................................327

Choose an Investment Strategy .............................................................333

Action Plan! ...............................................................................................335

glossAry

341

recoMMended reAdIng

381

Index

383

FIAbcI-usA MeMbershIp

390

FOREWORD

For more than 20 years as a licensed real estate broker, I have enjoyed a wonderful, exciting career, and I

have always been amazed that more people don’t take advantage of all this business has to offer. Real estate can be the ticket to financial independence, which is especially important in these times of downsizing, pension cutoffs, outsourcing of jobs, and other economic uncertainties.

A career in real estate offers so many benefits you simply can’t find in other occupations. Embarking on a real estate career is easy. You don’t need years of study or a university degree, and you don’t even have to be a broker to be a successful investor.

All you really need is a willingness to take action and work hard.

It’s also a great way to meet people from all walks of life while earning a good income. Plus, as a real estate investor, you can get great, predictable returns over time without the volatility of the stock market.

And don’t forget the tax benefits! The government encourages real estate investment and allows you to reduce your taxes through acquisition of assets. It doesn’t get much better than that. But, wait a minute! Yes, it does! Because through careful investment in real estate, you can build both income and wealth.

There aren’t many other careers on the planet that offer you those kinds of advantages!

So with all these benefits, why don’t more people invest in real estate? In my opinion, it’s due to fear. And that fear comes from lack of knowledge. At first glance, the subject seems so

complicated because of the intimidating language used—

leverage, capital gains, Tax Deferred 1031 exchanges, escrow, due diligence. We tell ourselves, How can I learn this subject when nobody seems to speak English!

Well, TheRealEstateInvestor’sHandbook takes care of that problem for you. It explains every aspect of real estate investment in the clearest possible terms and takes the mystery out of the subject. It outlines the best possible course to take in each area of investment. At the same time, the book doesn’t offer a simplistic

feel good approach to a real estate career. It also identifies pitfalls to avoid so you can always keep yourself on a profitable path. In this book, you’ll learn not only about the nuts and bolts of investment (mortgages, leases, negotiating, landlording) but also how to achieve the most important objective of all, particularly in times of uncertainty—financial security.

TheRealEstateInvestor’sHandbook lays a solid foundation for your success in property investment. All you need to do is learn and apply the knowledge in this book to build a house upon a steady foundation. And that house will have a wonderful address on it: A Secure Future.

I wish you much happiness as you embark on this exciting and profitable voyage!

John D. Pinson

Chairman, John D. Pinson, Inc.

CIPS, CRS, GRI, cert FIABCI

(International Real Estate Federation)

Johnisanexperiencedlicensedrealestatebrokerwhooffersthe

bestinrealestatenotonlyinFloridaandNewYorkbutalso

internationally.VisithisWebsiteat:www.johnpinson.com,and

hecanbecontactedatJohn@Pinson.com.

INTRODUCTION

i

ADVANTAGES &

DISADVANTAGES OF

REAL ESTATE

Investing in real estate is a time-tested strategy for building wealth. Like any investment, it should be approached with the most valuable weapon in your arsenal—knowledge.

The purpose of this book is to provide that knowledge through proven guidelines and principles of wise investment. In addition, this book will help you decide if real estate investment is the right strategy for your personality and your goals. Real estate is often touted as the path to great wealth and security, and the first step is to take an objective look at real estate as an investment, considering its advantages and disadvantages.

16

THE REAL ESTATE INVESTOR’S HANDBOOK

ADVANTAGES OF REAL ESTATE INVESTMENT

It Offers Good Returns

Historically, real estate has given investors an average annual return of 8 to 10 percent. This rate is comparable to historic returns in the stock market without the accompanying volatility.

As a general rule, real estate investments outpace inflation and create real wealth for investors.

It’s Relatively Easy to Begin

Anyone can get into real estate. Even if you have only modest means, there is a property that will fit your needs and allow you to get started.

It Provides the Ability to Use Leverage

Leverage is the ability to use credit to finance a portion of the costs of purchasing or developing a real estate investment. Simply put, this means borrowing money to buy a property while investing only a small portion of the purchase price. In other words, you can buy a property for dimes on the dollar. This, in turn, allows you to convert equity gains into cash—without selling the asset. By exercising self-discipline to build savings, you can acquire a minimum of capital, allowing you to enter the real estate market.

It Provides Long-Term Appreciation

A great advantage of real estate investments is that the properties themselves increase in value over time. This happens for two reasons. First, inflation tends to drive up the replacement cost of housing. Second, as the population

INTRODUCTION

17

increases, so does the demand for ownership. Appreciation puts dollars in your pocket.

It’s Stable

Compared to other investments, such as the stock market, real estate is stable. It tends to be both slow to rise and slow to fall, which means it’s more predictable in terms of the investments you make. Over the past 30 years, real estate values have gone up or down by only 4 percent or so. During that same period of time, the stock market bounced up and down by nearly 17

percent in terms of daily risk. Clearly, real estate can be a solid part of any investment portfolio.

It Provides Tax Benefits

The government provides the real estate investor with three tax advantages: deductibility, depreciation, and deferability.

• As an investor, you can deduct for such routine expenses as maintenance, improvement, property upkeep, and

even mortgage interest. These deductions offset your investment income and, in some cases, your personal income, reducing overall taxes in both instances.

• Tax laws also require you to depreciate your investments; that is, account for the wear and tear of a property by claiming an annual decline in the value of a building.

This allows you to reduce taxable income through

depreciation at the same time the property is most likely appreciating in value.

• The final tax advantage is deferability. By using IRAs and 1031 Exchanges to buy and sell investment real estate, taxes are deferred to a time when they will take a smaller

18

THE REAL ESTATE INVESTOR’S HANDBOOK

bite out of your income. A good example is the use of your Individual Retirement Arrangement (IRA). You

can invest your IRA money in real estate, and as long as the profits remain in your account, they’re tax-deferred.

You can also take advantage of the Tax-Deferred 1031

Exchange law. This tax law allows you to sell one

property and buy another without incurring capital gains taxes. You simply have to reinvest all your profits into the next property (or properties) within a specific timeline.

All successful real estate investors use these tax benefits to build wealth.

It Allows You to Build Income and Wealth

Real estate makes use of the principle of synergy. In other words, the investments work together to create a whole greater than the sum of their parts. For example, if you have a rental property, this gives you monthly income. At the same time, that property is likely appreciating in value while you’re paying down the mortgage. Over time (say, a 30-year mortgage), your mortgage payment stays the same, but the compounding of rental interest results in a greater and greater cash flow for you. Factor in depreciation, and your cash flow and return get even better. By the thirtieth year, the mortgage is paid off, your monthly expenses drop, and your cash flow really takes off.

And that’s just with one property! Imagine the further synergy you get when you invest in multiple properties (single-family homes, apartment buildings, etc.).

It Rewards Sweat Equity

Real estate is a physical asset made of wood, bricks, stucco, glass, and so on. Add some do-it-yourself improvements, or sweat equity, and increase a property’s value. All you need is a

INTRODUCTION

19

little home-improvement knowledge, a few tools, and a lot of elbow grease. Sweat equity costs nothing but time.

You Can Live in Real Estate

You can buy a home, fix it up, live in it, and then rent it out when you move to a second home. That first home gives you a foundation for building wealth in the real estate market. Many real estate investors have begun their careers this way.

DISADVANTAGES OF REAL ESTATE INVESTMENT

It Requires Capital

No matter what self-styled gurus say in books and infomercials, no one gets into the real estate market without money.

Investment can occur through the use of savings, Real Estate Investment Trusts (REITs), IRAs, and so on, but capital is required to start the process. In their early years, many successful real estate investors practiced that old-fashioned virtue: fiscal discipline. In other words, they scrimped and saved and poured every penny into their investments in order to reap the rewards later. They also learned everything they could about real estate and tax laws so they could maximize income and growth while minimizing costs.

Transaction Costs Can Reduce Your Returns

If you are not knowledgeable about real estate, profits can be greatly diminished by such costs as commissions, points, title insurance, closing costs, and other fees. Typically, the costs run around 15 percent of the transaction whether buying or selling.

Analyze purchases or sales carefully to realize a good return on investment. Study the market and get practical experience in the

20

THE REAL ESTATE INVESTOR’S HANDBOOK

buying and selling of properties.

It Ties Up Capital

For the most part, real estate investment is not a quick in, quick out kind of investment. Capital is tied up for a considerable amount of time. If you are impatient or need money quickly, real estate investment is not for you.

Returns May Vary

As stated earlier, real estate is a stable investment compared to the more volatile stock market. That, however, does not mean real estate prices remain the same. If you invest in poor areas of the market, you may find declining values rather than appreciating ones. You can avoid or minimize these fluctuations in two ways. First, analyze markets to choose desirable properties. Second, investing for the long haul will smooth out the bumps in the profit road, while you reap the reward of long-term appreciation.

Taxes Can Slash Profits (If You Are Unprepared)

Tax laws are favorable to real estate investment, but you must know how to apply them legally. Ignorance is expensive. Study the laws with care, and the state and federal government tax bites will be much smaller.

THE IMPORTANT QUESTION:

IS REAL ESTATE INVESTING YOUR GAME?

Weighing the advantages and disadvantages of real estate investment can help you decide if it is the right market for you.

Only you can decide that, of course, but here are some questions to consider:

INTRODUCTION

21

Does the Prospect of Investing in Real Estate Truly Excite You?

Everybody wants great wealth, but few people are truly passionate about achieving it. The passionate ones are those who succeed. Initially excited at the prospect of learning everything they can about real estate, they continue learning because they know that great knowledge will reap great rewards. They are also committed, willing to overcome any obstacle using legal and moral means.

Are You Prepared to Sacrifice?

If you are new to real estate and have little money to invest, are you prepared to scrimp and save, forgoing niceties in order to put money into investments? In other words, are you prepared to sacrifice part of the present to achieve future success? If so, real estate is for you because you can take the necessary long view.

Do You Have the Personality and Time to Deal with People and Problems?

Real estate investment requires dealing successfully with people. It demands the ability to negotiate fairly and expertly with lenders, real estate agents, mortgage brokers, and so on.

Professional investors often enjoy this process, seeing it as a wonderful game to play. If, however, you are averse to the time-consuming task of negotiating, it will cause you nothing but stress. If you own rental properties, there is the job of dealing with tenants. Are you prepared to handle leaky faucets, tenant complaints, vacancies, and many of the other problems associated with rentals? It calls for a combination of tact and toughness. Do you already have those qualities or are you prepared to develop them?

22

THE REAL ESTATE INVESTOR’S HANDBOOK

Consider the answers to these questions carefully. If you answer yes to all of these questions, then it’s time to take the next step: getting financially healthy.

GET AND STAY FINANCIALLY HEALTHY!

Before you make any kind of investment, you need to check your financial pulse to make sure you are healthy and disciplined enough to tread the real estate path.

Check Your Credit Rating

One of the first things lenders will check is your credit rating.

If it is good to excellent, chances of borrowing money are good. To find out your credit score, check with one of the three major credit reporting agencies. These companies act as a clearinghouse for lenders. They collect financial information and sell it to banks, credit card companies, mortgage companies, and other lending agencies. Lenders use that information to decide if an applicant is a good risk. The big three credit reporting agencies in the United States are the following:

Equifax Information Services LLC

P.O. Box 740256

Atlanta, GA 30374

800-685-1111

www.equifax.com

Experian

National Consumers Assistance Center

P.O. Box 2002

Allen, TX 75013

888-397-3742

www.experian.com

INTRODUCTION

23

TransUnion Consumer Solutions

P.O. Box 2000

Chester, PA 19022-2000

800-916-8800

www.transunion.com

Eliminate Debt

The best way to raise your credit rating is to pay off credit cards and any other debt. So if you have considerable debt, pay it off before even considering any kind of real estate investment. If you have a not-so-great credit score and you would like to improve it, there are three steps to take. The first is to pay your bills on time—all the time. The second step is don’t open unneeded credit card accounts to increase available credit. The third, and most important step, is to figure out where you stand financially by budgeting. In other words, reduce unnecessary expenditures so you can apply that saved money to your debt, improving your credit score.

To do this, you must analyze your current financial situation.

The first question to ask yourself is, How much debt is too much?

The easy way to answer that question is called the debt- to-income ratio, a simple method of measuring your net monthly income against your debt. For example, assume the following: Your net monthly income is $2,000. Your monthly debt payments are $500. Divide $500 by $2,000, and the result is your debt-to-income ratio:

500 ÷ 2000 = .25 (25%)

Financial gurus generally agree that debt expenses should be 25 percent or less of your income. A ratio of 10 percent or less is

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THE REAL ESTATE INVESTOR’S HANDBOOK

even better. Anything above 25 percent is a red flag, signaling that you definitely need to reduce or eliminate debt.

So what is your debt-to-income ratio? Answer that question by doing the following:

• Look at last month’s bills. Add all the fixed expense items (rent, mortgage, car payments, child support, loan payments, and so on).

• Check credit card bills, adding up the minimum

payments owed on each card.

• Figure out your monthly take-home pay (net salary).

• Now divide monthly fixed expenses by monthly income.

What percentage did you get? If it is 25 percent or greater, it’s time to take action to reduce your debt. You need to budget carefully so you can save money for your real estate investment.

If it seems difficult, use a strategy often used by athletes and successful people in all walks of life called visualizing. Visualize your ultimate objective—a house needing renovation, a series of income-producing properties that will give you the freedom to travel or to be your own boss. Now visualize that goal every day. On a mirror, refrigerator, or other highly visible place, tape notes that read, My budgeting will lead to a life of financial freedom or Short-term budgeting pain creates great financial gain, and so on. Repeating these positive assertions creates a change in thinking—one of optimism and a willingness to see big rewards.

Get Complete Insurance Coverage

The fastest way to derail your real estate investment career is

INTRODUCTION

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to incur unexpected expenses—hospital bills, house fires, auto accidents, and so on. Insurance coverage is required in the following areas:

• Auto. Most states require insurance. Even if your state does not, make sure you have it. Liability coverage will prevent major financial loss if you are in an accident.

• Disability. For most, future earning power is the biggest asset we have. Protect that asset with disability insurance. It will protect a portion of employment

earnings should you be incapacitated for a long time due to illness or injury.

• Health. Skyrocketing medical expenses can ruin your financial life if you or a member of your family should suffer a major illness or accident. Pay the money for major medical coverage; it is well worth the expense.

• Homeowners. This provides liability protection as well as protection against home-damaging events (fire, flood, hail, and so forth).

• Life. If you have a family or other loved ones who are dependent on you, buy term life insurance that provides a lump-sum death benefit. That benefit will replace your employment earnings in the event of your death.

• Umbrella (excess liability). This is a type of insurance that protects you against claims above