2010 March

Archive for March, 2010

Standard & Poor’s Economist: Housing Stabilized But Prices to Drop 5-6%

March 30th, 2010 |

Author: joe

Thursday, I attended Standard & Poor’s Market View of Credit Risk summit here in New York. David Wyss, the Chief Economist of Standard & Poor’s was the keynote speaker giving an economic outlook for the remainder of the year and beyond. Despite him commenting on the overall economy, he spent much of the presentation focused specifically on the housing market. Here’s a summary of his discussion.

The Recession is Over

The recession officially ended in the 3^rd Quarter of 2008. Wyss says that recessions are usually over when things are no longer getting worse. He commented that housing has stabilized and holiday spending was 2% higher in Q4 2009, than Q4 2008. “Consumers are no longer panicing. The panic is being replaced by fear,” says Wyss who in the past was a senior economist at the Federal Reserve Board and economic advisor to the Bank of England. He commented that that fear is much more healthy than the panic experienced at the end of 2008.

Real Estate Bubble was World Wide Problem

I thought this was important to note. Wyss mentioned how, with the exception of India and China, the housing bubble was a world wide bubble. Between 1997-2005 housing was up 70% world wide. Great Britain saw 155% gains, Spain 140%, Ireland 190%. Those markets are down as much as 50% today. Many Americans saw this as an American propblem because they are only reading American newspapers.

Real Estate Problems in US are Localized to Rust Belt and Sun Belt

Over 50% of the foreclosures have taken place in just 4 states, Nevada, California, Florida, and Arizona. Further problems are in places in and around Detroit which saw the US Auto Industry plummet taking real estate prices with it. The median price of an apartment in Manhattan is now the same as the median price of 50 homes in Detroit ($1million vs $20,000).

The bulk of the Sunbelt problems were related to speculation, 2^nd homes, and investors. He said investors are acting very “rationally” by walking away from those poor investments. That is creating a clearing out process which is healthy for any recovery.

Lack of Building is Creating a Shortage of Homes

Wyss reiterates what I discussed regarding a potential housing shortage. Each year 1.6million new homes need to be built to keep up with demand. New housing starts meanwhile are hovering around and annualized 575,000 falling 5.9% according to the commerce department. Simultaneously new home sales just hit another record low. Because of this, Wyss says the market has already absorbed over 1million units of excess inventory and by the end of this year the market will have shrunk by 2.5million units. This is healthy, though obviously not a great sign for the economy. He estimates around 18-24 months from now inventories of homes will be at healthy levels.

Real Estate is a Bargain Now but Prices Will Drop Another 5-6%

At the peak of the bubble, homes were, on average, 340% of average household income. Prices now sit at 240%, which is below historical averages. However due to foreclosures peaking Wyss projects another leg down for real estate but softening only another 5-6% nationwide.

Chief Economist of Standard & Poor's, David Wyss

Summary

The US Consumer has lead us out of all the recessions in the past through spending but right now Americans aren’t spending and job growth isn’t happening at a fast enough pace. One thing he said regarding unemployment that resonated with me. “Baby-boomers saw their 401ks become 201ks with the stock market decline. This forced many near retirement to stay in the labor market and continue to work, which in turn caused there to be limited job availability for new college graduates making the unemployment situation worse.” This creates less demand for housing and many of those graduates are staying home with mom and dad instead of finding jobs and ultimately buying homes. His prediction was this would be a very temporary trend and resolve itself in the next 24 months.

Wyss predicts the inventories will shrink, foreclosures will wane, and the impact of the commercial market downturn will be smaller than everyone is predicting. He sees the housing market mostly stabilized now. Prices will trend down slightly over the next 12 months and then turn around as the inventory contracts over the next 24 months.

For investors, I feel his comments are in line with many other economists and real estate thought leaders. A wisdom of crowd consensus is forming that shows the panic truly is gone, fear is subsiding in the real estate market , and we’re on the path to recovery. Wyss did mention slight trending up in mortgage rates this year which at this point reaffirms a smaller window to lock in at near record low rates. The opportunities to purchase though will remain until the shadow inventory is resolved.

Photo by Ryan Hinricher

Standard & Poor’s Economist: Housing Stabilized But Prices to Drop 5-6%

Related Blogs

Posted in Index |

No Comments »

Should You Hire a Real Estate Consultant?

March 30th, 2010 |

Author: joe

Businesses have long used consultants to bring in experience or knowledge that they have a temporary need for. Should real estate investors do the same? Many wanna-be tycoons think nothing of forking over large amounts of money for boot camps and mentors, experienced investors understand the value of real estate education. Yet how many of them would ever think to hire a consultant?

Most understand the value of hiring professionals, such as attorneys and accountants, even if they choose to perform those tasks themselves. A real estate consultant may provide a great value as well when a need exists. Regardless of how experienced someone may be, they don’t know everything.

Consultant vs. Mentor

Mentors are very common in real estate. Some view them as a colossal waste of money and vultures that prey on newbies looking for that magic bullet. Others seem them as a valuable asset that can shorten the learning curve. Mentors are supposed to take someone by the hand and teach them the ropes as they guide them through the real estate investing jungle. All too often they don’t deliver as promised, leaving the person who hired them feeling like a victim.

Consultants are different. They may bring a particular expertise to the table or advise on a specific aspect of the business. Most often, they are paid on an hourly basis. Perhaps there is a particular aspect of your business that you need help with but don’t feel the need to hire a mentor. Rather than slogging through the trenches trying to figure things out on your own, a couple of hours of a consultant’s time may be just the ticket.

Finding Consultants

There are professional real estate consultants that can be found in the phone book or by searching online. However, your best consultants may be closer than you think. If you are a serious about your real estate investing career, you should already belong to at least one real estate investor club (article). The majority of successful investors that I know are very happy to help others. Most would be glad to consult if asked. A fee arrangement can be worked out based on what is needed.

It can be very rewarding for those that do help others, and I’m not talking about money. Several years ago I sat with a young couple that was about to pull the trigger on a rehab deal. To them it looked like a sure-fire winner. When I pointed out all of the things they overlooked they quickly realized they were about to embark on a financial disaster. They ditched that deal and went on to another that was much better. To this day they thank me for the few minutes I spent with them. My fee for that consultation? If I remember correctly it was a cup of coffee. I am going to raise my rates, in the future I want a muffin to go with it!

We never had it as rough as the kids have it today. Look at the price of a gallon of gas or a piece of real estate or a college education. - Suze Orman

Photo: laverrue

Should You Hire a Real Estate Consultant?

Related Blogs

Posted in Index |

No Comments »

Open Question: What is the quickest a short sale can be closed?

March 30th, 2010 |

Author: joe

We are considering putting an offer on a house. It is a short sale that was just listed. The seller’s agent is out of the same brokerage office as our buyer’s agent. Will this help speed things up? What is the quickest amount of time you have ever known a short sale to go through and to closing? Also, once (if) we get offer approved by bank, how long then til it goes to closing?

Related Blogs

Posted in Index |

No Comments »

Open Question: does landlord have to tell when a property been flood recently?

March 30th, 2010 |

Author: joe

does a landlord and his rental agent have to let you know when a property has been flooded in recent past?

Related Blogs

Posted in Index |

No Comments »

Rapport Building Secrets of Rent To Own Real Estate Investors

March 30th, 2010 |

Author: joe

In Rent To Own Real Estate, the key is to find a motivated seller. Once we have found the motivated seller and have pre-screened them over the phone, we set an appointment to see the house.

==> Rent To Own Real Estate <===

On the day of the appointment, you want to call and confirm the appointment so you don’t waste your time driving to the property and finding out that the seller isn’t there. The only thing you should take into the house is your business card. Leave everything else in the car.

Ask the seller to show you around the house. If they tell you to just look around, ask them to give you the nickel tour. The intent is to view the house with them and build rapport with them.

==> Rent To Own Real Estate <===

* People only do Business with people they Like and Trust. You must make this connection before negotiating on their most expensive investment.

Look at their pictures and nick-knacks for ideas to ask them questions to get them to talk to you. Remember, people only do business with people they like and trust. You can only do this by building rapport. Let them answer your questions and then respond to what they told you.

Use F.O.R.M. to build rapport:

==> Rent To Own Real Estate <===

F: FROM

O: OCCUPATION

R: RECREATION

M: MESSAGE

F: Q. Where are you guys From? Your Response: “Oh really, I’ve got friends, family from there…” or “I have visited” or “Where is that?”

O: Q. What do you guys do? (Occupation) Your Response: “Wow…..I have always wondered about that.”

R: Q. What do you guys do for Fun or Hobbies? (Recreation)? Your Response: “I do that too”, or “I’ve always wanted to do that.”

M: Q. Where can we sit down and talk?

Once seated, give them your Message, by asking them Four Questions.

==> Rent To Own Real Estate <===

* Let them answer your questions completely, do not interrupt them. Again, people only do business with people they Like and Trust! Do you like people who interrupt you?

#1. So that I can better help you, tell me again, why are you selling?

#2. How else have you tried to sell your house?

(What you are doing is reminding them they have a problem).

#3. What do you hope I can do here for you today?

PAUSE: You are thinking on how to help them, let them see your concern and wanting to help them. *Your response is that you might not be able to buy their house today because of a lack of equity.

==> Rent To Own Real Estate <===

#4. However, I might be able to help you out of your financial problem by making your monthly payment for a while and cash you out in the future, is that something we should talk about or probably not?

If they want to talk more then explain to them you can do a Long term Lease, where your company will Rent the property for a period of time and in the future you have an Option to purchase the property at a price they agree upon today. The option will be $10 Dollars which will make it a binding contact. You will have the Exclusive Option to Purchase the property in accordance to the terms you agree to. (That is how Rent To Own Real Estate is done) You will cover most of the day-to-day maintenance up to $250 and they will be responsible for any maintenance over $250.

You then tell them you will require a long-term lease of at least 60 months to make it work. You will sublet the property to a Tenant Buyer and they will be the ones to actually purchase the property in the future. However, you will be responsible for making the payment to them and taking care of the day-to-day management. If they agree, you sign a Lease Purchase Contract that you will Lease the property for up to 60 months and you have the Exclusive Option to Purchase. Then set up a Lease Option closing with your Attorney.

===========================================

About The Author: Charles W. Moore is a U.S. Army Combat Veteran that began investing in Real Estate in 2001. He has served as the Vice President of the Capitol City Real Estate Investors Club of Columbia, SC and formed his first Real Estate Investment Co. in 2003. He owns several Real Estate Investment Co websites and is now a successful, Full Time Real Estate Investor, Webmaster, Speaker, and Author. For more detailed information on Rent To Own Real Estate go to: Rent To Own Real Estate

Related Blogs

Posted in Index |

No Comments »

Investors Needed in Detroit

March 29th, 2010 |

Author: joe

I have many properties available for Cash or Land Contract- I’m looking for serious investors who want to purchase wholesale priced property in good-great areas of Detroit and the Metro Area

Related Blogs

Posted in Index |

No Comments »

How to search for properties efficiently?

March 29th, 2010 |

Author: joe

I was analyzing my searching criteria procedures, Do more experience investors do more ‘actually looking at houses’?

I realize that I do more research, then actually looking at houses. Am I doing things not efficiently, should I be looking at more houses to determine valuation?

Related Blogs

Posted in Index |

No Comments »

The Ten Best in RE.net This Week: March 28, 2010 Edition

March 29th, 2010 |

Author: joe

1 ) Video Is The Future – A longer video that Jim the Realtor does walking through houses, but fast forward to about 3:45 and he starts talking about how we can use video in the future to view houses.

2 ) Discussions about Brokerages wer the talk of the RE.net world this week and does it matter. Here are a few of the better ones. Mark Davison Can a real estate brokerage matter? Jonathan Dalton Forget Big Broker vs. Small Broker, Let’s Talk Bad Broker vs. Good Broker. Jay Thompson Does the Real Estate Brokerage Matter (check out the comments section). And James Malanowski THE RISE AND FALL OF THE BIG-BOX BROKERAGE.

3 ) Renting vs. Buying when it comes to a house – This video is great because it is refreshing to see agents not just spew the usual “always buy, don’t rent.” The true cost of home ownership sometimes is too much.

4 ) Ignoring The Shadow Inventory Will Not Make It Go Away – Is the shadow inventory coming? Is it about to flood the market? Shadow inventory is no doubt out there, but it has been for a year. The question is whether they will release it and flood the market or just keep the trickle coming.

5 ) How Loan-Level Pricing Adjustments Keep You From Getting The Lowest Advertised Mortgage Rates – Why am I not getting that rate I saw quoted? We all know that every home buyer thinks they are being ripped off because did not get the rate they saw in the paper. This explains it all.

6 ) Top 10 Worst Places to buy real estate in the US – This one is going to be interesting to watch. I think they are full of it, but time will tell. Some markets like Phoenix, I just cannot see falling that much more.

7 ) I Leased a Property and It Is Being Sold as a Short Sale or Foreclosed…What should I do? – Something many people are worried about right now.

8 ) House Call: To Buy or Not to Buy – Do you want the first time homebuyer tax credit? Think of it this way, how fast would you rush out to buy a new car if the dealer said 4% off? That is what the $8,000 tax credit represents to a $200k house.

9 ) How screwed up is Bank of America? – The stories on the banks messing up on these foreclosures seem to never stop. Here is another one where the bank decided to foreclose on a house and take the goods inside, even though they were not the lien holder on the house.

10 ) The Lowest Mortgage Rates of 2010 Will Be Locked In March And April – Mortgage rates have to go up they cannot go any lower, we have been hearing it for a solid year now. Dan Green thinks there may be about another month and a half left of low rates.

The Ten Best in RE.net This Week: March 28, 2010 Edition

Related Blogs

Posted in Index |

No Comments »

How This Note Could Make You Money: Using Your Failures for Success

March 29th, 2010 |

Author: joe

I’m far from perfect. Even though I’ve been investing for 7 years now I still make plenty of mistakes. And I’m going to show you how if you make mistakes like I do, you can turn them around and make money from them.

So let me tell you what happened…

Now that I’m a successful investor and have plenty of money I’m willing to take more risks. Not stupid risks, but more calculated risks. For example, I will do a deal on a property that I’m not so sure I’ll be able to sell on a lease option. I will 100% tell the seller this upfront and we will agree that if I can’t sell the property I am just going to turn it back over to him.

This type of deal is worth it to me because I make at least $30,000 when a property sells and if it doesn’t all I’ve lost is my time. The key to this type of deal is being honest upfront with the seller that you’re not sure this is a good property and you are in a sense doing them a favor. But if it doesn’t work out they get the property right back.

Well… this is exactly what happened on a deal I did awhile back.

The tenant didn’t end up buying the property and I wasn’t too fond of it in the first place, so I turned it back over to the seller.

And whenever I am dealing with sellers whether it’s getting a property from them, turning one over or anything at all, I always do it myself. I take my business extremely seriously since it puts food on the table and I want to be the one handling important interactions.

But… with this particular property I was out of town for the turnover. I was not happy about this, but it was a simple turnover and I had my assistant do the cleaning and everything to get the property in order. Once she was done, she then she met with the seller and turned things over.

This is the first time ever I have let someone else do this…

And I’m sure you know what happened. I got a call from the seller that he was not happy with the way the house was cleaned and things were put back in order. I thoroughly apologized and then sent him a check for a couple hundred dollars to get things the way he wanted.

Then, he sent me the email below…

Jason -

Somewhere in your background is a teacher who taught you “character.” Character is who you are when no one is looking. You have demonstrated this rare trait exhibited by so few businessmen these days; I am thoroughly grateful. This is more than fair – I think it is the right thing to do considering the circumstances. Most good lessons cost us something; in this case you will know to personally check on the important things of property turnover, the next time.

So what lessons did I learn? Well, first to never again let someone handle these important meetings. (I already knew this but didn’t listen to myself). Second, that doing the right thing will always make you more successful. This particular owner has other properties I could do deals on.

But here’s the best part…

Guess what I’m going to do with that email? I’m going to add it to my testimonial folder that I show sellers when I meet with them. I’ll explain to potential sellers what happened and tell them they have nothing to worry about with my company because we will always do the right thing. There is no doubt in my mind that the new testimonial will help me close more deals.

So when you screw up and get a note like the one above, put it to use to help you close deals and make more money.

One last thing. If you liked today’s post you’re going to really want to read next week. Because next week I finally get to reveal my deepest darkest real estate secrets of how I really became successful. The secrets you can use to make a small fortune like me.

I’ve wanted to reveal these for years but I could have gone to jail for sharing them. For the first time ever I have approval to tell you everything. See you next week.

How This Note Could Make You Money: Using Your Failures for Success

Related Blogs

Posted in Index |

No Comments »

Open Question: I am on title but not on the loan and I would like to purchase the house from my ex boyfriend. Is there a way?

March 29th, 2010 |

Author: joe

I am on the title to the house but my ex boyfriend is on the loan with chase we are breaking up so I want to purchase the house. He is selling it on a short sale so i would like to buy it but I am on the title as the owner can I still try to buy the house. He put me on because we were together now he is moving out what can I do?

Related Blogs

Posted in Index |

No Comments »