Thursday, October 27, 2011

Patience and imagination are virtues ALL buyers need

All right, so for the last couple months I’ve been telling you that now is a good time to buy... With foreclosures and short sales currently on the market, and more to come in the next few years, a potential buyer can walk away paying 100k for a home that sold for 280k just three or four years ago… With that said, I came across an article this week that the Wall Street Journal did, and it pointed out an issue I realized I never talked about... That even though our current housing market is seeing an “oversupply of homes, it is also facing a new problem: a lack of attractive inventory.”

Here’s why…

Right now a lot of homes on the market are either short-sales or foreclosures. This means the homeowners living in them (or the tenants renting them) have no money at stake. They don’t care to make repairs to the home to make it more attractive for a buyer.  
They don’t care to touch up paint, or clean the walls to make the home look new. The owners or tenants of these homes aren’t getting any money from a short-sale or foreclosure and could care less if you see the home at its best… or its worst for that matter…

In the WSJ article, Slim Pickings Are Latest Headache for Home Sales, the author points out that because the inventory for 'regular' home sales are low, (not a short-sale, not a foreclosure) it may be hard for buyers to find their dream home, because a lot of homes they are looking at need a lot of work, and buyers just can’t see past it.

The bad news for buyers looking to find an immaculate home for a cheap price is, “regular” home sellers are pulling their homes off the market, rather than try to sell them at today's discounted prices.”

And really, you can’t blame them… How can they ask top dollar for their home, when the home next door is going for 100k less as a short-sale…?

So, like the title of my blog says, patience and imagination are virtues all buyers need in this type of market. Go into these short-sales and foreclosures knowing the situation. Know you may have to see past a lot of junk, dirty walls, stained carpet, chipped paint, broken sinks, cracked windows, trashed yards… If you can, you may just find your dream home, and at a great price. If you can’t see past it, and a lot of people can’t, just have some patience that the right home for you just hasn’t hit the market yet.

My wife always tells me, “all things in life happen at exactly when they are suppose to…” Purchasing a home is big deal. When it’s the right time, and right property, you’ll know.

Tuesday, October 11, 2011

Why you should become a landlord...

Over the last several weeks I’ve seen a reoccurring topic amongst Real Estate news: RENT.

So far in the last month I’ve read a handful of articles talking about the current “Rental Property Boom,” so thought it would make for a good blog.


The meat of the article pretty much says, because of all the foreclosures that are inundating the market (see previous blogs) now is a great time to buy a rental property.

“…demand is up for rental properties and rents are rising. That's partly because foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.”
“Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more.”

That last little sentence is the most important… “Landlords can CHARGE MORE.”
Being able to charge a renter more, means you will likely be able to get more money than what the mortgage payment is, which means POSITIVE CASH FLOW.

Here’s why… Typically banks require an INVESTOR to put down 20-25% of the loan price and prove they have enough funds to cover at least six months of the mortgage payment, taxes, and insurance… An example… A client of mine just purchased a rental property for 125K… He put 20% down, making his loan amount $100K. His monthly payment (including mortgage (PITI) and Water, Sewer & Garbage) is $800… After speaking to a local property manager he found out that the average rent in this area is $1200… That’s a POSITIVE CASH FLOW (PCF) of $400!!

I’ve found recently that an investor can have a PCF of upwards of $100.
To be honest, because I am a short-sale and foreclosure specialist and a lot of my clients are investors, the average PCF I’ve seen is around $600…

So, if you’ve ever wanted to invest in some rental property, now is certainly the time… Especially with more foreclosures expected to hit the market, and more previous homeOWNERS becoming homeRENTERS…

Some personal advice from me: I suggest finding an area you’d like to own in, then sitting down and talking to a good property management agency in THAT area… That way you can get a good idea of what your average rent would be… Then sign up with a local realtor who has access to foreclosure properties before they hit the market, this way you can get an offer in before anyone else… CNN Money also suggests, staying local…

“buying something you can get to in 10 minutes… Familiarity with the neighborhood also limits nasty surprises like a noisy bar or a nearby development competing for renters…Work with a local realtor who has experience with rentals and can help you assess how attractive a given home will be to tenants. “

Since this is MY blog, I am gonna go ahead and advertise that I would love to help you get into the rental property business. If you've been thinking about it, and have more questions just give me a call. 
916-834-7003!

Hope we can talk soon!
~ Chris 

Thursday, October 6, 2011

Federal Reserve: “A sluggish Real Estate Market affects all sectors of the economy.”

So I got this article last week, but decided it was a great topic to kick off October with.

In my last blog I talked about how a housing market recovery wasn’t likely to happen any time soon, because more foreclosures were on the horizon.

“Remember, we can only say we are in an actual “RECOVERY” when home prices are higher, and people are actually making EQUITY on their investments.”

Well it turns out the Federal Reserve met in Sweden last Wednesday to discuss what more foreclosures means for the economy as a whole, and are finally realizing they may need to re-think how they are dealing with the situation…


So, as many of you may know, right now interest rates are at an all time low. ESPECIALLY on mortgages. True, this is GREAT news for people wanting to buy a home because they will be able to qualify for more money, but what about for those of us whom already have homes, but want to try and take advantage of those rates and refinance…?

"In the U.S., most homes are financed by 30-year fixed-rate mortgages, so a fall in long-term interest rates really only affects existing homeowners to the extent they refinance… This scenario is not working in an economy where many borrowers have fixed rates and homes underwater are keeping them from refinancing.”

That’s right… Interest rates being at an all time low mean nothing to those of us whom are already in a home, because the only way we can take advantage of those low rates is IF we can refinance… The only way a person(s) can refinance is if they actually have EQUITY in their home… EQUITY is something real hard to come by these days because home prices are dropping like crazy, due to SO many foreclosures hitting the market… See the cycle…?

The semi-good news is that this article is pointing out that the head of the Federal Reserve is now open to allowing banks to refinance a home, even though there is no equity in that home… The REAL-bad news is; just because he is open to the idea, doesn’t mean it will happen. In fact, in my opinion, it won’t happen any time soon because there is too much legislation that would have to pass in order for it to work…

The whole reason I wanted to blog about this topic is because I wanted to congratulate the Federal Government on realizing they need a plan B for their economic recovery, and good job on realizing that plan needs to start with aiding in the recovery of the housing market…

“Rosengren stressed that no recovery can be fueled without restoration of the housing market. Residential investment grew more than 30% in the first years of past recoveries, while in the recent recovery, residential investment actually fell in the first two years following the end of the recession… declines in real estate prices can have a substantial impact on the capital of financial institutions, which impacts their ability to finance not only the housing sector, but also other sectors of the economy…”

Here’s hoping it doesn’t take them another 10-years to actually get things going.