So, you want to buy and wholesale some REOs?

A short presentation on how you can invest safely, and without taking time from your day job.

Time to buy REO's

View more presentations from Steve Roesch.

Home buyer tax credit may get 9th life

It has been rumored that congress has agreed to a new form of the home buyer tax credit to extend into 2010.

It seems that it will look a little different than 2009. This new tax credit agreement is supposed to ride along with the unemployment benefits bill that is being voted on in the next 24 hours.

Here are some of the possibilities that we could see on the extension:

1) Extend to April 30th, with contracts that began by then, and escrows closed by June 30th, 2010
2) Credit will include more than first time buyers. Perhaps a 2nd time buyer. Rules are vague right now. May be guidelines about how long they owned their previous home. Or limit on the equity they pull out. Or caps on how much income they can make.
3) Oh, and the $8,000 number is rumored to be $6,500 instead.

All in all it sounds positive. Everyone seemed in such a frenzy to buy and close by the end of the year or all hell would freeze over. Now, we can wean ourselves with an extra 120 days to keep shopping. It will also be nice for the housing market, because it will allow some movement in the higher than median price points for some markets. It seemed like there was too much bidding going on in the less than median price point, and nothing but crickets (long quiet days on market) for the higher priced homes.

And dropping the credit seems fair. It's the best way to wean the people off of the system. Oh, you waited? Well, you still have a chance, but your penalty is $1,500. Now, don't wait too long this time!!!

What Happened to the TIC?

It appears the hot market of the TIC has cooled off. Investors jumped at the idea of grouping money together and leveraging partners to have the opportunity to buy a bigger investment. Mostly commercial investments. The idea that someone else found the partners and then managed the property, and then guaranteed the steady return on the investment, was hard to resist.

Unfortunately, the TIC investments are suffering just like other commercial investments. However, it is even harder when you have several investors now that can't agree on how to solve a tough problem.

Vacancies have also risen in the commercial industry in today's economy and the ability to raise more capital or refinance has become increasingly difficult with the current mortgage crisis. Especially when you have mutliple owners and a property that has not been performing.

Lastly, everyone realizes the exit strategy is harder than it sounded. When the chips are down, people want out. And in a TIC, it needs to be unanimous to have everyone cash out, or convince the others to buy you out, or you sell your portion publicly

For more on why TICs are not be producing, and where you should invest if you like the concept, see the presentation below:

TIC vs REO Investing

View more presentations from rushsteve.

Dear REO Agent,

Dear REO Agent,

Why must everything be your way? Do you have the only foreclosure on the market? Surely you remember what it was like before the Boom/Bust? You were showing homes as a buyer's agent, or you were peddling the mom and pop listings to the emotional owner occupants. Whenever you came across the lowly foreclosure listing, you turned your nose up at it, just like the rest of us. But now you have a few REO listings. Maybe you have 20, or maybe you have 100. Nevertheless, you have 1 client. Or one type of client. The type of non sustainable client. The kind of client that doesn't refer you to their friends and family. The kind of client that doesn't treat you with respect, or think you deserve their business. The kind of client that will never be able to give you on-going repeat business. Because when the market turns, the banks will not need as many REO agents. They will go back to having one… for the entire state. And if you are lucky enough to still be peddling those REO listings when the market is back to balance and normalcy, you will now have the one lowly listing that is impossible to sell, because it's gross and non financeable, and that's no longer the status quo.

We all know you had to do it to make a living. Some of you are making a killing for the time being. Awesome. But do you have to be arrogant? Do you have to be insulting? Really? Seriously? I mean, you are actually pushing some of the worst houses on the market that most of us wouldn't sell to our own mother. And your client, the bank, is so jacked up on stimulus money and tax payer support, that you are one step away from being a public servant or government employee. So, at least have some humility, because you are working for the people, by the people.

I am shocked at the lengths you will take to make buyer's agents do your job. Here's a synopsis that is all too common:

"Hey, Buyer's Agent, follow these instructions to get your offer looked at: Fill out all of the details about yourself and your buyer on MY transaction sheet. Then upload your offer along with 10 more specialty addenda, to MY website, that goes directly to MY seller. And then don't call me, because I won't return your call. You can email me, but I will shoot you a canned response that says, I won't respond for 3 or 4 days."

And another thing… Last time I checked the terms for purchasing any house were negotiable. But every time someone wants to write an offer, the bank sends back an addendum that erases everything and puts the terms back that they want. That's actually fine with me. That's part of the negotiations. But when the buyer wants to come back one more time and counter any terms of the banks addendum, that is when the brick wall starts getting put up. We hear things like, non negotiable. Or no alterations allowed. Funny, we agreed upon price, but now, because of a few small items, we are going to kill the deal before it gets started. And whose fault was this? Is it the sellers? Asset Manager? The listing agent? Or their assistant who is just following their orders? I just have to wonder, why sometimes common sense can't prevail. Has this new market, that is so dominated with REOs, become flooded with listing agents that are just order takers? Or perhaps we have several cocky REO agents that get on a power trip, just to control the buyer's agents? Not realizing, that they themselves are a buyer's agent too sometimes. Or could it be they are too afraid to negotiate with their own Asset Manager, because that might be construed as disobedience, and they may not earn the next round of foreclosure listings?

I want to be a little fair, and try to show 2 sides to the coin. I know the REO agent does not have it all that easy. They start out with the BPO (freelisting appraisal). Then sometimes they have to give out "cash for keys", to get the previous occupant out. Then they have to coordinate cleaning up the property, and then prepare all the normal marketing, and deal with the extra paperwork for the bank, and do it all for a discounted commission, usually.

And now you are going to treat the buyer's agent like an idiot?

I think not! Lest I remind you, I just saw you giving the crack head $500 bucks for his keys, right before you started mowing the yard and putting up the for sale sign for your cut rate commission.

Having Appraisal Issues?

Why do we bother to pick a price to sell a home anymore, when the appraiser has the final say in value?

This doesn't seem all that illogical, though. You should only be selling your home for what it's worth, right? But who gets to decide the value anymore? The tax assessor? The listing agent? The seller? The licensed appraiser? In my book, none of these should ultimately decide the value. It is always the buyer that decides the value. Hasn't it been a long time economic fact that supply and demand, determine value? And as long as the consumer sets down the dollar amount for that commodity, haven't they just set the value? Let's only talk about non necessity items here, and true competitive capitalism. Because when the buyer doesn't have any choice on whether he/she needs an item, or have any choices for such items, then they truly don't have much to say when determining value. But in any normal marketplace, buyers have their freedom to choose. And when they find the right color, size, flavor, shape… for the right price… they buy it. And if they can negotiate, they will. And if it's not priced within reason, they also have the freedom to walk away.

But I am speaking specifically about houses now. In a lot of larger ticket priced items, like real estate, there is financing involved. Adding a partner to the transaction. This partner is actually the larger share holder, and thus requiring this 3^rd party appraiser. Not the one, who has shopped in the competitive marketplace. Not the one, who has to live in the house, or drive to work from this house. Not the one who picked it to be near a certain school, or live closer to their family. A non biased, and non personal, cursory overview of the recently sold homes for the area. And if there are no recently sold homes for that area, then it becomes the appraiser's subjective opinion.

But, then again, this is the bank, that is the one shelling out usually more than three quarters of all the money for this home. Surely, they must have hired someone really great to protect their investment in this asset? Actually, that is not the case anymore. Helped by some new government guidelines, banks now feel that the ambiguity of the appraiser is a better way to choose the one determining value. Not based on local experience or tenure, or any other quality. Just pick someone, that doesn't know someone in the transaction and is licensed. And to be fair, and non biased, make it more like picking a name out of a hat. The appraisal industry used to run like normal capitalism. Banks would choose an appraisal company usually based on the following : competitive pricing, availability, speed in turnaround, and size of support staff. Now, it is random selection. The larger experienced appraisers, seem to get no more business than the newer or less entrepreneurial appraisers. Those that made a good living, now are changing industries to continue making a good living. Those that struggled before, are finding themselves getting randomly selected more often, because being in a rotation is better than fierce competition.
Too many deals are falling apart based on this new system. When a buyer makes an offer, usually, they have seen 20 to 50 houses before making a decision. They, themselves are a pretty good judge of value by now. It's pretty obvious to spot the one overpriced house. So, why does the appraisal trend today, find a large percentage of homes are overpriced?

I think it is the new system. The appraiser has no allegience but to the rotation. In the past, they were part of the deal. Using relationships and knowledge to put together common sense to create value. But today, it is like the DMV. Get in line, wheres my ticket, get back in line. I understand where the corruption was, and agree with regulation (that is an entirely different blogpost). But is this trend coming from the new system healthy to the market? No way. It's adding more downward pressure on the housing prices, and it is also killing deals. And that is causing homes to stay on the market longer, looking for another buyer with a different appraiser, in the rotation, perhaps with a different opinion.

If this is the new era of real estate, then perhaps we should cut to the appraisal first.

Want a Handout? Put your hand out!

Whether you agree or disagree with the gentleman in the video, this is a cliche at its finest.

"Nice guys do finish last."

Speculators that jumped into the market late and bailed out early, got to take advantage of the handouts being offered as they lost money.

But others who understood the market and took calculated risks, continue on for the long haul and try their best to fulfill their obligations. And yet they get frowned upon when they want the equal opportunity that the speculators got by simply holding their hand out.

Mr Gilliam, I salute you.

Can you find the REO in this REmOdel?

A beautiful REO transformation from the uninhabitable, to a home you could let your mother live in.

A live example of "One man's junk is another man's castle."

Below is a picture presentation of the before and after remodel project on an REO in Tracy, California.



Properties like this are being reformed all over the CA market, done by the NorthPoint REO teams.

71% of Americans say, "Now is a good time to buy real estate!"

Home buying is on the rise and with it the perception that real estate is a good long term investment. The Gallup Poll reported that 71% of Americans think that right now is a good time to buy houses. That is the highest its been in four years! Coupled with the fact that homes are more affordable now than they have been between 2003-2007 it makes a lot of sense.

Perception across the US is changing, compared to savings accounts, bonds, stocks and mutual funds, 33% of Americans find Real Estate to be the second best long term investment, that's right! Well at least we know consumer perception in the real estate market is still strong. Today's market is better than the 1980s especially with so many government incentives.

Americans moved less last year, then past 6 decades.

Why?

It certainly wasn't due to a shortfall of inventory choices.

It certainly wasn't due to interest rates being too high.

I think it was a combination of:

1. Fear that prices would continue lower, and
   
2. Banks changing lending practices limiting buyers ability to borrow.
   

This kept buyers from buying, and those buyers that were buying a resale, affected those sellers from moving. As the market prices continued downward, causing sellers to lose equity, the choice became simple for many sellers. DON'T SELL. The difference between this year's percentage of Americans moving and previous decades is: Sellers that didn't have to sell, didn't sell. Whether they tried or not. Those that did have to sell, sold for discount and/or a loss.

The speculation is that many of the Baby Boomer population, that are empty nesters now, should be downsizing.  But because they are losing equtity, they are the ones that are deciding to hold tight and not move. Since this demographic makes a large piece of the population pie in America, this theory may be the right on point. But, I think it is just a small part of the puzzle. Because everyone will move or sell for the right price. Therefore, drilling down deeper, the true reason is buying power. Buyer's don't have power, because fewer banks are lending them money, and they are afraid prices will fall, so they sit on their hands until confidence comes back.

The normal level of people moving for the last decade has been around 13%. Which is still lower than previous decades. I feel that is due to the incredible low interest rates since Sept 11. People were comfortable in their loans, and less antsy in their homes.

But in 1951 and 1984 the level reached approximately 21%. Both followed stagnation and depressed eras. Could we see another shift of moving similar to the previous 30 year cycles? Especially, with pent up demand, low interest rates and prices that have rolled back by nearly half in many of the nation's most popular cities? Start reserving your UHauls, because I think the people are prepared to pack.

Link to MSNBC article 

Why Multi Family or Single Family?

There are several obvious reasons an investor might choose a multifamily investment over a single family investment when purchasing Residential Investment Property.

Most investors want cash flow. The price to rent ratio on multi unit buildings are much better in comparison to the single occupant property. Basically, higher gross income is achieved for a lower cost of product.

Another reason is vacancy risk. The property with more units has less risk of being 100% vacant, than if the single tenant vacates. In that scenario, the vacancy is always 100%.

If those were the only 2 things that mattered, why would anyone want to purchase a single dwelling for a rental property?

The fact of the matter is, there are plenty of other factors to consider with comparing the 2 opportunities.

Before I spell out the details, I want to give you my conclusion first. Overall, each investment has its unique features and benefits, and I suggest not choosing one over the other. Rather, a perfect portfolio of real estate would include both.

Location. The end-all, be-all of real estate. If the majority of people don't like where it is, then you will always be renting or reselling to the minority. Have fun. Both SFR and MFR are located in good and bad locations alike, however, the MFR that is located in the better locations, are more rare, likely more expensive, and defeat the purpose of cash flow, if the price to rent ratio is similar to a Single Family.

Cost. The overall cost of a MFR is higher than SFR in almost every category. Price. Down Payment. Interest Rate. Turn-over & Maintenance. All things need to be considered, when figuring your apples-to-apples return on your investment.

Tenant Quality. Typically the average multifamily unit rental rates run at or below the average rent for the market. And a single family home rents usually much higher than the average rent for the area. Therefore, your tenant is typically above the average income and more stable. And you can expect higher turnover and effectively more maintenance and repairs in the Multi Units.

Exit Strategy. Whether or not the investment earns a net income throughout your ownership, both will need to be sold for a gain, which amplifies the percentage of your return on the capital you have invested. But each investment is sold to a different party. The multifamily resale market is dominated by the investor. You will sell your product to another investor like yourself, who is interested in one thing. Making Money. So, if you ran your investment into the ground, it will reap what you've sown. However, a single family home, is resold to the emotional owner occupant. Now your investment can have vision for a family. The new buyer does not care what its previous rental income was. Only can they fit their couch under the window, and/or walk their kids to school. Your window of opportunity to sell is much broader in the single family resale arena. In most real estate cycles, the investors run 20% of the number of sales. Leaving the vast majority of buyers for the single family dwelling.

To recap what I said earlier: I do not favor one over the other. CASH FLOW is important in every investment. And in almost every case, the MFR does cash flow significantly higher than the SFR. But I think both are extremely important to hold in one's portfolio. To be heavily weighted in just one category is actually a mistake.

Put a home on Layaway?

No matter how much the government tries to help, banks are still having difficulty making loans to the average homeowner.
Eventually renters want to become buyers. And in this economy, the loan qualification task is becoming harder and harder for most renters.
The more you save, the more the bank just raised the down payment requirement. The harder you work on fixing your credit, the higher the score is needed to qualify.

A Lease Option or (Layaway) is a way to still fix a price with a seller... rent the property... and still build equity. Eventually you will need a loan. But in a couple years, lending qualifications will be more lenient. And the money you have spent on deposits and rent won't all be wasted as fees. They will now be credited toward something. Your Home!

The Economy Hit The Reset Button

Are we in the middle of just another market cycle?
Or is this a full blown reset of the current economy and the way we know it?

If the best advice is to invest in the valleys and troughs of a normal business cycle, wouldn’t you rather buy commodoties at the bottom of the biggest trough in this generation’s history?

Steve Roesch
Market Advisor
http://northpointgroup.vflyer.com/
steve@northpointgroup.com

Hottest Markets for Population Growth Rates in 2008

Thanks to the hard work at the US Census Bureau, we now have the latest data on the highest growth rates in the US.

Where are they?
Take a look at the chart to see the top 15 Metros with 1 million or more that have the highest percentage increase of growth from July 07- July 08.

But the bigger question is why are they? What makes these cities so inviting to our nation's inhabitants?

Let's try to determine what they have in common first?

Location seems pretty random: SE, SW, West, NW and Rocky Mountain. We can at least determine that Great Plains, Great Lakes, and NE are lacking representation on our chart. Texas seems to make up 40% of the top 10.
Size tells us something. Notice approximately 10 of the MSA are between 1 and 2 Million in population. This could mean that people are looking for a smaller city with affordability and quality of life, but not wanting to give up the amenities that large Metropolitan areas have to offer. ie... International Airports, Employment Opportunities, Entertainment Franchises or Venues, etc...
Tax Leniency also may be a factor. 5 cities on our list have absolutely no income tax. 1 has income tax on stock and bond dividends only. 2 others have a low flat income tax. And one other has no sales tax.
Job Growth rates. Except for New Orleans, the same cities in this top 15 are also frequent players of high ranking metros for job growth percentages in previous years. For example Raliegh, NC, has consistently been on the top spot of many job growth lists since 2005. Therefore it is not surprising for it to be #1 on this list. What's most impressive though, is the 4.3% growth rate

The more money people can keep in their pocket combined with lower costs of living (including housing) and the ability to obtain and retain employment, are the real drivers to the population rates.

for the press release from US Census: http://www.census.gov/Press-Release/www/releases/archives/population/013426.html

What Do You Get For Nothing?

Normally, you get what you pay for right?
No effort, no return. No pain, no gain. No risk, no reward.
Okay, no more cliche' analogies...
But, there are some investment opportunities where you can literally, put nothing down, and still have gain for little invested.
Yes, It's Real Estate. Nice Real Estate. With Tenants. Nice Professionally Managed Tenants. Not some college town 5 hours away from the nearest airport. A real populated desirable cosmopolitan metro.

Take a look at a low down, high return investment in one of the nations largest and fastest growing areas.

The State of California's Real Estate Market

Many market conditions point to a healthy return of the housing market in California. Although, prices may not rebound at rates they did in the early 2000's, they also may stop falling any lower than they are now. That is only one reason to buy now.
Other reasons to buy now: Shrinking Inventory, Congress Driven Low Interest Rates, Cash Flow for investors, Homes are selling below the cost it takes to rebuild, etc...

Take a peek at this recorded webinar for a market update, and some great sample REO opportunities.

Is pricing a home low, in hopes for a bidding war, a good idea?

When purposely pricing a home below the market value in hopes to attract multiple offers, then you agree to play the bidding war game. In a multiple offer situation, it can good for the seller, because people do tend to let emotions fly when they make a higher offer. And this leads to more money for the seller. However, with heightened emotions, there is also pain and then mistrust. Every buyer wants the house, and they are going to be mad when you have to tell them, I'm sorry your offer was beautiful and perfect, but not good enough and therefore REJECTED!

Let's say you have 6 buyers with offers... That's 5 that now are angry at someone. When the onion is peeled back, some will scrutinize if you used good faith in consideration with their offer. If the agent presented it in a timely manner. Did you pass any confidential information to other parties milking higher offers. Did you discriminate against a particular buyer. Even if none of this is true, the accusation itself, if pushed into a legal arena, is simply not worth the inconvenience. I have been around the block enough to see it get ugly too many times.

Let's look at it from another angle. Let's say you get your first offer. It's good. But another offer is on the way. Its better. You wait. The first buyer gets angry. "Why hasn't my offer been accepted?" The second buyer never produces, and the first buyer withdraws. While you waited, the first buyer kept looking. They know you didn't respect their offer, and just found it easier to work with another seller. The cliche is similar to dating. "There are plenty of other fish in the sea!" Thus is true with the 2008-2009 real estate market. You now have a house without an offer at all. A low priced home and no bidding war. Other buyers are looking at it and saying, what is wrong with that house? You can't raise the price now, the market expects if you don't sell that you will lower your price.

On many occasions, you will end up with exactly what you asked for. More offers, and you pick the best one. You have to price it perfect, and know how to pull offers from buyers. You have to know what to say, without saying too much. You have to earn their trust, and being willing to break it. And if you are a Realtor, and you want to be successful, you can't let others know your intentions. Buyers and other Realtors that end up with the short end of the stick, remember who put them there.

If you want to price it low for the intent to score a higher value, you have to be willing to take the risks.

Model Home Lease Back and Cash Flow

What if you could invest in Residential Real Estate, but treat it like a commercial investment?

The Model Home Lease Back.

The builder will keep your home looking like the Flagship of the neighborhood. People will walk through daily, but the systems and appliances are going to be hardly used. It's like buying a brand new car and keeping it in the garage.

It's similar to commercial investments: because the tenant is a company, rather than a family. They pay rent plus utilities and taxes, unlike residential. They are a built in tenant, and handle their own maintenance, no need for property management.

Why would the builder sell the model? A builder needs to raise capital in today's market due to tight credit limits. Building a spec home takes time and money. But a model is standing inventory that also needs to be sold at some point. This makes the most financial sense. They raise money, continue building, and rent back until they are finished with the development.

In the meantime you receive huge positive cash flow, on the nicest house in the neighborhood. No concern of vacancies or pets, and earn about 12% return on your downpayment and costs.

See below for our latest opportunities located in the city that has the largest job growth in the nation... Dallas-Fort Worth. Would you believe that this area also has one of the highest population growth rankings in US as well?

Jobs = People

Top 10 Population Metros

Nielsen Study Finds Atlanta, Dallas and Phoenix Are Top Markets by Recent Population Growth
November 3, 2008
From MarketWatch, submitted by David Boehmig, President/Founder

Analysis Also Identifies Seven Population Growth Indicators That Strongly Correlate to Fast-Growing Markets, Providing Expansion Opportunities for Retail Industry

NEW YORK, NY, Nov 03, 2008 (MARKET WIRE via COMTEX) — A new Nielsen Company analysis aimed at uncovering expansion opportunities for the retail industry in a down economy has found that sustained growth is occurring in large metros such as Atlanta, GA; Dallas, TX; and Phoenix, AZ, which ranked as the top three fastest growing markets over the last eight years.

The study, which was conducted by Nielsen Claritas, Nielsen’s leading marketing information source, and based on data compiled as of early 2008, showed that Atlanta and Dallas CBSAs (Core Based Statistical Areas) added more than one million in population since 2000, while the Phoenix CBSA was close at 971,849.

            America's Top 10 Markets by Volume Growth: 2000-2008

                                        Population  2000-2008    2000-2008
1       Atlanta-Sandy Springs, GA        5,357,017      26.1%    1,109,036
2       Dallas-Fort Worth-Arlington, TX  6,164,066      19.4%    1,002,522
3       Phoenix-Mesa-Scottsdale, AZ      4,223,725      29.9%      971,849
4       Houston-Sugar Land-Baytown, TX   5,665,312      20.1%      949,905
5       Los Angeles-Long Beach, CA      13,304,944       7.6%      939,317
6       Riverside, CA                    4,170,780      28.1%      915,959
7       Washington, DC-VA-MD-WV          5,384,723      12.3%      588,540
8       New York, NY-NJ-PA              18,871,770       3.0%      548,768
9       Miami-Fort Lauderdale, FL        5,526,947      10.4%      519,383
10      Las Vegas-Paradise, NV           1,875,245      36.3%      499,480


Nielsen Claritas Pop-Facts(R) 

Rounding out the top five were the Houston and the Los Angeles CBSAs, which also grew by nearly a million people at 949,905 and 939,317, respectively. A CBSA includes both metropolitan areas of at least 50,000 population and micropolitan areas with a population between 10,000-49,999.

“And while some of these markets like Phoenix and Los Angeles have been hard hit by the recent wave of foreclosures, there has been no mass exodus from these markets or anywhere else. People who have foreclosed most likely have not left the market but rather have just become renters. Faltering markets, such as these, will likely rebound and continue to grow — and their underlying demographics are solid,” said Mike Mancini, Nielsen Claritas Vice President of Data Product Management and co-author of a whitepaper that documented the study’s findings, titled:

“Finding Growth in Challenging Times: Seven Indicators to Evaluate Population Growth.”

These Population Growth Indicators, which strongly correlate to fast-growing markets, are:

1. large land areas,
2. booming suburban rings,
3. widespread affluence,
4. an increasing Hispanic population,
5. diversified employment,
6. long commutes, and
7. the presence of lifestyle shopping centers.

“The indicators give retailers a robust tool to identify locations with significant potential for market expansion — markets that may even lead the way in an economic recovery in the coming years,” said Terry Munoz, Vice President of the Nielsen Claritas Retail, Restaurant and Real Estate Group and the other co-author of the whitepaper.

In looking at each indicator, the study further classified CBSAs into three primary groups: Metro Cities, with populations over 200,000; Metro Towns, with populations between 50,000 and 200,000; and Micro Towns whose populations are under 50,000.

For example, a ranking of the markets with populations under 100,000 people revealed that the top three — Palm Coast, FL, Fernley, NV, and St. George, UT — all grew by more than 50 percent since 2000.

Located beyond congested metros, these markets have attracted jobs, retailers and residents thanks to low crime rates and fewer traffic jams. Some of the smaller markets, like St. George, are close to national parks and wilderness areas that appeal to young families and retirees, according to the whitepaper.

“With this analysis, retailers can quickly assess a market’s potential and determine where it fits into an overall growth strategy,” Munoz said. “Even in a down economy with slow population growth, this innovative modeling approach can suggest expansion opportunities in overlooked markets.”

For more information on how to obtain a copy of the whitepaper please visit www.claritas.com.

About The Nielsen Company

The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). The privately held company is active in more than 100 countries, with headquarters in New York, USA. For more information, please visit, www.nielsen.com.

You had me at ZERO

Recently I was talking with a very good client of mine about a purchase, and I was reminded of one cardinal rule.

Keep it simple.

I was talking to him about a property that could be bought for ZERO down, rented, had positive cash flow, and was in a nice location of a popular city in the US.

His reaction was, "This sounds too good to be true, does it work?"

I was so excited that a buyer wanted to talk to me about investing in real estate, rather than punching me in the face or throwing their soda at me, (both have never happened to me, by the way) that I simply reacted without thinking.

My response:

It does work. These are real fannie mae approved loans. They use the equity as the down payment. It only works when 1.) a seller that owns the property 100% free and clear, and is willing to sell and get paid off later. 2.) local bank willing to finance under these terms. None of the big banks will do it. They only see investing in black or white today. But a local bank knows and understands its market better and as long as they have a Fannie Mae stamp, they know it's easier to sell on Wall Street.

The buyer essentially takes the 100% price, uses 25% of the equity as his down (zero cash) and borrows 75% at 6.125% 30 year fix interest rate. Terms that cash flow all the time. The cash required is usually just closing costs. Anywhere from $2000 to $7000 depending on the property.

Everyone says its too good to be true. So, what is the catch?

The catch is… you could have paid cash for the house and got it cheaper 3 weeks earlier, if you were willing to spend ALL cash, buy it from the bank, make your own repairs, settle all outstanding liens (whatever were discovered) and then find a renter. Essentially, the catch is, yes there is a better deal if you are willing to take all of those risks.

This is a way, to still get a great deal, and hardly put any cash out of pocket, and having most of those risks being taken by the wholesaler REO company.

My company makes its money by being the lender, and a commission as the broker.

He said, "Stop, you had me at Zero"

Property Performance with zero down payment option

Purchase Price $138,000

Owner Finance Opportunity:
10% down or $13,800
6.5% interest only, 3 years fixed

Prime +1 year 4 and 5.
60 month balloon. Refinance or Sell.
$16,000 rebate after closing

Bring your own lender:
Reduce 10% off the sales price.

---

Owner financed zero down option payment = $672/mo + (no mortgage insurance MI) + insurance + tax = $849/mo

Owner Occupant Payment Analysis = $899/mo with $4,350 down, FHA with MI, Outside Lender ------>

Investor Cash Flow Analysis on Pre-rented Property with Zero Down (owner financed) ↓

Click Images for Larger View

All figures are estimates. Rates are subject to daily market changes. Qualifications vary from lender to lender, owner financing qualifications are different from conventional lenders as well.

Fannie Mae has good news for investors

As of March 1, 2009, Fannie Mae increases its loan limits from 4 mortgages to 10.

Finally, investors are not snubbed, but being allowed to help in the housing recovery.

In the last 12 months Fannie Mae pulled its stamp of approval of investors with more than 4 mortgages for fear they were risky and toxic. True, some were. Many speculators did get in over their head and create some damage to the housing industry. Many of them used the subprime product, though.

But realistically, the investor with more than 4 mortgages, may have been the professional, savvy, and experienced investor that our economy needs. And we need them active, not with one hand tied behind their back. This is the period where foreclosures are rampant. Some cities are 1 in 34 homes are foreclosures. And some neighborhoods are 1 in 10. These are conditions that investors, people with money, willing to take chances, thrive in.

And when the housing market desperately needs risk taking buyers, these buyers were limited to 4 mortgages. Most of them using one for their Primary.

Not any more. These investors can jump in at auctions, use their capital, and refinance down the road if need be. They can refinance their current properties, that may have adjusted and been quite painful on their monthly budget.Making this change will allow more credit to flow, and release some toxic assets that banks need to get off their books.

OR SO WE HOPE!!! It's all up to the investors.

In short, here are the new guidelines:

720 credit score
25% downpayment for a 1-unit (30% for a 2-4 unit)
No mortgage delinquencies in the last 12 months
6 months of reserves for each investment property.

Fannie Mae Disclosure

Are you glad you escaped the housing bubble?

Kudos to you, if you missed the last housing boom, because you missed the big BUST too.

Investors and homeowners alike, that sat on the sidelines during the last real estate boom, are NOT kicking themselves today.

They may have watched home prices in many markets around the country go up 10% - 20% in one year, and thought...

"Boy, this market is really heated, I'm staying out of it" or "I wish I got in earlier, these prices today are ridiculous"

But, they did not buy earlier, and they did not buy when the market was heated, and they certainly did not buy during the free-falling bust.

What a sigh of relief. No Loss... but, No Gain.

---

Historically, real estate has gone up approximately 4% per year since 1910, almost 100 years. [reference Robert Shiller of Case Shiller from Irrational Exuberance.] Consider inflation, and that hardly seems like a good investment. Consider, leverage by financing real estate, and positive cash flow by income received, and now it looks like a phoenomenal investment.
It can look like a bad investment when you pay all cash, speculate on the appreciation, or have a large negative cash flow. Avoid those things and buy for the long term, and it is a great return.

Let's assume the most recent bust, has erased the gains of the boom. 08 erased 07. 09 erases 06. In some markets 08 may have erased 05 too. BUT, never the less, investors that bought in 2000 still have a 20%-24% gain on average. The same would also be true for some that bought in 06, may have to wait for 2016, but could receive 20%-24% gain as well.

How many times has real estate posted similar losses? The last similar drop was 2 generations ago. It is safe to say, it may not happen again in our lifetime. But if it does, it seems to wipe away recent gains, not total gains. Many buyers that are taking advantage of prices today, are saying, "We are happy to afford today's values, as we were priced out of the market a couple years ago." (not priced out a decade or more ago)

Comparatively, if you invested in the following companies for a decade, do you think you would have similar gains, let alone any of your investment back?

Motorola, Sears, Ford, Citigroup, Fannie Mae, Yahoo, Qwest, Firestone, American Motors, Texaco, Pan Am, Worldcom, Enron, Lehman Brothers, Circuit City.

Energy, Telecom, Finance and Retail Giants... no investment is 100% safe, including real estate. But many of the above companies no longer have any value left, or are facing that fate. Even, I am guilty of owning several on that list, based on raving reviews or a sparkling prospectus. No one could predict their destiny any more than the recent boom/bust mortgage crisis. Whenever something is too good, it usually isn't good forever.

This is not an argument of stock vs. real estate. Rather, I am saying, Real Estate can be viewed as a safer investment, without surrendering your entire investment to a entity that declares itself bankrupt, or corrupt CEO running the company into nothing. There is still something of value with real estate, even in the down turn. Either a roof over your head, or renting the roof over someone else's head.

If the worst is behind us, it could be another 60 years before you have to worry about losing your initial investment in Real Estate. And if you truly owned and financed said property during that period, you would own it free in clear long before that time came!

But if you want to buy or invest, you have to jump in sometime. But when?

The safest time to jump in will be after the bust. No one can predict the perfect time, but watch and see who is buying today, and don't just be the watcher.

Should you utter the words Phoenix with Investment yet?

I believe it is time.
Couple of key indicators are pointing the needle back to Phoenix.
It's been a long time since the red hot investor needle was pointing to the desert.

So, what is it that has changed?

1. Builders have virtually stopped building. Limiting the increase in supply.
2. Inventory is shrinking. Sales are up 60% Nov-Dec 08 and 135% 07-08
3. Population is still increasing faster than national rates. 2.5% projection vs 1% US
4. Still plenty of jobs to hold in the population. Only 6.3% unemployment. US 7.2%
5. Affordability of homes. Median prices come down, renters gravitate toward buying.
6. Investor levels are rising. No one wants to be the first and be wrong.
But if you wait too long, you are the last and hold all the regret.

Not only have builders stopped building, many have gone out of business. Those that are still in the game, have lost the large credit lines that allowed them to stretch their reach from 100 homes per year, to 1000 homes per year. This will keep the new housing inventory to a level of normalcy. Also, the population projections appear to be lower than the previous decade. Builders get overzealous with building permits when population expectations are above 3% growth rate.

Housing monthly inventory index is shrinking. Part of it has to do with the builders not building. But that seems to be offset by the massive foreclosures that are piling up. What is changing is the buyers are buying again. Prices have reached affordable levels that have made home buying attractive again. The question of rent vs buy now is being answered with BUY!

The actual number of houses on the market is fluctuating at 45,000 to 48,000. Which is not a low number. How the monthly index is determined, is by the amount of buyers entering the market each month. Stats are showing sales keep increasing. In Phoenix the monthly index has been slowly dropping and now is at a 10 month supply. In many markets around the country, the montly supply index has simply been increasing all year and the national average is now over 11 months supply.

Prices have been pounded in Phoenix, and there will be more foreclosures, which will keep these prices low. Investors have taken notice. The rate of investors in the market this month is 15%. A number Phoenix hasn't seen since 2005. Investors were part of the problem for the Phoenix decline, but mostly speculative investors. Combined with over-building, and a sub prime lending spree. This time investors are looking at an attractive 1% price to rent ratio. Cash flow is the difference. Let's face it. Rent doesn't change that drastically in 3 years. But prices in Phoenix have been a roller coaster. They have now rolled back to roughly half of their peak.

Properties like this example are available:
Avondale, West Valley Suburb.
Master Plan Community
Homes all built post 2000
Variety of home prices ranging from $120k-$400k
2005 levels, homes were minimum $200's
One bank owned REO cuts the $99,000 mark.
3 bedrooms, 2 baths, tile floors, covered patio.
Rent estimates $900-$1000

1% Price to Rent Ratio = Cash Flow

Since, today's investors are less speculative, and more cashflowcentric, then this is a healthy addition to the reason Phoenix could be on the road to recovery sooner than later.

Some of the markets that were first to bust, are going to be the first to recover.
Phoenix will be one of those markets, the signs are already pointing in the right direction.

Foreclosures don't have to be ALL CASH buys

Usually, you have to pay all cash to get some of the best deals in the foreclosure realm.

Below is the webinar presentation from 1.22.09, where we show you how you can buy great foreclosures with little to nothing down.

Inside are examples of New Properties, Bank Owned, and REOs that are remodeled and rented.
There are also examples of portfolio financing and 30 year fixed conventional financing, specific to individual properties. We have solutions for clients that have over four investment loans too.

Importantly, where do we have these opportunities? Inside the presentation, 3 markets are presented. Atlanta, Charlotte, and Memphis.




For more information about properties, financing and market specifics, please email me at Steve@NorthPointGroup.com

The solution to your real estate problem.

Here's a chronology that we are all too familiar with:

1. You bought real estate and it went up in value
2. You found a renter that covered your expenses
3. Time goes by, things are smooth, but your rate went up
4. You begin the pain of negative cash flow, but you live with it
5. You want to refi and you discover you CAN'T because you lost value!
6. Your tenant just informs you that they are moving out
7. You want to sell and cut your losses

Daily I run into this problem with random clients, my past clients, or even myself.

I don't blame people that want to sell. It's in our human nature to flight to safety.
If you put in a down payment, you want to get some of it back before it's too late, right?
Holding on to an investment that everyone says will just keep going down in value, with no exit strategy is just insane. Everyone wants their strategy to be, "buy low and sell high." But if you bought in the last 5 years, and want to sell 2008 or 2009...You are doing exactly the opposite.

So, if you take a look back at an investment and realize you bought high. SELL HIGHER! Don't sell low.

Didn't I say I had a solution?

The solution lies in holding on to the asset, gaining more income, but at the same time, putting the actual plan of selling into action.

The Lease Option.

What is it?
A renter that pays a premium rent with the intent to purchase your home.

Why does this work?

1. Lease-Option Tenant pays more rent. This lessens your cash flow problem. In some Lease Option agreements, the rent is increased by a much higher level, and that rent is given back to the tenant in the form of price reduction, or down payment, or closing costs. Whichever is the norm in that market.
2. Avoids Vacancy. Whenever you sell, it should be vacant. Buyer's do not enjoy looking at homes that are tenant occupied. And in today's market, it will take a lot longer to find a buyer than a renter. But a Lease Option Tenant will live in the unit until they buy it. No sell vacancy period.
3. Sells the property at future value, not today's loss. Tenant will sign up to buy the property at the value you want today, but not until tomorrow.
4. Reduce Realtor Fees. This is almost a guarantee in every market. You can do this yourself, if you have the time to find a renter. You just make an amendment to your rental agreement. Most Property Management companies can do this as well. They will charge extra, but it's heck of a lot cheaper than 2 Realtor commissions.

The pickle that most people are in, where this solution may not work for, are the ones where the loan has gotten out of control. Rate is adjusting 2pts every time, or the loan has a balance due, or the Neg Am is at recast (if you don't know what this is... good :-))

If you fall into this category, a loan modification can solve that problem for some people.

If you are facing $400 negative output every month on your investment property, all you have to do is Lease Option for $200 more than your current rent, and Loan Modification for $200 off your current payment.

Now you are breaking even again. I am not going to tell you that it is easy. But losing $50,000 is not easy to swallow, either.

Leased for 2 years, Positive Cash Flow

5101 Powell, Blue Springs, MO

$165,900
2 year renter until Nov 2010
$1300 per month
$183 Positive per month
12 Miles to Downtown
1 mile to Bass Pro, Independence Mall, Costco, Lowes
1 Block to Blue Springs Lake
Schools, 8,9 and 10 out of 10 http://www.greatshools.net/

WHY BLUE SPRINGS?
12% population growth, (2x the national average)
Population 53000 people
Household Income $74,000 year
Median price home $174,000 (Affordable)
19% job growth projected next 10 years (Sperling Best Places)

Why Kansas City?

1. 2.5 million people
2. Income is 20% higher, and cost of living 20% lower than both national averages
3. Diverse economy. Federal (IRS, Reserve, Leavonworth) Tech, (Garmin, DST, Cerner), Telecom (Sprint, Verizon), Manufacturing (Hallmark, GM FORD HARLEY), Finance (HR BLOCK, American New Century), Logistics (YRC, BNSF and KC Southern Intermodals)
4. 17 Fortune 1000
5. 48% renter occ, and of those 75% renters live in units 25 years or older. (demand for new housing)
6. 75% of builders build less than 100 homes per year. (no mega developing, or major national builder presence)
7. Positive net migration of 1.2% per year past 10 years.
8. Job growth expected to reach 3% per year in 3 years
9. 4 billion invested in downtown econ, and total of 7 billion including the metro area
10. Great quality of life amenities and high end retail not seen an many other Midwest cities from Dallas to Chicago.
11. 6^th smartest city by Kiplingers. And 2^nd highest college grads in Midwest behind Chicago.

Thinking about investing in Temecula, CA?

WE DO!

Temecula may have its share of foreclosures. But that doesn't mean it's a bad real estate market. Sometimes, prices get ahead of the median incomes in the area, and that makes real estate unaffordable. Affordability is a key index for a healthy real estate Micronomy.

A Purchase at the peak of this market may have led to disaster, but we predict as prices have declined, affordability has reset itself again. And the fundamentals of this area between Orange County, San Diego and the Inland Empire, make for a strong recovery.

Incomes, Education, and Job Oppornities are impressive in all categories.
Expect steady appreciation in the future, however, nothing volatile or exuberant that led to our recent decline.



Presentation shows demographics, statistics, geography and quality of life.

If you are interested in opportunities in the Temecula Market, give me a call immediately. Or stay tuned to the blog for more.

Steve Roesch
Market Advisor
503-213-3550
Steve@NorthPointGroup.com

New Construction, Bank Owned and Financed at low down

Total Down at closing = $2,000
$175,000 Price. Appraised $195,000.
Originally priced well above $200,000
Builder could not sell in time before the bank took them back. Now the bank wants to finance for you, Owner or Investor, for $2000 down.

Located on a quiet street in Atlanta Metro, Georgia.
These are big 2000+ square feet, 5 bedroom, 3 bath houses.
Complete move in ready, blinds, fridge, landscaping.
If you want to rent it out, or rent it, the market rent is $1200.
2 Homes just like this are rented for $1200 in the neighborhood.
The Mortgage payment will be $948 for the next 3 years.

If you live in Atlanta, you know about the wonderful reasons to live there.
Which is why over 1 million people have moved there in the last 7 years.
The most growth for any city in the US during the same time.

Foreclosures without the headache

$128,000 priced
You Pay = $98,000 = Discount


Down = $2,000 = Low Down
Rented = $1,000 = Cash Flow
1 Yr Lease = Removes Vacancy Factor
Remodeled = No Additional Capital Needed

Finance 75% of original price and only put $2000 down.
The remainder is your discount on the house. 24% discount!!!

Rented $1000 per month until Jan 31, 2010.
Positive Cash Flow by $83-$163 per month after all expenses and management fees

Since its rented for the first year, which means no vacancy, then $163 x 12 is $1956
That’s the down payment back right there, returned in 1 year

6831 Collier
4 bedrooms
Remodeled
Close in Atlanta, 15 min. to downtown
1 mile to Walmart-Publix-RiteAid-Hollywood Video-Riverdale Plaza
Already Rented.

Atlanta Top 10
1. Georgia gains the 4^th most population in 2008. US Census.
2. Atlanta adds 1 million people in the last 7 years. Highest Growth in the US.
3. Atlanta is home to the world’s busiest airport,
4. 22 of the Fortune 1000 HQ. 5^th highest concentration of the Fortune 500
5. One of the most preferred cities to open or expand corporations by CEOs
6. Huge Rental Demand. Nearly 50% of residents are renters.
7. HQ for many mega-corporations like: CNN, Coca-Cola, UPS, Home Depot, Delta, Turner, COX and more.
8. Lots of Government jobs including, GA State Capital, Military Bases, Federal Reserve Bank, and the CDC (center for disease control)
9. Home to 5.1 Million people
10. Attractions for all, such as: NFL Falcons and Major League Baseball Braves, SIX Flags Amusement Park, Nascar at
Atlanta Speedway, and the Nations Largest Aquarium

Click to Enlarge the Cash Flow Analysis.

Put up $2000, and receive $100 per month in return

How about this for a business opportunity?

1. You invest $2000, up front
2. In return, you will get between $89-$163 per month in return
3. You will have your $2000 back in 1.6 years.
4. You keep receiving payments until you ultimately own a $118,000 asset
5. At which point, your monthly receivalbe will now increase to $600 per month
6. Each year, your monthly income may increase 3%, depending on market conditions
7. Each year, the value of your asset could also increase about 3% per year depending on market conditions

Yes, this is a Real Estate Transaction, and it sounds too good to be true.
But it’s not. Take a look at this example:

Just under 10 miles from downtown Atlanta

$118,000 home for $90,000,
That’s $2,000 down and $88,500 borrowed at 6% 30yr fix.
WE CAN FINANCE THESE TERMS
Rents are $925 for similar properties
Beautifully remodeled.
Previously foreclosed on, provides for deep discounts.

Georgia gains the 4^th most population in 2008. US Census.
Atlanta is home to the world’s busiest airport, and 22 of the Fortune 1000 HQ.

Steve Roesch
Market Advisor
Cell: 503-318-6351
steve@northpointgroup.com

Low Risk Foreclosures for $7,000

Let's talk foreclosures...

What's on your foreclosure wish list?

1. Deep Discounts
2. I don't want to buy bulk
3. Built in Quality Tenants with Cash Flow
4. No Surprise Liens
5. No Repairs Needed
6. And I want the ability to use financing for leverage

The majority of foreclosures usually come with a discount. But you're lucky to get one other item off the wish list. And, the deepest discounts are usually found if you buy in bulk.

Everybody wants to get a deal.
But if you have to go Deep into your pocket, to get a Deep discount, it's not much of a Deal.

Let me show you how you can acheive your foreclosure wish list and still have a Great Deal.

Example:
Foreclosed Duplex
Wholesaler Acquires in Bulk for Deep Discount
Title Cleaned, Property Rehabbed, Professionally Placed Tenants.

$130,000 appraisal

Numbers of the Deal:

$104,000 Price and Only $7,000 Down
$1150 Rent Per month, Total for both sides
$165 ++Cash Flow per mo. after all necessary expenses and foreseen maintenance

$7,000 is the total cash investment for Down Payment, repairs, lease up expenses, start up vacancy, etc
$97,000 is the loan with 30 year fix loan at 6% rate (rates change daily, not guaranteed)

Where are these Deals located?

We have similar programs like this in several markets across the US.

This duplex is located in the Atlanta Metro. Specifically, Covington GA, just 30 minutes East of downtown Atlanta.

Atlanta Accolades

One of the highest ranked cities for jobs and population growth in the country
over the last decade.
Huge Rental Demand. Nearly 50% of residents are
renters.
Home to the World's Busiest Airport and HQ for many
mega-corporations like: CNN, Coca-Cola, UPS, Home Depot, Delta, and more. About
27 of Fortune 1000 are HQ here.
Lots of Government jobs including, GA State
Capital, Military Bases, Federal Reserve Bank, and the CDC (center for disease
control)
Home to 5.1 Million people, and attractions for all, such as: NFL
Falcons and Major League Baseball Braves, SIX Flags Amusement Park, Nascar at
Atlanta Speedway, and the Nations Largest Aquarium.

Call me for more Markets and Deals, or Follow the Blog