I'm back to my blog and feeling very dismal that I am not spending more time at it - there is so much going on in the property market. The question has been asked of me several times, by skeptical clients about the numbers of property today - and why property over another investment. I have started asking - why not property over another investment? For so long, may financial planners have been lauding the virtues of property investing. Similar to equities - property prices were skyrocketing. It was almost a sure thing - perhaps for a few years better then equities for returns. The 'sure thing' was concentrated around the spectacular rise in property values, and had nothing to do with the performance of the property. Now, when property is at it's lowest in 10 years, and it can perform, investors are cautious. It's my humble opinion that we, as a society, stopped thinking of our assets as vehicles for financial performance, and, instead as vehicles to gamble with. Also, stocks have been perceived as easier, and over the long run - more lucrative. We now know that to be untrue - it's just unfortunately that we've shed billions of dollars of wealth gaining that little nugget of information. That said, equities still hold sway over property investing. If I pose the below numbers as equities - I receive enthusiastic yes's about purchasing - if I pose these returns as property - I get looks of skepticism. Yet the numbers I pull are actual examples, and are available all over the USA, every day of the week. Here are a few numbers:
The numbers:
1. Initial cost - $57,000 (property)
2. Additional investment - $20,000 (renovation)
3. Total Investment - $77,000
A Sell - $99,000 (Lease with option to buy)
B. Dividend - $850.00 (monthly lease payment for 12 months)
C. Immediate Cash Bonus - $3000.00 (down payment)
Adding the Returns:
1. Annual growth - $24,000 31% ROI (Equity at closing)
2. Total Dividend - $10,200 13% (Lease payments for 12 months)
3. Total Return - $34,200 - 44%
Risky? I don't know - this happened to be my own investment - I've many others similar, and I produce like results for clients - but I do know this....with the equities world upside down, and property values at levels where the assets can now perform at extra ordinary levels, I'll invest in property all day long.
Sunday, March 8, 2009
Friday, February 13, 2009
Turning Complaints into Progress
I had every intention of writing a blog full of complaints today. The challenges of working with agents who list bank owned properties only was fueled by conversations with fellow colleagues who experience similar challenges. One conversation became a full rant about how these agents don't return phone calls, and potentially don't even submit our offers. That was my rant, but it's over, and I have a more middle tune now - and its far more positive.
I am finding as I work with agents that some are extremely verbal, while others prefer to work only be email. While email is great, it does not allow any type of relationship to grow - by which I can then more concretely advise my clients of what is an appropriate offer. We give our clients a corridor by which to make their bids. Of course, we want to leave as much margin as possible, mainly because the amount of 'branding' is variable. This means that with every house, you never quite know what you will find when you tear it down. If we have an agent that works with us, we can put in a low ball offer and then work the offer through our corridor to reach a solution that is beneficial to all parties. And, recently I have found several agents that are willing to do this, that are helpful in the work they do with the bank, and are allowing our group to get good fair deals for your investors, while providing a strong product for the buyer tenant that is being placed in the home. It becomes a win win for all parties, which is ultimately what our goal is. And we have had success!!
I will be filming our next branding, to give people an idea of what goes into the process, and how quickly a nasty home really transforms into a beautiful new home, with added value fo rthe parties involved. In the meantime, suffice it to say I am pleased with the purchases we are currently in contract with, and will spend my time talking about the really great agents that are a part of making this happen, and not dissing those who are potential blockers.
I am finding as I work with agents that some are extremely verbal, while others prefer to work only be email. While email is great, it does not allow any type of relationship to grow - by which I can then more concretely advise my clients of what is an appropriate offer. We give our clients a corridor by which to make their bids. Of course, we want to leave as much margin as possible, mainly because the amount of 'branding' is variable. This means that with every house, you never quite know what you will find when you tear it down. If we have an agent that works with us, we can put in a low ball offer and then work the offer through our corridor to reach a solution that is beneficial to all parties. And, recently I have found several agents that are willing to do this, that are helpful in the work they do with the bank, and are allowing our group to get good fair deals for your investors, while providing a strong product for the buyer tenant that is being placed in the home. It becomes a win win for all parties, which is ultimately what our goal is. And we have had success!!
I will be filming our next branding, to give people an idea of what goes into the process, and how quickly a nasty home really transforms into a beautiful new home, with added value fo rthe parties involved. In the meantime, suffice it to say I am pleased with the purchases we are currently in contract with, and will spend my time talking about the really great agents that are a part of making this happen, and not dissing those who are potential blockers.
Sunday, February 8, 2009
Fannie and Freddie Mac finally wake up!!
Great news for investors - and evidence that the government is waking up. With 100's of millions of dollars parked and lending more and more difficult, Freddie and Fannie have realized that investors are good for the economy and will help revitalize the property market. They couldn't be more right. This is an open doorway or investors to reap huge benefits in the next couple of years. For my business, this is HUGE! And, the added benefit is that investors can finance first time home buyers and credit challenged buyers. Its a win win for all. See below the details!
Multiple Mortgages to the Same Borrower and Reserve Requirements Changes
Fannie Mae has issued Announcement 09-02, Updates to Multiple Mortgages to the Same Borrower Policy, Reserve Requirements, Reserves Definition, and Form 3170.
Multiple Mortgages to the Same Borrower
To help support housing recovery, we are introducing an expanded policy regarding multiple mortgages to the same borrower. Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with our mission to provide stability, liquidity, and affordability to the nation’s housing system.
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70–75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any investment property or second home loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.
Second home and investment property loans to borrowers with five to ten financed properties will be accepted for whole loan purchase or delivery into MBS with purchase dates on or after March 1, 2009
Investors come forth!Sunday, January 25, 2009
The Weekend
Today I was reading advice about about how to purchase bank owned homes. It's interesting that as you read through various processes across the USA, you can note differences with how the banks work with foreclosures. I saw a few things of interests:
1. One writer spoke of the 'great' deals offered. He mentioned a home at that sold for $500,000 3 years ago being sold for $250,000 as a foreclosure. Great deal? Not at all. The owner could not sell the home for what they paid for it. They lost the home. That's no great deal. Its the tragedy of what is happening in America. The market ran up speculative prices with homes and the ordinary home owner got caught up in it. Some were speculating, but some truly needed a home to house their family - yet two years down the road they lost it. Homes are valued only at what the average family can afford within that neighborhood or zip code. I just read a brilliant numeric analysis of how to price a home, and I'll share that as soon as I have permission from the author. It is brilliant, and I will start using it on every time I look at a home for my investors.
2. The agents that sell foreclosures. They are a mixed bag to be sure. Take for instance the home I wrote about on Friday - the home which has the front door blocked from the inside making it impossible to get in the house. My partner put a call into the agent the same day - but received only voice mail. She left two more voice mails - but never had it returned. I called the agent on Saturday - and received the sweetest voice mail stating that she only worked Monday through Friday and did not work on weekends. In a working economy - one in which people work Monday through Friday and look for houses on the .... weekends....you'd think she would make herself available at least on Saturday. But unfortunately she did not - and my client, a cash investor, could not get into the house. In these situations, I always wonder if the bank understands the "dedication" of the agent they have designated to sell the house. Frankly, were I the asset manager, I would be monitoring closer - but I'm not the asset manager, and I'm beginning to feel that things are just done differently from how I do them!
3. Negotiation - actually pricing and negotiating bank foreclosures is tricky. Every one believes they are experts in pricing, and the bank tries to always get what they have into the house. They seem to get offended when the recieve a low offer - one the perspective buyer believes is the fair value for the house. Often they won't even answer. Often, the agent does not even submit! After all, they work on commission - and it's in the agents best interest to get as high a price as possible. Therefore, they often tell you about the 'value' of the home in their opinion, and as a buyer - you can only believe them. In this, I advise all buyers to become experts - understand what home values are - how to value them, and how to buy them. There are experts out there - and I'd like to meet more!
As I complete a couple of presentations for my institutional investors, I continue to be amazed at the great profits investors can make, if they are cautious and really know what they are doing!
1. One writer spoke of the 'great' deals offered. He mentioned a home at that sold for $500,000 3 years ago being sold for $250,000 as a foreclosure. Great deal? Not at all. The owner could not sell the home for what they paid for it. They lost the home. That's no great deal. Its the tragedy of what is happening in America. The market ran up speculative prices with homes and the ordinary home owner got caught up in it. Some were speculating, but some truly needed a home to house their family - yet two years down the road they lost it. Homes are valued only at what the average family can afford within that neighborhood or zip code. I just read a brilliant numeric analysis of how to price a home, and I'll share that as soon as I have permission from the author. It is brilliant, and I will start using it on every time I look at a home for my investors.
2. The agents that sell foreclosures. They are a mixed bag to be sure. Take for instance the home I wrote about on Friday - the home which has the front door blocked from the inside making it impossible to get in the house. My partner put a call into the agent the same day - but received only voice mail. She left two more voice mails - but never had it returned. I called the agent on Saturday - and received the sweetest voice mail stating that she only worked Monday through Friday and did not work on weekends. In a working economy - one in which people work Monday through Friday and look for houses on the .... weekends....you'd think she would make herself available at least on Saturday. But unfortunately she did not - and my client, a cash investor, could not get into the house. In these situations, I always wonder if the bank understands the "dedication" of the agent they have designated to sell the house. Frankly, were I the asset manager, I would be monitoring closer - but I'm not the asset manager, and I'm beginning to feel that things are just done differently from how I do them!
3. Negotiation - actually pricing and negotiating bank foreclosures is tricky. Every one believes they are experts in pricing, and the bank tries to always get what they have into the house. They seem to get offended when the recieve a low offer - one the perspective buyer believes is the fair value for the house. Often they won't even answer. Often, the agent does not even submit! After all, they work on commission - and it's in the agents best interest to get as high a price as possible. Therefore, they often tell you about the 'value' of the home in their opinion, and as a buyer - you can only believe them. In this, I advise all buyers to become experts - understand what home values are - how to value them, and how to buy them. There are experts out there - and I'd like to meet more!
As I complete a couple of presentations for my institutional investors, I continue to be amazed at the great profits investors can make, if they are cautious and really know what they are doing!
Friday, January 23, 2009
It's Friday
I'm new to blogging - I like writing but have not blogged before. I am working to commit myself to daily updates that will, I hope get more and more interesting as I understand what readers are looking for and the medium becomes familiar to me.
Who am I? I returned to the USA after 19 years living overseas. I'm still adjusting - its been a bit of a culture shock - but in a good way. I made a rash decision to check out some different markets in the US, and ended in Columbus Ohio. After cities such as Moscow, London, Cairo, Tokyo, Singapore etc, Columbus is an experience of its own - not all bad. I'm still adjusting.
As of now I am writing in first person - I'm trying to get out of the business mode that I live and breath every day. I'm sure I'll slip into business lingo from time to time - if so, just give me a heads up and I'll change my language!
Now, what do I do? I run RenuHomes. I created RenuHomes after I left my corporate position. I didn't expect the stock market to tank, to loose 75% of my IRA money, to see the value of my housing holdings dip to 2000 levels, or to commit to a nomadic lifestyle at the time. I only thought of taking my business model created in business school, and implementing it. It's been a wild roller coaster ride since then. About my organization. I work in real estate. I am NOT a real estate agent. I am NOT a house flipper. My organization is am umbrella organization which has 3 components - a consulting arm for investors, a renovation arm (known from now on as 'branding', and a placement service for 'buyer tenants'. Its product creation in an industry which has no defined 'product'. I daily get looks of questioning when I say 'my product'. "What is your product"? "A house?" (brow furrowed - the asker trying to clearly understand 'product' in real estate'). Yes, a 'product'. I am going out on a limb here and will say it's a great product by the way. It has significant returns - up to 15% on a monthly basis, and has a nice little cash annuity at the end of the 'term' after the buyer leasee purchases. Let me give you an example (these are live projects - you can buy them now - my email is posted - but please provide phone number so I can ring and discuss)
Project 1
Buyer tenant has 5000 deposit down
Buyer tenant will pay 850 per month
Buyer tenant can purchase up to 125,000 (meeting appraised value)
Term of project - 12-18 months.
Investor purchases unit for 100,000
Great return on investment and risk is low with this couple.
Project 2
Buyer tenant has 3000 deposit down
Buyer tenant will pay 1250 per month
Buyer tenant can purchase up to 145,000 (meeting appraised value)
Term of project - 12-18 months.
Investor purchases unit for 110,000
Great return on investment and risk is low with this couple.
Project 3
Buyer tenant has 3000 deposit down
Buyer tenant will pay 800 per month
Buyer tenant can purchase up to 110,000 (meeting appraised value)
Term of project - 24-30 months.
Investor purchases unit for 85,000
Great return on investment and risk is low with this couple.
This gives you an idea of the types of return - a calculator will compute the yields. What is my job and what do those projects have to do with me? I locate the 'Investor'. I place the 'Investor' with the Buyer Tenant. I 'Brand' the house the buyer tenant moves into. And my organization manages the process to funding - in tandem with my partner organization. I am creating financial independence for investors - using property as the vehicle. It's easy? Not so! Yesterday I previewed houses. Here's what I encountered:
House 1.
People were still living in the house. Picture smelly clothes all over - bathrooms that had not seen a sponge or cleanser in weeks (months?), carpet stained and dirty, kitchen sink full of rank dirty dishes....well I think the picture is clear on that property.
House 2.
Nice looking house on the outside. A HUD house. I have a key to HUD houses, which works on all houses posted by HUD. I tried to get into the front door - but the key did not work. Tried the back (tramping in the snow by the way - I was well dressed as I was going to an evening function after), key did not work. Called the agent - he know nothing, nor could he say why the key didn't work other then he thought someone else (mystery person) was changing locks and cutting deals. He told me to call the management company. I called. In the process - I fell (icy cold here, ice and snow everywhere). Dropped my iPhone in the snow and thought I lost it due to moisture, but it was saved! Management company confirmed a rogue agent (yes rogue!) was selecting the best HUD houses, changing the locks and trying to cut deals with them. He also confirmed agent is now in jail, and the locks would need to be changed again. He agreed to ring me after the new locks where on.
House 3.
Nice looking house from the outside. An empty house....I think. I retrieved the key from the lockbox and opened the door. It would open only an inch. Blocked from the inside. I pushed, leaned back and kicked, but the door would not budge. I house is impossible to enter. It's owned by a bank - but potential buyers can not get into the house to view it. It seems someone is squatting in the house. I'll not even go into the steps required to be able to view the house. I will try again this weekend, and if you are interested - I'll let you know the results.
Welcome to the world of bank foreclosures, REO's, HUDs and short sales. It's like the wild west, and its growing. But it's a business with its own rewards and I enjoy it.
This is day one. You are always welcome to contact me - but I have to go back to work now, and inform my clients of the results of my house search. More later!
Who am I? I returned to the USA after 19 years living overseas. I'm still adjusting - its been a bit of a culture shock - but in a good way. I made a rash decision to check out some different markets in the US, and ended in Columbus Ohio. After cities such as Moscow, London, Cairo, Tokyo, Singapore etc, Columbus is an experience of its own - not all bad. I'm still adjusting.
As of now I am writing in first person - I'm trying to get out of the business mode that I live and breath every day. I'm sure I'll slip into business lingo from time to time - if so, just give me a heads up and I'll change my language!
Now, what do I do? I run RenuHomes. I created RenuHomes after I left my corporate position. I didn't expect the stock market to tank, to loose 75% of my IRA money, to see the value of my housing holdings dip to 2000 levels, or to commit to a nomadic lifestyle at the time. I only thought of taking my business model created in business school, and implementing it. It's been a wild roller coaster ride since then. About my organization. I work in real estate. I am NOT a real estate agent. I am NOT a house flipper. My organization is am umbrella organization which has 3 components - a consulting arm for investors, a renovation arm (known from now on as 'branding', and a placement service for 'buyer tenants'. Its product creation in an industry which has no defined 'product'. I daily get looks of questioning when I say 'my product'. "What is your product"? "A house?" (brow furrowed - the asker trying to clearly understand 'product' in real estate'). Yes, a 'product'. I am going out on a limb here and will say it's a great product by the way. It has significant returns - up to 15% on a monthly basis, and has a nice little cash annuity at the end of the 'term' after the buyer leasee purchases. Let me give you an example (these are live projects - you can buy them now - my email is posted - but please provide phone number so I can ring and discuss)
Project 1
Buyer tenant has 5000 deposit down
Buyer tenant will pay 850 per month
Buyer tenant can purchase up to 125,000 (meeting appraised value)
Term of project - 12-18 months.
Investor purchases unit for 100,000
Great return on investment and risk is low with this couple.
Project 2
Buyer tenant has 3000 deposit down
Buyer tenant will pay 1250 per month
Buyer tenant can purchase up to 145,000 (meeting appraised value)
Term of project - 12-18 months.
Investor purchases unit for 110,000
Great return on investment and risk is low with this couple.
Project 3
Buyer tenant has 3000 deposit down
Buyer tenant will pay 800 per month
Buyer tenant can purchase up to 110,000 (meeting appraised value)
Term of project - 24-30 months.
Investor purchases unit for 85,000
Great return on investment and risk is low with this couple.
This gives you an idea of the types of return - a calculator will compute the yields. What is my job and what do those projects have to do with me? I locate the 'Investor'. I place the 'Investor' with the Buyer Tenant. I 'Brand' the house the buyer tenant moves into. And my organization manages the process to funding - in tandem with my partner organization. I am creating financial independence for investors - using property as the vehicle. It's easy? Not so! Yesterday I previewed houses. Here's what I encountered:
House 1.
People were still living in the house. Picture smelly clothes all over - bathrooms that had not seen a sponge or cleanser in weeks (months?), carpet stained and dirty, kitchen sink full of rank dirty dishes....well I think the picture is clear on that property.
House 2.
Nice looking house on the outside. A HUD house. I have a key to HUD houses, which works on all houses posted by HUD. I tried to get into the front door - but the key did not work. Tried the back (tramping in the snow by the way - I was well dressed as I was going to an evening function after), key did not work. Called the agent - he know nothing, nor could he say why the key didn't work other then he thought someone else (mystery person) was changing locks and cutting deals. He told me to call the management company. I called. In the process - I fell (icy cold here, ice and snow everywhere). Dropped my iPhone in the snow and thought I lost it due to moisture, but it was saved! Management company confirmed a rogue agent (yes rogue!) was selecting the best HUD houses, changing the locks and trying to cut deals with them. He also confirmed agent is now in jail, and the locks would need to be changed again. He agreed to ring me after the new locks where on.
House 3.
Nice looking house from the outside. An empty house....I think. I retrieved the key from the lockbox and opened the door. It would open only an inch. Blocked from the inside. I pushed, leaned back and kicked, but the door would not budge. I house is impossible to enter. It's owned by a bank - but potential buyers can not get into the house to view it. It seems someone is squatting in the house. I'll not even go into the steps required to be able to view the house. I will try again this weekend, and if you are interested - I'll let you know the results.
Welcome to the world of bank foreclosures, REO's, HUDs and short sales. It's like the wild west, and its growing. But it's a business with its own rewards and I enjoy it.
This is day one. You are always welcome to contact me - but I have to go back to work now, and inform my clients of the results of my house search. More later!
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