CA Foreclosures Point to Housing Bottom

Dan Levy and Daniel Taub from Bloomberg News have suggested in their article, "Foreclosures point to housing bottom," that California is well on it's way to reaching the bottom of the real estate market, and is most likely the closest of all 50 states. They continue to explain how bidding wars are common place.

In my opinion, they are right on! In the East Bay real estate market we most often see multiple offers on hot properties.

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How Low Can East Bay Homes Go?

Years ago, real estate buyers would have never thought that homes in East Contra Costa County would be priced as low as they are today. Homes in Brentwood, Antioch, Oakley, Pittsburg, Bay Point and Concord have reached low low prices. Buyers are finding bargain properties with little or no work needed. With everything on sale, buyers have a plethora of options from which to choose.

But with so many options, and buyers, it can be difficult to have your offer accepted by the banks. These inexpensive homes are receiving multiple offers within the first hours of it being listed. In addition, even though a home may be listed extraordinarily low, the multiple offers are coming in well above the asking price. Banks have realized that listing a property with a lower than market asking price, will entice home buyers to flock to the property. Within a few days, homes have soared past the original asking price and go into contract quickly.

There is talk around the town that home prices will continue to drop throughout East Contra Costa County. That may very well be true…but consider that homes are already reaching a low price point. Homes are beginning to fall into the $110 dollar per square foot range. When a home is being sold for that price per square foot, there really isn’t much room for it to come down in price. That is not an absolute statement, but it’s normally true. Furthermore, while foreclosures continue to flood the real estate market, trends do not show a slowdown into the future. Banks will more than likely continue to take on more inventory and keep cutting deals on their properties.

As a home buyer, this is one of the best, if not the best, times for you to purchase a home. Rates are considerably low, first time home buyer programs are outstanding, and there is tons of inventory available. While inventory levels remain saturated, it does not mean that buyers can wait on the sidelines. The best deals out there are getting multiple offers within hours of putting it on MLS. The point is, if you are planning on getting a deal, be prepared to act quickly.

Narrow down where you would like to purchase a home. Either the community, neighborhood, street, area, whatever is important to you. Once you do that, work with a reputable Realtor or real estate agent to find you the deal of a lifetime. Act quickly, and the next one just might be yours! We may not be at the bottom, but it sure would feel good to know that you bought near it, instead of on the upswing.

Indy Mac May Be Investigated for Fraud

By now, almost everyone has heard of Indy Mac failing on Friday, July 11, 2008. Reports are saying that investigative measures are being considered. Oh, what a blessing!

Let me explain...

When real estate was hot, mortgage brokers and lenders (really real estate professionals) were your best friend. They were your doorway to riches and home ownership. Almost everyone you knew had "the best" agent, or new of one. However, that was mainly because everyone knew they could get a deal or two under their belt when lending guidelines were laxed and real estate prices were booming. Now-a-days, real estate agents are jumping through hoops to regain the trust they lost so easily (okay, not all agents, but the "agent" in general).

If Indy Mac's roots are investigated for falsifying documents, it may help clean up the real estate agent persona. To be honest, when real estate was hot, a real estate license was really a "license to steal." Mortgage brokers and agents were able to charge ridiculous points to get people into a house. When they falsified mortgage applications and income statements, there were doing injustice to more than just themselves, but to shareholders and depositors across the globe.

Once the mortgage mess settles, and real estate (on a national level) goes back to a normal state, will mortgage brokers and agents be redeemed from their corrupt counterparts. Indy Mac officials, employees, whatever their "title," I hope...have another thing coming.

Who's Your Bird Dog?

In today's real estate arena, investors are looking for that bottom dollar deal. Okay, let me rephrase, investors are always looking at the bottom dollar, but with the talk of foreclosures and bank owned properties, people are seeking the deal of a lifetime. Today it seems as though people are doing a lot of searching for these bottom dollar deals, when instead they could have a "bird dog" do it for them.

Bird Dog: informal. a person hired to locate special items (or real estate)

If the average investor could hire a trusted bird dog, they would be able to spend less time searching for properties and more time "researching" them. Instead of scouring the internet for probable investment properties, you would have someone, or some company, working for you. By leveraging their time, you would create more time for you to investigate the potential each property has in your real estate portfolio.

Whether that time is used for crunching numbers, investigating long and short term real estate trends or analyzing demographic growth, you would be more efficient in your decision making process. However, it's not suggested to make uninformed decisions or act more quickly than normal, that is beside the point. Working with a bird dog will help you find the right investment for you.

Finding a trusted and well established bird dog is not always difficult, but finding one that works for free is. However, eRealtyInvestors could be the answer you were looking for. They don't charge a fee, they have located, tried and tested real estate markets spread across the U.S., and they will help you along the way.

The point of a bird dog is to maximize your time by leveraging another's. See if eRealtyInvestors can help you find what you've been looking for.

Is Property Management Right For You?

Real estate investors are either turned on or off about becoming a landlord. For the most part, there are two ways to go about property management. You can choose to do it yourself, or you can pay someone. Both options have pro’s and cons.

Self serving property managers tend to enjoy the excitement of getting their hands dirty and being in on all the action. Whether it’s finding a tenant, fixing the stove, replacing the water heater, or even weekly lawn maintenance, this investor is there. Likewise, being your own property manager involves a lot of time, work, and sometimes stress.

While self serving property managers are doing all the work, the passive landlord tends to take on the less hands-on approach. Typically, passive landlords pay a professional property a monthly percentage fee to manage their property. The monthly percentage paid to the property manager will pay for them to fix a problem or to evict a tenant (unfortunately, it does happen). Often times, real estate is purchased in distant cities or outside the investors home state. Trying to be an active property manager is difficult when you are 3,000 miles away from your property.

In both cases, determining which investor you want to be is up to you. Let’s look at the pro’s and con’s of each:

You are the property manager:

Pros

• Choose tenants
• Repairs
• No added fees
• Direct control
• Save money

Cons

• Time
• Stress
• Not a professional (expertise)
• Rules and Regulations
• Liability

Hiring a property manager:

Pro's

• Time
• No emotions
• Professional
• Sleep at night

Con's

• Monthly fee
• Tenant approval
• Repair costs and time

Take a minute and see if you can think of anything else not on this list. If it applies, I will add it to the list. Leave a comment below to add to either list.

Looking at both lists, they are almost a mirror image of one another. Being your own property manager saves you money, allows you to choose your tenants, and you have direct control over your property. However, you may receive calls in the middle of the night from your tenant who has a water heater that broke, or that the septic tank has overfilled, or that the roof is leaking from the rain. Situations may occur where to have you evict a tenant. Be aware of eviction laws and proceedings to stray yourself from lawsuits. That is the last thing people want to deal with. Plus, how do you deal with people in general? Are you willing to let people pay you late? If so, be sure to settle between landlord and friend.

On the other hand, when hiring a property manager, many of these issues are not a factor. Even though a monthly fee is taken in consideration for their services (whether something happens or not), it is considered to be well worth it by many passive property managers. Taking this route can lead to many more nights of sleep knowing that if any problems arise, they don’t have to get out of bed and drive to the investment property. Or, what if you are a lousy property manager? Aren’t you glad that you hired a professional who starts the eviction problem on your house on the 10th day of the month? For a hundred or so dollars a month, professional property managers will manage your property for you.

Before you consider becoming a property manager, or hiring one, print the Property Manager Checklist. It will help you understand the quirks of professional and effective property management as well as outline what is expected in the job performance.

Many investors will agree that hiring a professional is easier and more cost effective than to try and become a professional themselves. Leveraging time, money and expertise is how successful real estate investing happens. Before your next investment property purchase, consider if you are fit to be a property manager. If not, consider hiring a professional (not that you won’t be good…). The opportunity cost of hiring a property manager may outweigh the monetary costs to managing your own property.

Cash on Cash Return Formula & Example

Investors often refer to a cash-on-cash return ratio while evaluating income property. Cash-on-cash return is normally a simple calculation and does not take into account appreciation, depreciation, or tax benefits. Investors generally use this quick and easy formula to determine cash flow potential, as well as if a property is underpriced.

Example

Joe Investor is considering purchasing a four plex with a purchase price of $285,000. When all four doors are rented, Joe will receive $3,200 a month in rent. However, to purchase this property, Joe must invest $65,550 (including downpayment and closing costs). Fully rented, this four plex will cash flow $1,067 per month. Joe’s cash on cash return would be 19.5%.

Real Estate Investing Webinars Now Available!

eRealtyInvestors has chosen to host online webinars for their investors. Seemingly, it makes the busy professional more inclined to learn more about real estate investing from the comfort of their home, business, or even while on vacation (must have internet connection).

Please refer to http://www.erealtyinvestors.com. eRealtyInvestors also holds in person real estate investing workshops in San Diego, CA and Concord, CA.

Instant Gratification Leads to Impatient Investors

Today’s lifestyle promotes people to receive instant gratification. Whether it be starting up the gas fireplace with a flick of the switch, or popping food into the microwave to sit down and watch your favorite recorded shows while skipping past the commercials. Of all things we can think of, unfortunately, real estate does not work that way.

Remember back in the 90’s when we had dial up internet? It took over 5 minutes sometimes to load pages. Could you imagine waiting that long to look at the weather, check your email, or even look at real estate listings? Google and Yahoo! take only milliseconds to find hundreds of thousands of results now. Shoot, back then it was easier and faster to wait and watch the news to hear the local forecast! Ok, maybe not, but with all the creative inventions and time saver products that are out there in the world, there is not a way to speed up time to make money in real estate.

Effectively building wealth takes time. There are no cheat codes for money, health, winning poker hands, and glamour in life. Wealth is not something you can turn on and off with a remote. It doesn’t happen overnight unless you inherited money from a rich uncle or you won the local sweepstakes. Considering the alternatives to making it rich overnight in real estate, you have rampant appreciation and flipping homes.

As a real estate investor, it is not only incredibly difficult to ride the appreciating wave or make it in the flipping game, but these niche investments take time, dedication, and precision. One minor calculation or market change, and the investment could be toast. Let alone if you put a few eggs in one basket. Comparing gains from losses in most speculative deals, if it were as easy as everyone said it was, why isn’t everyone rich? Easier said than done, right?

While looking at flipping houses and following the appreciating markets, there really are not many “wealthy” people who made their money flipping homes. Yes, most successful people have made their money in real estate, but they did so by not selling their equity. Holding real estate is part of true wealth, where your total assets (things that make you money, not just money alone) make more than your total liabilities (things that cost you money).

Over time, wealth can be achieved by any investor. Success rates can be attributed to the types of real estate markets that people invest. Area’s that forecast above average growth are markets that can yield better returns. Let your wealth gratification build with time. As much fun as it would be to create wealth overnight, for the majority of people, it is impossible and irrational. Furthermore, until Google, Yahoo! and Microsoft create a time machine, you should quit thinking of the get rich quick real estate investments, and begin building your wealth. Every day you keep looking for that killer deal is another day you could have added to your wealth creation. A day at a time seems like forever, but your payday will be here before you know it.

What’s The Big Deal With All The Deals?

Most people agree that buying something under priced is the name of the game. How much fat can you trim before you start getting to the muscle, bone, or until it’s severed off? Time will tell with today’s talk about foreclosures and REO's. Everyone I run into asks if they saw this week’s list of sold foreclosures. Or if I saw the latest listed properties that are priced so low, people are offering more than the asking price to purchase the property. Has it ever dawned on you that the banks understand the deal with deals? Price them low enough and people won't be able to resist the deal, bailing them out of the mess they created for themselves.

I have seen them. I have heard about them. I have thought about what those people are actually buying, and I figure that people are glad because they got a deal. The deal made it fun, not the fundamentally sound choice for purchasing, or the likelihood of the returns that property will make in time to come. Like Louie has said before, “When you go to Macy’s and the signs say 40% off, what does that really mean? It means that you are paying 40% less of the marked up price.” In other words, how much was that marked up in the first place?

Looking at home prices throughout the East Bay Area within the last few years, the markup was incredibly high. Although prices are becoming affordable again, the homes that are marked way down, even though they are still overpriced, are like the clothes you find at a Goodwill store. No one else wanted them so they get rid of the inventory at below clearance prices.

Be weary of missing fixtures, dead landscaping, broken windows, or holes in the wall because often, this is what people are buying. So the big deal about today’s deals is that you got a deal. The deal is to say to one another, I bought this home for only $__ thousand dollars is all most people can brag about. On the other hand, this is the correction of the over valuated housing market. And, it has provided some good buys for the few smart purchasers.

The point of all this is that don’t buy a foreclosure to say you’ve bought a foreclosure. Make sure the bank owned property fits your need; financially and not emotionally. Be sure that the property fits comfortably within your lifestyle and tolerance level. I sure know I don’t want the deal in one of America’s ghetto’s for $135,000…I can tell you that much right now. That might be a steal, but I don’t know if I would want to go there and sleep, let alone visit. Consider what you are buying, what you intend to do with the property; and if you have the tolerance to put up with your “deal.” Sometimes a deal isn’t the deal you’re looking for. Be selective and find the right purchase for you, albeit a new home, one a few years old, or a REO/foreclosure.