Article from Mortgage News Daily
The National Association of Realtors® (NAR) stayed right on message as it proposed a four-point plan for Congress to enact to resuscitate the housing market and including yet another plea to keep banks out of the real estate business.
The plan, revealed in a statement made late last week and in the NAR President's Podcast released on October 21, calls for a special "lame-duck" session of Congress and asks that it consider the following, what it calls "consumer-driven" provisions to boost the economy and soothe the nerves of jittery homebuyers.
1. Eliminate the provision contained in last summer's housing rescue bill that requires first-time homebuyers to repay the $7,500 tax credit they receive under the plan and expand that credit to apply to all buyers of a primary residence.
2. Urge the government to use a portion of the allotted $700 billion that was provided to purchase mortgage-backed securities from banks to provide price stabilization for housing. The Treasury department should be required to:
3. Extend credit down to Main Street, making credit more available to consumers and small businesses; Expedite the process for short sales;
Expedite the resolution of banks' real estate owned (REOs) properties.
4. Make permanent the prohibition against banks entering real estate brokerage and management, further protecting consumers and the economy.
In the podcast NAR President Richard F. Gaylord called the proposal "a boldstep on the policy front," and urged NAR members to talk with members of Congress while they are home in their districts over the election hiatus about the proposal and how important its provisions are to consumers.
In the earlier statement Gaylor said, "Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible." It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans. We are asking Congress to act right away."
Gaylord said NAR, as the leading advocate for homeownership and private property rights, believes it is important for Congress to address the concerns and fears of America's families, much in the way it has addressed Wall Street turbulence. "Housing is and has always been a good, long-term investment and a family's primary step towards accumulating wealth."
Gaylord said that NAR will strongly pursue those proposals and is calling on Congress to return to enact housing stimulus legislation in a lame-duck session after the national elections in November.
NAR's Four Point Plan
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Wednesday, October 22, 2008
Monday, October 13, 2008
Your Agent.... A Member of Your Real Estate Investment Team!!
This is for the investors out there!
Please choose your Realtor carefully. This role is an extremely important aspect of your real estate team. The Realtor, among other things, understands the details of your target market. They posses the knowledge and expertise, not to mention the time, to implement a marketing campaign on your behalf. Because this is a service that the Realtor provides, that expense doesn’t come out of the investor’s bottom line.
But what led me to warn… no… to emphatically beseech investors out there is that this current market has an ever increasing rate of uncertainty. For the past couple of months, the level of risk has been rising daily. And as an investor, if you have inventory that needs to be liquidated in order to weather this market, it is important that it’s executed quickly. Everyday your property sits is either capital leaving your pocket or opportunities missed to proceed with other projects.
Case in point, I have looked at a couple of commercial properties that have the potential to be great investments. So I did my analysis of the property and the area to get a value. My analysis clearly shows that the asking price is egregiously overpriced. So I’ve spoken to the owner’s agent to get an understanding of how they arrived at the asking price. The agent told me that the value of his property was based on other properties in the area with the same number of units that had contracts on them. But he did not mention anything about the income those properties produced or market cap rates in the area or any other pertinent information used to get their value. From speaking to the agent I understand that he is more knowledgeable of residential properties than commercial properties. So if an offer was made, it would be like comparing apples to oranges for the agent. Unfortunately, the agent wouldn’t understand how to arrive at a fair market value.
So investors, make sure you have, as part of your team, a Realtor that understands your needs as an investor.
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Please choose your Realtor carefully. This role is an extremely important aspect of your real estate team. The Realtor, among other things, understands the details of your target market. They posses the knowledge and expertise, not to mention the time, to implement a marketing campaign on your behalf. Because this is a service that the Realtor provides, that expense doesn’t come out of the investor’s bottom line.
But what led me to warn… no… to emphatically beseech investors out there is that this current market has an ever increasing rate of uncertainty. For the past couple of months, the level of risk has been rising daily. And as an investor, if you have inventory that needs to be liquidated in order to weather this market, it is important that it’s executed quickly. Everyday your property sits is either capital leaving your pocket or opportunities missed to proceed with other projects.
Case in point, I have looked at a couple of commercial properties that have the potential to be great investments. So I did my analysis of the property and the area to get a value. My analysis clearly shows that the asking price is egregiously overpriced. So I’ve spoken to the owner’s agent to get an understanding of how they arrived at the asking price. The agent told me that the value of his property was based on other properties in the area with the same number of units that had contracts on them. But he did not mention anything about the income those properties produced or market cap rates in the area or any other pertinent information used to get their value. From speaking to the agent I understand that he is more knowledgeable of residential properties than commercial properties. So if an offer was made, it would be like comparing apples to oranges for the agent. Unfortunately, the agent wouldn’t understand how to arrive at a fair market value.
So investors, make sure you have, as part of your team, a Realtor that understands your needs as an investor.
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Tuesday, October 7, 2008
The 3 Don'ts of a Landlord
It’s not an easy business being a landlord. All you see is the good life on the informercials. You see people sitting on beaches or on vacation in Las Vegas. But there are so many things you don’t see during those get rich quick marketing campaigns.
It is important that an investor in rental properties understand the ins and outs of the leasing business. I must say that since I’ve been a landlord, I’ve learned so much in a short amount of time. Most of the things learned were learned the hard way, trial and error or just by touching the hot stove! Well let me impart on you the top three things that are now engrained in my psyche!
1) DON’T overpay for a rental property!
It’s extremely important to know a property’s value. Duh! This may seem like an extremely basic point. But I don’t know how many people fall short of this fundamental principle. I recently did an analysis of apartment buildings that were purchased in Washington DC and I don’t know how many buildings were purchased at amounts way above their value. Before I started investing, I read a lot of books and every book stressed the importance of not overpaying for a property. An investor can not, I repeat… CAN NOT be led by emotions. If the property has the best location and no rent ceiling, do not pay a penny more than what the property is worth. And guess what… I have fallen in that trap before. More than once to my shame! Overpaying!! Putting my emotions into my analysis and justifying why I should make the purchase by how I feel. If you can’t be objective in your analysis then find some one who has a good understanding of financial analysis and have them run your numbers. That way you will have someone who has no interest in the property and can tell you if it is a good deal or not. Remember… asking price is different from purchase price.
2) DON’T underestimate the importance of routine maintenance!
Expenses eat away your profits. Normally when your expenses run high, it’s likely due to something that could have easily been remedied. Schedule periodic inspections with your tenants. It’s always better to catch problems either before they arise or while they are still minor. Also have your tenants understand that they need to bring to your attention anything that needs repair. I’m not talking about getting a new refrigerator every Christmas! Items such as leaky faucets, running toilets, cracked windows. After all this is your property and it is the most important asset in your rental business. If you are like me and don’t know a hammer from a wrench then solicit the services of a handy man. I think handy men are the unsung heroes to most businesses!
3) DON’T run low on reserves!
This, I believe, is why most landlord’s end up selling their properties. Reserves, Reserves, Reserves! One day a tenant will move out of your unit. Or worse, you will run into a wolf in tenant’s clothing. You know the one, the non paying tenant. If you don’t have the reserves to cover periods were rent revenue doesn’t cover debt service and expenses then your business will ultimately fail. Make sure you are saving some of the rental income each month to cover shortfalls. I know you may have the urge to put some of that income towards a new car. Or to take some of the revenue and go on a vacation. Believe me, there will be time for that. But the time is after you’ve built enough capital to cover the undexpected. Remember this is a business! If you keep that in mind then you will treat your units as such!
If you keep these three basic lessons in mind then you will have the foundations of a successful rental business!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Friday, October 3, 2008
KISS... 'Keep It Simple Stupid!"
Lately, I’ve been reading article after article about the rise of foreclosures, the effects of foreclosures and that the root cause for the need of this bailout plan, currently in Congress, is the current housing crisis. And no one seems to know what to do! Now I’m no economist, so I see the solution as a simple one. I went to a military college where I was taught the adage of “KISS”… Keep It Simple Stupid or rather it was frequently yelled at me.
But to me the solution would be to modify the terms of these bad loans. Ok… you may say that these people should not have gotten into these loans knowing they couldn’t afford them. So why give them relief. Then I would tell you that these lenders should not have made unscrupulous loans without verifying the info they received from the borrower. For the life of me I don’t understand, from a lender’s perspective, the justification for the underwriting department using stated income documents. As a lender, if one of your main procedures is to mitigate risk by determining the creditworthiness of a borrower, why wouldn’t you take more caution by at least verifying what the borrowers puts on the documents?
Then you might say… “Well interest rates were at historical lows causing banks to practically give money away.” Well everyone does share the blame for this crisis. But I think to avoid taxpayers footing the bill, just modify these loans. The banks will become liquid again which in turn will ease the credit crunch. These mortgage backed assets will take a slight decline in value, but when the mortgages are adjusted and homeowners start making payments again, these assets, at the least, will have a determinable market value. A value that, I believe, will appreciate at a faster rate than the current solutions. And the final result will be a restoration of confidence in the American economy.
And in the end, I won’t have to read so many articles about foreclosures!
As always feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
But to me the solution would be to modify the terms of these bad loans. Ok… you may say that these people should not have gotten into these loans knowing they couldn’t afford them. So why give them relief. Then I would tell you that these lenders should not have made unscrupulous loans without verifying the info they received from the borrower. For the life of me I don’t understand, from a lender’s perspective, the justification for the underwriting department using stated income documents. As a lender, if one of your main procedures is to mitigate risk by determining the creditworthiness of a borrower, why wouldn’t you take more caution by at least verifying what the borrowers puts on the documents?
Then you might say… “Well interest rates were at historical lows causing banks to practically give money away.” Well everyone does share the blame for this crisis. But I think to avoid taxpayers footing the bill, just modify these loans. The banks will become liquid again which in turn will ease the credit crunch. These mortgage backed assets will take a slight decline in value, but when the mortgages are adjusted and homeowners start making payments again, these assets, at the least, will have a determinable market value. A value that, I believe, will appreciate at a faster rate than the current solutions. And the final result will be a restoration of confidence in the American economy.
And in the end, I won’t have to read so many articles about foreclosures!
As always feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Friday, September 5, 2008
US Housing Bubble has Popped!!
Article from Mortgage News Daily by Megan Ainscow - CEP News Ltd. 2008
A report on housing prices by Global Insight says that although prices for single-family homes are still heading downwards across the country, the rate of decline has gone down and "extreme overvaluation of house prices is essentially non-existent."
The only states that had extreme overvaluation in the second quarter were Hawaii, Washington, Oregon and Utah.
The country's housing prices are down 4.8%, falling in 152 of the 330 metropolitan areas included in the study. This is an improvement from the 6.6% decline seen in the first quarter of 2008 and the drop off seen in 295 (89%) of the 330 areas in the fourth quarter of 2007. The most severe losses are in California, Florida and Michigan. Indeed, 43 of the 50 worst metropolitan areas are found in these three states.
Still, though the numbers paint an improving picture the report says "real estate markets are not ready to recover. The building and financing excesses of the boom years have yet to be worked off. There remains a huge inventory of unsold homes on the market with foreclosures adding more daily."
The House Prices in America study looks at 330 of the top metropolitan real estate markets in the United States, representing 78% of the country's housing units.
With optimistic caution, I believe this is a sign that housing prices will regain traction in FY2009. Would you agree?
As always feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Thursday, August 7, 2008
$7,500… $3,750 if You’re Single!
The new housing bill isn’t as much of a rescue as it turns out to be, at least for the proposed tax credit. The bill introduces a $7,500 tax credit for first time home buyers ($3,750 for single people) who purchase before July 1, 2009. As a matter of fact, the tax credit isn’t a credit at all. It’s actually a loan. A zero percent loan, but a loan nonetheless. Anyone who chooses to take advantage of the credit has to pay it back in 15 years via their federal filings. To me this is a round about way of offering down payment assistance without coming right out and saying it. No...you can’t use the credit at closing but you can use it during tax time. Even if you purchase a house in 2009 you can use the credit on your 2008 tax return by filing an amended return.
The National Association of Home Builders believes the credit will jump start the housing industry and get some potential buyers off the fences and into a new house. Once again, my stance is why can’t the government just keep the down payment assistance programs? I think that will be more effective than the tax loan…I meant credit.
For more information on the tax credit check out this site launched by the National Association of Home Builders, http://www.federalhousingtaxcredit.com./
As always feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
The National Association of Home Builders believes the credit will jump start the housing industry and get some potential buyers off the fences and into a new house. Once again, my stance is why can’t the government just keep the down payment assistance programs? I think that will be more effective than the tax loan…I meant credit.
For more information on the tax credit check out this site launched by the National Association of Home Builders, http://www.federalhousingtaxcredit.com./
As always feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Wednesday, August 6, 2008
A Seller's Woes!
As you know, seller assisted loans will cease due to the new rules of the Housing Bill. This is effective October 1 so current buyers in the market are trying to seize every opportunity to get every credit they can from sellers. And I don’t blame them. When I purchased my first house, my realtor explained to me the concept of “You never know if you don’t put it in the offer!”
Well now that I am on the opposite end of the transaction, I understand what some sellers go thru when considering offers. In our current venture, we are selling a single family home targeted to first time home buyers. So I understand that I will have to give a little. So the other day a first time home buyer submitted an offer that was below our asking price (of course), but they also wanted 6% closing help. I don’t mind giving closing help. But we intentionally priced this property below market so the new owner would have equity coming into their first home. We went back and forth with the traditional counter offer followed by the counter to the counter offer. Needless to say we just had to reject the final terms. The buyer wanted a little more than what we could give! Hopefully another interested buyer will drop by and offer more favorable terms.
Is that really the sign of the market or am I a seller asking for too much?
As always please feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
Well now that I am on the opposite end of the transaction, I understand what some sellers go thru when considering offers. In our current venture, we are selling a single family home targeted to first time home buyers. So I understand that I will have to give a little. So the other day a first time home buyer submitted an offer that was below our asking price (of course), but they also wanted 6% closing help. I don’t mind giving closing help. But we intentionally priced this property below market so the new owner would have equity coming into their first home. We went back and forth with the traditional counter offer followed by the counter to the counter offer. Needless to say we just had to reject the final terms. The buyer wanted a little more than what we could give! Hopefully another interested buyer will drop by and offer more favorable terms.
Is that really the sign of the market or am I a seller asking for too much?
As always please feel free to post your thoughts!
Damien
"With Wealth, comes Responsibility!" Matthew 25:14-30
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