I read several posts lately about the dire nature of the real estate market with questions about whether now is a good time to invest based on the “badness” of the market. These are sensible warnings and no one can be faulted for calling a spade a spade. However, the assumption that someone is in denial if they claim now is a good time to invest might be a little too sweeping as generalizations go.

I agree that anyone who has his head in the sand and is pretending all is well is treading on a thin mindset, but there is something else to consider. The market is what it is. In a way, an investor’s impetus to invest is outside comparative market analysis, except in the sense of predicting time frames for turnarounds. In other words, an investor’s main concern is not if the market is up or down, but rather does a particular investment make sense in the context of where the market is and the future prospect of where the market might go.

Hardly anyone will ever time the market perfectly, and it’s not necessary. The main thing is to take each investment and judge by it by numbers. Right now may be the best time to buy if the numbers work and if your prediction of turnaround time is fairly accurate. Of course no one knows if the market will get drastically worse, but when the market is good no one knows if the market will get drastically better, so we take chances that extremes will be avoided. There is risk involved in investing.

Investors are a different breed who live by risks. An investor weighs risks in an up market just as he weighs risks in a down market. The risk in a down market is that the market will continue downward further than expected, so getting the best price and establishing cash flow are important. If you decide to buy in a down market, you are betting the market will not go down further (or much further) than the price reduction you negotiate and that the cash flow will help offset what further downward movement there is until the market turns upward again. In an up market price is still important although you may have to pay closer to asking price, but you are betting the market will continue to rise until you get to a point where you can sell for a profit.

If interest rates are following the heat then rates should be lower in a down market and higher in an over-heated market - this is if we are going by rational actions. But whatever may be the case, an investor need only judge by how the market IS, not by its “goodness” or “badness”.

If you have judged this market for what it IS and looked at the numbers that have to materialize for the investment to make sense, then now is as good a time as any to invest. It’s a matter of knowing your market and predicting the future fairly well. If you are in a market where the economy is diverse and the only thing holding it back is a national slowdown, then it’s pretty safe to say your market will rebound and probably won’t sink into oblivion.

At any given time markets are in flux, but you should be able to predict fairly well if nothing major has changed locally. If you are trying to time the market and waiting for a bell to signal the absolute bottom, you will most likely miss it because there are no bells, just investment judgment.

This is what investing is about. This is what separates investors from normal buyers who buy when they think every is good and is going to get better. It will take more number crunching and you have to use discipline to stick with a plan of action, but if you’ve made a plan based on the numbers that have to make sense, then the rest is the risk an investor takes.

This may not make sense to some people, but it does to me.

If you're new here, you may want to subscribe to our RSS feed or sign up for our real estate social network. Thanks for visiting!

Tags: investing in an up or down market, Investment risks, real estate, real estate investing, real estate timing

I’ve decided to lie to you. At least, I’m being honest about it!

I have grown tired of reporting weekly, it seems, on the ever expanding, contracting global credit market and the resultant deep recession the U.S. currently finds itself on the cusp of.

Americans, perhaps more than people anywhere, love being in denial. We deny we are getting fatter and fatter by eating McDonald’s 15 pounders; we deny that our kids are getting dumber and dumber even if high school seniors often can’t point to the U.S. on a world map; and, we deny that we are in denial, even though we clearly are…about a lot of things.

So, why not be in denial about the alleged mortgage/credit crisis (note, I said, alleged!!).

Here Goes

Home prices are now actually at an all time high! I know, if you read “the news” you’ll be told that prices of existing single family homes fell another 2.6 percent in February for an annual decline of 12.7 percent.

Just deny it!

That’s right.Who is to say that “facts” have to screw up your day? Ignore “the news” and, take a page from George W.–just keep saying things are getting better and they will…for him.

What’s that? You say you read that consumer confidence has fallen to a five year low this month? Nonsense.

Just deny it!

It will go away. We don’t have to face any “fact” we think will make us loose sleep. Just keep telling yourself–and others–that consumer confidence is at a 175 year high!. There, doesn’t that feel better? Of course it does.

The cost of food, medical care and gas going up,up and away? No freaking way!!!

Just deny it!

In fact, convince youself food prices are lower now than anytime since the turn of the century–the 20th century; that everyone has health insurance that even pays for free liposuction; and, that Saudi Arabia has decided to donate a decade’s worth of free gas and oil to each and every American simply because they can!

Bet you REALLY feel better now!

Yes you do!!! Don’t deny it!

Tags: credit crisis, ecoomy, food prices, housing, mortgage crisis, real estate

Determining the economic value of an apartment building’s location can pose challenges for novice apartment building investors as well as seasoned experts. As compared to evaluating the location of a residential single family home investment property, an analysis of an apartment building location can seem overwhelming.

When examining the location of a single family home the necessary data to reach an educated opinion of a properties location for investment purposes can easily be comprised by determining such factors as recent sales prices in the neighborhood, the general appearance and upkeep of the surrounding houses, the school district, the rents in the area and the areas major employers. When assessing the location of an apartment building, especially in a city that is unfamiliar to the investor, additional data and further analysis is necessary to create an educated analysis of the apartment building’s location.

Factors of Analysis

The economic analysis of commercial real estate location is a complicated, in depth and sometimes tedious process whose parameters are far beyond the scope of a short introductory article but some of the basic issues and themes should at least be familiar to first time apartment building investor. The geographic location of an apartment building investment property can have an enormous impact on its long term value appreciation. It is the relationship between physical location (within a state, a city, or county) and the local economy that can impact the location value of an apartment building most prominently.

For example, is the apartment building geographically close to a high technology hub, a hospital, factory, or other major employer for that particular geographic location? This type of analysis will require some extra work and general familiarity with the local economy.

Trends

The apartment building investor should also examine what the population trends have been in that area over the past few years or even decades. For example, has there been an influx of young professionals from the suburbs moving to the city center for employment or a lifestyle change? Or, has there been an exodus in the opposite direction.

Area Vibrancy

Another general point to consider is the overall economic vibrancy of the urban area where the real estate is located. Have major corporations recently opened branch offices in the area? Have developers built infrastructure like strip malls and shopping outlets? Are there plans to build a utility or factory that could be a supply of well paying employment for prospective tenants? A small investor can often make assumptions about economic conditions by watching the activities of large retail commercial construction companies.

These few observations are just a few of the myriad factors that can go into a comprehensive analysis of an apartment building’s location. Obviously, I haven’t introduced any financial models that can be of great help when comparing different apartment buildings in different geographical locations.

Tags: apartment complex, apartments, commercial evaluation, Commercial Real Estate, real estate, real estate investing

Just as a review, buying property “subject to” means buying a property subject to the existing financing.
The seller’s original financing stays in place until either refinanced or sold to a third party. The investor/buyer takes title to the property while leaving the loan in the seller’s name. If we were to take over payments on a property worth $100K and the mortgage payoff is roughly $50K; our offer should be in the $80K range. That leaves a $30K equity payout to the seller. In the perfect world we would love for the seller to agree to accept that $30K when the property is refinanced or sold to a third party.

Assuming that the seller accepted these terms, the seller always is concerned about how they are protected. In these types of transactions we immediately notice that there really isn’t any way to force the investor to make on time payments on a seller’s loan. The seller generally has to trust that the investor/buyer is not going to let the payments go after a few months and leave their credit jacked. The seller realizes that if that happens then their equity payout due is in jeopardy.

So the question is: “How can the seller protect themselves from these types of situations?” The answer on the investor is “we don’t have to take title immediately.”

You may have heard of a Land Installment Contract. There is a pro-seller contract and a pro-buyer contract. In this case you would use a hybrid of the two to give the seller the most amount of comfort possible. In a gist, this agreement transfers the title of the property from the seller into escrow instead of it being transferred to the investor/buyer. Without title to the property the investor/buyer lacks the power of an actual owner and the only way to reap the full benefits of property ownership is to give the seller the equity payout in full via refinance or sale. Sellers love this. And the Land Installment Contract can totally be tailored to the situation. This will definitely help you close some of those home runs that turned sour.

Blessings to Your Real Estate Investing Successes,
Milton B. Yates

Tags: buying property subject to, creative real estate, financing, real estate investing, real-estate-finance, subject to

Hey Everyone and welcome to the 88th Edition of the Carnival of Real Estate! This week, we had 23 submissions and I’m going to share with you 14 of the ones I think are most interesting.

Top Pics

• Will’s Why I Still Love Real Estate Investing: Being A Landlord on the Your Finish Rich Plan blog, talks about the pros, cons, drawbacks, and discusses many tips for the wanna-be landlord. The post is quite thorough, and a definite read for any potential landlord!
• Neelakantha’s 101 Tips & Resources for the Upside-Down Homeowner is a comprehensive list of tips and resources for homeowners who are upside-down on their homes. (International Listings Blog)

Quick Reviews

• Cliff Jacobson shares his list of the Top Ten Foreclosure Myths at the WebHomeUSABlog. While the list is a good one, it appears as though the list concentrates on REOs (bank owned properties), and not those properties that are in foreclosure, but haven’t gone to auction yet.
• Dan Melson at Searchlight Crusade writes a timely post, What $5 (and Higher) Gas Means to Suburban and Exurban Real Estate. This article is not only thorough, but pretty much nails it.
• Is there really gold in building green? by Patrick Duffy (The Housing Chronicles Blog) is a nice piece of commentary that examines the current status and importance of Green homebuilding.
• Roberta Murphy from the San Diego Real Estate Blog writes an interesting post called A San Diego Short Sale Solution that details how people in San Diego are focused on foreclosures instead of short sales, and comes up with a conclusion why this is the case. Her argument works for the entire country, not just San Diego, I believe.
• Handy Saputr shares How to Find A Good Mortgage Broker Online, which discusses why someone would want to use a Mortgage Broker, and gives some good general tips for dealing with them.

The Rest

• Is there such thing as a ‘green’ bubble? by Nathan Blair
• Observations of the Mortgage Market by Nigel Swaby
• Apartment Owners’ Liabilities Under Review by Matt DiChiara
• Second Real Estate Financial Model - First Development by TerryT2
• How to Maintain Your Lawn on a Budget by Debbie Dragon
• The Real Estate Market - When Will We See The Turn? by Joe Manausa

The Graphics

Chart from The Graph That Shows Why New Home Sales Are At 17-Year Lows by Dan Green of The Mortgage Reports Blog

We hope you enjoyed all of the great articles in the carnival, and I look forward to hosting again some time soon (probably won’t happen for a LONG TIME, though).

Tags: , carnival, carnival-of-real-estate, green real estate, housing, landlord, real estate, real estate carnival, real estate investing

We have all heard the classic saying: It’s not what you know, but who you know. It’s true in life, it’s true in business and it’s certainly true in real estate. The people you know and the connections that you make have a profound impact on all aspects of your life. This was something that I discovered fairly early in my business career.

When I started in the financial services industry as a stockbroker I spent the majority of my time dialing for dollars. I spent countless hours calling people I didn’t know in the hope that they might be willing to have a conversation with me, let alone become a client. I was sure, or at least I hoped, that there had to be a better way. I asked successful veterans for tips on building a business and what they had done to achieve the degree of success that they had.

Two answers were constantly thrown back at me: networking and referrals. I was told to join the Chamber of Commerce and other business groups in order to build relationships that would lead to a steady stream of referrals. I was also warned that there is no instant gratification, relationships take time to develop. It is important to remember that it is called net-work-ing because you have to work at it.

Stage One

The first step in networking is to get out there. Have plenty of business cards and develop a 30-second commercial that clearly explains what you do. You need to develop your listening skills, you have two ears and one mouth – use them in that proportion. It is easy to spot the novices at networking events, they’re the ones running around trying to sell their product or service to anyone with a pulse. They usually go home empty handed.

At this stage you should be focusing on building relationships. Ask people what they do or what they need, then shut up and listen. In his book, The 7 Habits of Highly Effective People, Stephen Covey calls the 5^th habit: “Seek first to understand, then to be understood.” If you understand what other people want and help them get it, you will wind up getting what you want as well.

Stage Two

By now you’ve met a bunch of people and collected a lot of business cards. What do you do with them? This is where the real work begins. Many people do all of the stage one activities and stop there. They’ll say that networking is useless or ineffective, for them it is. Many people you meet will be nothing more than contacts, you’ll wind up seeing them at other events but rarely will you go beyond a casual greeting. That’s to be expected and there is nothing wrong with that.

However, you will also meet people that you are truly able to connect with. Perhaps your life objectives are similar or your businesses overlap in some way. These are the relationships that you need to nurture. Grab a cup of coffee or share a meal and get to know this person. Focus more on developing the relationship than on any one transaction. People tend to do business with people that they like.

Stage Three

In stage three you have reached the point where people come to you. When you strive to help other people they will work to return the favor in kind. You become known as someone who is well connected and is a good source of information. This does not happen overnight, but it is well worth the effort.

In real estate you need to clearly define your goals and clarify your message. Go to real estate investment clubs and become known to others. Don’t ignore other groups just because they are not real estate related. If you are looking to buy distressed properties or pre-foreclosures, you can find leads just about anywhere. You may find that you are the only real estate investor in attendance and that certainly gives you an edge.

I have built several businesses over the years using the power of networking. It is an incredible tool when you learn how to use it.

One secret of success in life is for a man to be ready for his opportunity when it comes.
Benjamin Disraeli

Tags: networking, real estate, real estate investing

(Note from the editor: The following tale shows what kinds of properties you can end up running into when investing in real estate. I’ve seen some pretty nasty homes as well, and you never forget them! - Josh)

The “Rat House”

It seems that every house deal I have done ends up with a title rather than just refer to it by address. Some notable ones include, the Movie Theater House, the &*$% House, the Fish House, the Church House and the topic of this article…The Rat House.

I had bought the small 3 bedroom house of 1,031 square feet in 2001. The house had an attached 2-car garage but, it didn’t feel as small as it was. I knew I had a big task ahead concerning the garbage and belongings of the previous owners. Trash was everywhere. In the hallway, there were four doors. One was for the bathroom, one for the master bedroom and two other bedrooms. The piles of trash, boxes and clothes were as high as five feet in most areas and walking down the hallway…Sideways, I discovered there were two bedroom doors totally hidden from view because of the garbage.

The people that lived there (who I bought it from) were a bit loopy and both of them were not really able to move any of their things by themselves. In other words, if I wanted to get at the house to fix it, I would have to move them out. I showed up the day after it closed with 3 Hispanic “Day Laborer’s” and a big U-Haul to move them out. I had a 30-cubic yard roll-off dumpster in the driveway and we went at it.

I was mainly out in the front yard so I could keep out of the way of the guys going in & out during the first 30 minutes. One of the guys came out empty handed and was coughing non-stop. The other two soon followed with similar coughs. Once one of them stopped coughing, I asked, “Que es la problema?” He shook his head and pointed inside the house. One of the others said to me in broken English, “Breathing is bad in house.”

I motioned for them to stay outside and went in to look.

I went through the living room and into the hall. Before I got to the bedroom, I noticed the air had a lot of brownish dust in it which was heavy enough that it was hard to see farther than 10 feet away. I looked in the first bedroom and saw the guys had only emptied the room out to walk inside it about four feet. My eyes looked down at the floor and did a double take.

You could barely see the old, disgusting carpet because it was heavily covered with…

Rat %&$# (Droppings)!

I immediately covered my mouth and sprinted out of the house. I told the guys as best as I could (bad Spanish speaker) to not go back in until I got back. I drove to Home Depot a few miles away and bought three respirators. Once back at the house, the guys donned the masks and within an hour, they had completely filled the dumpster with garbage! The problem was that they had only emptied the two smaller bedrooms. We had to stop for the day because the city had to come pick up the dumpster to empty it and bring it back before we could continue. The same thing happened the next three days.

By the time the guys got the entire house totally empty, they had moved the previous owners into a two bedroom apartment, filled a 10X20 foot storage locker and FOUR, 30-cubic yard roll-off trash dumpsters! For those unfamiliar, that is the big, industrial size bins seen on construction sites.

Now that the house was empty, I was able to take a closer look at what repairs were going to be needed. What I saw was like nothing I had seen before and I seriously doubt I will ever see again.

“These people didn’t have pet rats… The rats had pet people!”

To say there was rat &%#$ everywhere was an understatement. Most parts of the house was covered with one to three inches of droppings and the garage floor was so bad that I honestly thought there was a dirt floor and not concrete! All of the cabinets had droppings that covered the shelves in them and the drawers were the same way.

The walls were disgusting as well. I thought I had seen it all but that thought went away quickly when I realized the crud on the walls was not cobwebs and dirt. Stuck to the walls (everywhere) was actual RAT DROPPINGS! The baseboards throughout the house were riddled with holes that the rats had made and the metal covers of coffee cans nailed to the walls indicated that the previous owners had attempted to keep the rats out of the living areas in the house. But guess what the REALLY amazing part was?

Not a single rat had lived in the house in over 8 years!

I talked to neighbors the rest of that day, gathering information about the previous owners and the history of the house. It turns out that there had been a grocery store behind the Rat House over 8 years before I bought the house. The neighbors told me that rats thrived in the garbage behind the store and the houses nearby had experienced a severe rat problem. After enough complaints piled up, the city ordered the store closed and the rat problem was solved.

The previous owners never bothered to clean the house out after the rats moved on. They simply threw something over the rat crap and went on as though there was nothing there. Now keep in mind that this house was only 1,031 square feet.

Here is a summary of what came out of and what went into the Rat House…

Thirty gallons of oil based Kilz primer-sealant
Twenty gallons of paint for the interior
All new cabinets, appliances and plumbing in the kitchen
New toilets, sinks, tubs, mirrors, medicine cabinets in both bathrooms
A total of five dumpsters were filled with trash from the house
The original trash budget of $450 ended up being over $1,600.
All new flooring
Countless panels of drywall replaced after ripping out to clean behind walls.

And the best details I saved for last….

There was so much rat &%#$ in that house that if it had been possible to collect it all and put it in one place, it easily could have filled… TWO or THREE 55-GALLON DRUMS!!!

During the trash-out phase, a total of SIX MUMIFIED RATS were removed from the house!
I guess those six were the unlucky ones to not make it out alive.

Usually I have some sort of moral to the story but, in the case of the Rat House, not even the $20,000 profit I ended up with can ever get me to forget about the house that had become so populated with rats, that I believe the rats literally took control of the house and the two poor, mentally unstable (assumed) previous owners.

Tags: rat infestation, rats, real estate, real estate investing, real estate investor, scary homes, ugly homes, yucky homes