Real Estate Agent Comparables
The next piece I’ll talk about is working with real estate agents to get comparables, or “comps” on units which interest you. Remember in my previous post about working with real estate agents? If you didn’t read that one yet, go back and browse it. This is where a good agent in your corner is so valuable.
When getting comps, you want to look at the prices at which units sold, not what the listing prices are. Solds – particularly over the previous 4-6 months tell you what buyers are really paying for properties in that area. The problem with listing prices is that they often reflect more idealism than reality. Listing prices can help you see a relatively better deal, when you note that the asking price is lower than all the others’ asking prices, but ultimately, how does it compare with what people have truly paid?
Also look at how long the properties are sitting. If you are looking at a unit that has been on the market for 210 days, that can tell you a number of things. First, it likely tells you the property is for some reason overpriced. That’s not always the case, but it’s something you should take into consideration. Many times it means a property needs some kind of rehab or at least polishing compared to others in it's price class. Properties will sell when priced attractively.
Within that issue could be the potential for a deal. The seller might simply be relying on their agent’s advice, and that advice might be flawed. A seller might be willing to accept a lower price, but feels that the agent is in charge, and just operates from that vantage. Buyer’s also tend to think asking prices are somewhat written in stone, and might just be staying away. A property which has been on the market for a long time means there’s potential motivation there, so try an assertive offer.
Multiple List Data
Related to getting comps from agents is using the multiple listing service (MLS) and the auto mailings you are getting from your agent. While those are asking prices, in bulk they help you understand what’s going on in a community. You can see the overall range of asking prices, how long something is sitting on the market, how much inventory there is, and so forth.
I actually have my agents set me up a search to pull all units in my criteria that have been on the market for over 90 days, and that adds in a good factor in my searching. As I mentioned above, it helps illuminate what sells at what price and what does not, but it can also put a potential nugget on my plate if the seller becomes motivated and fearful that a property won't sell.
In my next posting, I'll be examining title company assistance, appraisals, assessments, and local government resources at your disposal. So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Wednesday, December 19, 2007
Friday, November 9, 2007
Valuing Property Remotely (part 1)
Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor. Thanks for joining me on the journey as we learn about real estate investing across the country
Today, I want to talk about a subject that is near and dear to most investor’s hearts. I probably get more questions about this subject of determining property values than nearly any other. It really is a vital, important subject, but at the same time, isn't really rocket science. There are a few well-utilized procedures that will make the process simple.
I’ll also note that while investors need to know value and make their purchases accordingly, accurately predicting a property’s value is much more important to a flipper than someone holding over the long term. It's much like a stock investor not needing to be as concerned with the "perfect" entry point as much as a day trader would need to be.
Make no bones about it – no investor should be buying at retail value…or worse, above retail value, but if you are flipping a property you are concerned about margins, and that makes a property’s value far more immediately important than the person who is controlling a real estate asset for 10 or 15 years or even more.
Value is Everything
With that in mind, your mantra should be that “value is everything.” I love Robert Allen’s statement from his book, The Challenge (my personal favorite by the way), “until you know value, everything is worthless….once you know value, everything is valuable”
What he is saying, in effect, is that until you know value, you stand to either overlook potential deals, or make big financial mistakes. Once you understand values, you are in a position to recognize deals, and to turn your back on those that aren’t worth pursuing – because you know value!!
Condition, of course, effects value, and you can’t overlook that. A $100,000 price in a $120,000 neighborhood is not a bargain if the house needs $25,000 worth of work. It’s always best to see a property face-to-face, but if you don’t do that, you need to invest some money in things like home inspections, appraisals, and contractor’s estimates for performing any rehab. Plus, you'd better have a lot of faith in your real estate agent's opinions about condition and appeal. Personally, this goes to the heart of what I was talking about in the last edition - how a good agent is worth their weight in gold, and you should take your time in finding the right one.
Working the Farm
With that in mind, let’s begin with the ultimate value-determining method, and that is called “farming.” Working a farm simply refers to becoming so familiar with an area, or neighborhood, that you are as much as expert in property values there as anyone. If you study a farm long enough, you will be as accurate as any appraiser....perhaps even more so because you know what things are really selling for as opposed to their potential value.
So, you can see, here lays the problem with hop-scotching all over the place chasing deals, and not having some kind of focused attention geographically. You never really get to know values. When you work a farm, you know what the inventory is, what sells, at what price, what’s sitting, what the condition of the various properties are, what’s sold and how quickly, and what’s coming on the market.
I began much of my investing career when I lived in a very large planned, golf course community near Richmond Virginia. I used to spend my weekends driving that community and a couple of neighboring ones. I knew, probably within about $2,000 what a house would be listed for, and what it would sell for. I knew what was for sale, what kind of shape it was in, if it was a foreclosure, or vacant, how long it had been on the market….in short, I was a local expert, and could ascertain the value as good as any real estate agent or appraiser. I just knew, and that came from studying the area.
So, let’s say your searching has led you to an area of condos in Florida that appeal to you. In that case, do your farming with those condos within that basic area. Be very systematic about it – get to know everything you can about pricing, value, market conditions, rental rates, etc. Become the resident expert, and don’t jump around looking in that Florida community one minute, another Florida city, the next, and then chasing after something in Atlanta the next day. You need to be more focused than that.
In the next addition I am going to introduce several more strategies and tools. As I move down the road, my objective is to give you a concise set of tools you can use to determine values to a very close degree, even if you've never been in the area. So, keep a watchful eye out for the coming segments.
Until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Today, I want to talk about a subject that is near and dear to most investor’s hearts. I probably get more questions about this subject of determining property values than nearly any other. It really is a vital, important subject, but at the same time, isn't really rocket science. There are a few well-utilized procedures that will make the process simple.
I’ll also note that while investors need to know value and make their purchases accordingly, accurately predicting a property’s value is much more important to a flipper than someone holding over the long term. It's much like a stock investor not needing to be as concerned with the "perfect" entry point as much as a day trader would need to be.
Make no bones about it – no investor should be buying at retail value…or worse, above retail value, but if you are flipping a property you are concerned about margins, and that makes a property’s value far more immediately important than the person who is controlling a real estate asset for 10 or 15 years or even more.
Value is Everything
With that in mind, your mantra should be that “value is everything.” I love Robert Allen’s statement from his book, The Challenge (my personal favorite by the way), “until you know value, everything is worthless….once you know value, everything is valuable”
What he is saying, in effect, is that until you know value, you stand to either overlook potential deals, or make big financial mistakes. Once you understand values, you are in a position to recognize deals, and to turn your back on those that aren’t worth pursuing – because you know value!!
Condition, of course, effects value, and you can’t overlook that. A $100,000 price in a $120,000 neighborhood is not a bargain if the house needs $25,000 worth of work. It’s always best to see a property face-to-face, but if you don’t do that, you need to invest some money in things like home inspections, appraisals, and contractor’s estimates for performing any rehab. Plus, you'd better have a lot of faith in your real estate agent's opinions about condition and appeal. Personally, this goes to the heart of what I was talking about in the last edition - how a good agent is worth their weight in gold, and you should take your time in finding the right one.
Working the Farm
With that in mind, let’s begin with the ultimate value-determining method, and that is called “farming.” Working a farm simply refers to becoming so familiar with an area, or neighborhood, that you are as much as expert in property values there as anyone. If you study a farm long enough, you will be as accurate as any appraiser....perhaps even more so because you know what things are really selling for as opposed to their potential value.
So, you can see, here lays the problem with hop-scotching all over the place chasing deals, and not having some kind of focused attention geographically. You never really get to know values. When you work a farm, you know what the inventory is, what sells, at what price, what’s sitting, what the condition of the various properties are, what’s sold and how quickly, and what’s coming on the market.
I began much of my investing career when I lived in a very large planned, golf course community near Richmond Virginia. I used to spend my weekends driving that community and a couple of neighboring ones. I knew, probably within about $2,000 what a house would be listed for, and what it would sell for. I knew what was for sale, what kind of shape it was in, if it was a foreclosure, or vacant, how long it had been on the market….in short, I was a local expert, and could ascertain the value as good as any real estate agent or appraiser. I just knew, and that came from studying the area.
So, let’s say your searching has led you to an area of condos in Florida that appeal to you. In that case, do your farming with those condos within that basic area. Be very systematic about it – get to know everything you can about pricing, value, market conditions, rental rates, etc. Become the resident expert, and don’t jump around looking in that Florida community one minute, another Florida city, the next, and then chasing after something in Atlanta the next day. You need to be more focused than that.
In the next addition I am going to introduce several more strategies and tools. As I move down the road, my objective is to give you a concise set of tools you can use to determine values to a very close degree, even if you've never been in the area. So, keep a watchful eye out for the coming segments.
Until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Tuesday, October 23, 2007
Finding and Working With Agents for Out of State Purchases (Part 2)
As I mentioned in my last posting, in my experiences you will probably contact between 25 and 50 agents in a given area in order to find from 1 to 3 agents who are really top-rate.
What you are looking for in an agent are the following:
They Must be Comfortable and Capable Dealing With Investors
They must understand and be comfortable with investor mentality. That means they must be comfortable making assertively-priced offers and/or asking for creative terms. Do they regularly work with investors? Are they an investor themselves? Ask them questions to that effect. Ask them pointed questions that would elicit investor-oriented knowledge (such as about owner financing). If they want to send you immediately to a mortgage officer to get you qualified, they just identified themselves as a non-candidate.
They Should be oriented towards buyers and not sellers.
A selling oriented agent will not fully grasp the needs of a complex investor-buyer. Investors seek either concessions on price and/or terms. A typical selling agent is focused on getting top retail dollar...in most cases to the exclusion of everything else. However, every once in a while, you come across an agent that understands what investors need. More important, they are comfortable with it and are willing to present and negotiate creative offers.
They do What They Say They Will Do
Do the agents you interact with do what they say they will do? If you give them criteria for emailed listings, do you get them…that day? Do they check on the deal which you inquired about?
They Scout Deals
A good agent will follow up with potential candidates beyond what is merely automatically filtered through the MLS. In other words, they seek out and scout deals for you. They initiate calls about properties instead of waiting for you to inquire about something.
They Are Customer-Oriented as Opposed to Sales-Oriented
Do they have a customer-serving mentality, or are they trying to sell you on something? If discussion about that agency agreement comes up before anything else, they are either inexperienced, brainwashed into the proscribed procedures, or more interested in themselves.
They Are Patient
Investors need to have the numbers work, either on price, terms, or both. Yes, we make nutty deals, but the right kind of agent will understand that. So, a good agent understands that you may need to filter through 100 deals to find one nugget worth pursuing. If they stop communicating with you after two weeks simply because you haven’t bought anything means they are not the kind of agent you need.
They Are Well Connected
Get a sense of who they know. See if they have contacts with investor-oriented mortgage brokers, title company, contractors and so forth.
They Are Not Legalistic
They shouldn’t be hung up on the letter of the law as far as the industry goes. Many are schooled to the point of no longer being able to think for themselves. I was licensed in two states at one time, and most agents really don’t know or understand their legal obligations. For example, a seller’s agent’s fiduciary responsibility to their client doesn’t mean they shouldn’t answer your candid questions. If they feel you are asking something that could hurt negotiations for their client, they should check with them to see if the client is willing to answer; not reject you question under licensure laws. Some agents seem to feel it’s their responsibility to play para-lawyer and be a roadblock to transactions. By way of another example, a war-zone is a war-zone, and an agent isn’t violating any fair housing laws by pointing that out – as opposed to keeping tight-mouthed and merely referring you to the police department for you to independently digging up that information. Guess what…if the police can disseminate that information it’s public knowledge and not a fair housing violation!
Additional Thoughts
Be wary of agents you find on sites like rehablist.com who appear to have dozens of investor-oriented listings. It may sound ideal, but generally isn’t. These are typically agents who farm the MLS for interesting looking deals – the listings are not theirs, they don’t know the properties, and most don’t want to expend any energy knowing them. They hope for a quick-flip speculator type who will buy without doing their due diligence, sight-unseen as if the house was no different than a stock or bond. Moreover, most, if not all, fail to do what they say they will do. They are all about marketing, and little about action.
Now, you as a potential buyer have some responsibilities.
Don't Be A User
Keep in mind that you don’t want to be a user of people. Agents, like anyone else, need to earn a living, and they do so on commission. While you need to be assertive and choosy as to who you work with, you don’t want to abuse your workings with people. With that in mind, you:
Don't Be a Lookie-Loo
Need to be a buyer. Nobody – not even the best agent – will work with you indefinitely. If you are a lookie-loo, don’t waste agent’s time. Use the Internet instead. You should have a clear criteria in mind that you can supply to the agent – price, number of bedrooms, style, situational indicators like foreclosures if that interests you, etc. Have them help you with locational issues if you don’t yet know the area. What you can’t do is say, “just dig me up anything that I can buy for 40% under value.” That’s the sign of an amateur investor and a red flag you are a waste of their time.
Do what you can on your end
Filter through listings to find what appears to be of value. Don’t ask the agent to drive to 25 properties if you are just curious. Prequalify deals, do your own drive-by’s if you can….in short, you put in as much legwork on your side before you ask an agent to spend time, gas, and energy viewing a property.
Be loyal
When you find a good agent, stick with them and send all your business their way. The more they sense your loyalty, the more they’ll work on your behalf.
Be appreciative – send a $10 Starbucks card every once in a while to that agent who’s spent 25 hours with you. It’s the least you can do! That goes a long way to building two-way loyalty.
Don’t be too quick to establish allegiance
Just because you know them and have had a few phone calls doesn’t mean you owe an agent anything. They have to live up on their end just as you do on yours. Even the process of sending listings is not enough – any agent can do that. They should be regularly contacting you, getting updates, checking to see if there’s anything they can do, etc.
When you find that worth-their-weight-in-gold agent, you use them exclusively. That’s the point when you switch from calling all the listings in town to telling your preferred agent what interests you and having them follow up. All you need is an MLS number and they can find out all you need. Make sure if you do talk to another agent, or a builder that you let them know you have an agent you work with. You don’t want to inadvertently cut your agent out of a deal – and believe me, the industry is such that they will try to cut them out in an instant because it means more money.
There are many rewards for building this kind of loyalty – and this is where it gets exciting.
When you build rapport with an agent they get to know your values – they are your eyes and ears when you are not located there. I’ve literally bought properties, that I didn’t personally visit, with full confidence, by relying on my agent and the tradespeople she/he used.
Real estate agencies often have what are called “pocket listings” that don’t appear on the MLS, and that means reduced competition - and they can send these your way.
They will hand-hold you through the transaction. That may seem like something only a newbie needs, but if you are newly investing in a geographic area, that kind of help can be invaluable in understanding local/state laws, customs and such. That means you can get great council on what vendors – like title companies or inspectors to use, how certain aspects of title work and taxes work, and what to be watchful of that might be unique to the area. Just recently, I had an agent in Arizona introduce me to roof rats and the hazards related to them when fruit trees are too close to a house.
They can hook you up with recommended vendors – title companies, mortgage companies, inspectors, manual tradespeople and so forth. If you are new to that market, getting first-hand testimonial can save you a lot of time, and help you avoid mistakes when selecting vendors. And, if the agency has clout, they can get often get you trade discounts.
That’s a lot to consider – if you have any questions or if you didn’t catch something, email me at
william@thecoasttocoastinvestor.com and I will be happy to clarify anything.
If you know of anyone who is interested in real estate investing, whether beginner or otherwise, please tell them about the blog. In addition, if you or an associate would like to access my audio podcast, just contact me at william@thecoasttocoastinvestor.com so I can include them in my mailing, and let them know of upcoming episodes and the other resources I have available.
I continue to assemble these resources for real estate investors. Not only do I have the weekly audio show, but I've put together an audio discussion board for investors. Recently, I also built two social networking communities which are gaining a lot of attention - for all of you who like Facebook or Myspace, you'll love these!
It will be a fantastic spot for networking, learning, and getting to know other investors. Give me a shout by email or phone if you want details (614-886-8233 or william@thecoasttocoastinvestor.com)
Do you want to learn real estate investing...learn the ropes? How about having someone actually guide you through the process? I am going to open registration for the first session starting in November. It will be a full 12 weeks of hands-on, real world training. There's nothing like it on the market, and the best part is, unlike all the guru's stuff, you can actually afford it! I'll keep you posted, but feel free to call (614-886-8233) or email if you have questions:
william@thecoasttocoastinvestor.com
Finally, many of you are asking about mentoring and coaching, and that is a great way I can serve you. I have limited slots available to do that, so if you are interested, please give me a shout so I can discuss it with you...beginners welcome! This is a great chance to have someone hand-hold you during your investing activities and have access to an expert at your disposal as easily as making a phone call or sending an email. If you'd like to know more, feel free to call (614-886-8233) or email me: william@thecoasttocoastinvestor.com
So, until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
What you are looking for in an agent are the following:
They Must be Comfortable and Capable Dealing With Investors
They must understand and be comfortable with investor mentality. That means they must be comfortable making assertively-priced offers and/or asking for creative terms. Do they regularly work with investors? Are they an investor themselves? Ask them questions to that effect. Ask them pointed questions that would elicit investor-oriented knowledge (such as about owner financing). If they want to send you immediately to a mortgage officer to get you qualified, they just identified themselves as a non-candidate.
They Should be oriented towards buyers and not sellers.
A selling oriented agent will not fully grasp the needs of a complex investor-buyer. Investors seek either concessions on price and/or terms. A typical selling agent is focused on getting top retail dollar...in most cases to the exclusion of everything else. However, every once in a while, you come across an agent that understands what investors need. More important, they are comfortable with it and are willing to present and negotiate creative offers.
They do What They Say They Will Do
Do the agents you interact with do what they say they will do? If you give them criteria for emailed listings, do you get them…that day? Do they check on the deal which you inquired about?
They Scout Deals
A good agent will follow up with potential candidates beyond what is merely automatically filtered through the MLS. In other words, they seek out and scout deals for you. They initiate calls about properties instead of waiting for you to inquire about something.
They Are Customer-Oriented as Opposed to Sales-Oriented
Do they have a customer-serving mentality, or are they trying to sell you on something? If discussion about that agency agreement comes up before anything else, they are either inexperienced, brainwashed into the proscribed procedures, or more interested in themselves.
They Are Patient
Investors need to have the numbers work, either on price, terms, or both. Yes, we make nutty deals, but the right kind of agent will understand that. So, a good agent understands that you may need to filter through 100 deals to find one nugget worth pursuing. If they stop communicating with you after two weeks simply because you haven’t bought anything means they are not the kind of agent you need.
They Are Well Connected
Get a sense of who they know. See if they have contacts with investor-oriented mortgage brokers, title company, contractors and so forth.
They Are Not Legalistic
They shouldn’t be hung up on the letter of the law as far as the industry goes. Many are schooled to the point of no longer being able to think for themselves. I was licensed in two states at one time, and most agents really don’t know or understand their legal obligations. For example, a seller’s agent’s fiduciary responsibility to their client doesn’t mean they shouldn’t answer your candid questions. If they feel you are asking something that could hurt negotiations for their client, they should check with them to see if the client is willing to answer; not reject you question under licensure laws. Some agents seem to feel it’s their responsibility to play para-lawyer and be a roadblock to transactions. By way of another example, a war-zone is a war-zone, and an agent isn’t violating any fair housing laws by pointing that out – as opposed to keeping tight-mouthed and merely referring you to the police department for you to independently digging up that information. Guess what…if the police can disseminate that information it’s public knowledge and not a fair housing violation!
Additional Thoughts
Be wary of agents you find on sites like rehablist.com who appear to have dozens of investor-oriented listings. It may sound ideal, but generally isn’t. These are typically agents who farm the MLS for interesting looking deals – the listings are not theirs, they don’t know the properties, and most don’t want to expend any energy knowing them. They hope for a quick-flip speculator type who will buy without doing their due diligence, sight-unseen as if the house was no different than a stock or bond. Moreover, most, if not all, fail to do what they say they will do. They are all about marketing, and little about action.
Now, you as a potential buyer have some responsibilities.
Don't Be A User
Keep in mind that you don’t want to be a user of people. Agents, like anyone else, need to earn a living, and they do so on commission. While you need to be assertive and choosy as to who you work with, you don’t want to abuse your workings with people. With that in mind, you:
Don't Be a Lookie-Loo
Need to be a buyer. Nobody – not even the best agent – will work with you indefinitely. If you are a lookie-loo, don’t waste agent’s time. Use the Internet instead. You should have a clear criteria in mind that you can supply to the agent – price, number of bedrooms, style, situational indicators like foreclosures if that interests you, etc. Have them help you with locational issues if you don’t yet know the area. What you can’t do is say, “just dig me up anything that I can buy for 40% under value.” That’s the sign of an amateur investor and a red flag you are a waste of their time.
Do what you can on your end
Filter through listings to find what appears to be of value. Don’t ask the agent to drive to 25 properties if you are just curious. Prequalify deals, do your own drive-by’s if you can….in short, you put in as much legwork on your side before you ask an agent to spend time, gas, and energy viewing a property.
Be loyal
When you find a good agent, stick with them and send all your business their way. The more they sense your loyalty, the more they’ll work on your behalf.
Be appreciative – send a $10 Starbucks card every once in a while to that agent who’s spent 25 hours with you. It’s the least you can do! That goes a long way to building two-way loyalty.
Don’t be too quick to establish allegiance
Just because you know them and have had a few phone calls doesn’t mean you owe an agent anything. They have to live up on their end just as you do on yours. Even the process of sending listings is not enough – any agent can do that. They should be regularly contacting you, getting updates, checking to see if there’s anything they can do, etc.
When you find that worth-their-weight-in-gold agent, you use them exclusively. That’s the point when you switch from calling all the listings in town to telling your preferred agent what interests you and having them follow up. All you need is an MLS number and they can find out all you need. Make sure if you do talk to another agent, or a builder that you let them know you have an agent you work with. You don’t want to inadvertently cut your agent out of a deal – and believe me, the industry is such that they will try to cut them out in an instant because it means more money.
There are many rewards for building this kind of loyalty – and this is where it gets exciting.
When you build rapport with an agent they get to know your values – they are your eyes and ears when you are not located there. I’ve literally bought properties, that I didn’t personally visit, with full confidence, by relying on my agent and the tradespeople she/he used.
Real estate agencies often have what are called “pocket listings” that don’t appear on the MLS, and that means reduced competition - and they can send these your way.
They will hand-hold you through the transaction. That may seem like something only a newbie needs, but if you are newly investing in a geographic area, that kind of help can be invaluable in understanding local/state laws, customs and such. That means you can get great council on what vendors – like title companies or inspectors to use, how certain aspects of title work and taxes work, and what to be watchful of that might be unique to the area. Just recently, I had an agent in Arizona introduce me to roof rats and the hazards related to them when fruit trees are too close to a house.
They can hook you up with recommended vendors – title companies, mortgage companies, inspectors, manual tradespeople and so forth. If you are new to that market, getting first-hand testimonial can save you a lot of time, and help you avoid mistakes when selecting vendors. And, if the agency has clout, they can get often get you trade discounts.
That’s a lot to consider – if you have any questions or if you didn’t catch something, email me at
william@thecoasttocoastinvestor.com and I will be happy to clarify anything.
If you know of anyone who is interested in real estate investing, whether beginner or otherwise, please tell them about the blog. In addition, if you or an associate would like to access my audio podcast, just contact me at william@thecoasttocoastinvestor.com so I can include them in my mailing, and let them know of upcoming episodes and the other resources I have available.
I continue to assemble these resources for real estate investors. Not only do I have the weekly audio show, but I've put together an audio discussion board for investors. Recently, I also built two social networking communities which are gaining a lot of attention - for all of you who like Facebook or Myspace, you'll love these!
It will be a fantastic spot for networking, learning, and getting to know other investors. Give me a shout by email or phone if you want details (614-886-8233 or william@thecoasttocoastinvestor.com)
Do you want to learn real estate investing...learn the ropes? How about having someone actually guide you through the process? I am going to open registration for the first session starting in November. It will be a full 12 weeks of hands-on, real world training. There's nothing like it on the market, and the best part is, unlike all the guru's stuff, you can actually afford it! I'll keep you posted, but feel free to call (614-886-8233) or email if you have questions:
william@thecoasttocoastinvestor.com
Finally, many of you are asking about mentoring and coaching, and that is a great way I can serve you. I have limited slots available to do that, so if you are interested, please give me a shout so I can discuss it with you...beginners welcome! This is a great chance to have someone hand-hold you during your investing activities and have access to an expert at your disposal as easily as making a phone call or sending an email. If you'd like to know more, feel free to call (614-886-8233) or email me: william@thecoasttocoastinvestor.com
So, until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Thursday, October 11, 2007
Finding and Working With Good Agents for Out of State Purchases (Part 1)
In this edition I am going to chat about how to locate and work with real estate agents. I am going to talk candidly about agents from an investor’s vantage…and I recognize that I run the risk of being a bit offensive to agents and brokers because of that. I’m certain to cross the line for many real estate agents, but I am dealing in matters of investor practicality. Investors and agents come from two different worlds, and they don’t necessarily agree with each other.
While I am a big fan of For Sale By Owner deals, there’s no doubt that the vast majority of real estate transactions take place through agents, so the agent angle is one you really must master.
Collectively, agents have made me about $250,000 over my last 4 deals – so, we’re not talking about small change. But, you are not going to access those kinds of deals if you simply try to grab properties & agents at random. If you just walk in the door and ask to speak to an agent you aren't going to succeed at much (except for perhaps getting frustrated!). It takes a certain amount of interpersonal skill, rapport, and instinct to pick an agent well.
Now, let me say that on whole, I really don’t have a lot of good to say about the real estate agent community. I’m not talking about specific agents, or even the industry as it wants to be. I’m talking about what I like to call the “nit whit factor” represented by the bulk of agents. I can say, with all sincerity, that some of the most repugnant and clueless people I’ve ever crossed paths with have been real estate agents. There’s just something in real estate sales that seems to attract a particularly poor crowd of people, and in many cases, people choose real estate for all the wrong reasons. I also think that certain factors within the real estate industry serve to propagate those problems.
Great agents are just that – fantastic professionals who are worth their weight in gold. The problem is, I think only about 1 out of 1,000 typical agents is any good, and only about 1 out of 100 solid agents is any good to an investor. Again, I am not trying to affront good, hardworking agents – it’s all the others that make up the bulk of the industry that I’m at odds with. It's almost comical how many agents just want to list a property, put it in the multiple listing service and wait for everyone else to do all the work...yet collect a commission check from that!
Buyer's Agents and Seller's Agents
Let’s begin by getting all you newcomers up to speed on the difference between a seller’s agent and a buyer’s agent. A seller’s agent works for the seller, and their duties and responsibilities are to the seller’s best interests. A buyer’s agent works for the buyer and their duty is to the buyer’s best interests. The problem is, when you call on a listing, by default you are dealing with a seller’s agent, and that leads to a lot of natural roadblocks and conflicts. Even when you have an agent who appears to be excitedly offering you listings and information, if you don’t have an agreement otherwise, seller’s agency is implied – so they are really still in the seller’s corner.
Unless you are fully comfortable with that arrangement, and representing yourself in negotiations, your best move is to get a buyer’s agent working for you, who can get you information on multiple listed properties, provide information on the comments in the MLS, etc.
But, buyer’s agency can have it’s problems as well. Do you remember what I said a moment ago about the real estate industry propagating certain problems? One of them is the notion of exclusive agency. That is, when you sign an agency agreement – buyer’s or seller’s, that person has an exclusive right to represent you. That works OK if you are a seller, because even though you only have one official agent, they are co-oping your listing to all the other agents through the multiple listing service. So, if your agent isn’t that productive you at least have all the agents seeing your property through the MLS.
With an exclusive buyer’s agent, however, if your agent isn’t productive, you are stuck. And, you’ll find that many agents want you to sign that agency agreement before they ever talk to you or supply leads. I've had agents on more than one occasion wanting me to sign an agency agreement before they ever even got to know me and my objectives!
The problem is, with exclusive agency even if YOU find the property, unless it was spelled out otherwise the agent would be entitled to a commission. So, if the agent doesn’t produce, and you end up scouring the area, they still expect to get a commission on the deal. In most cases, buyer’s agent commissions are paid by the seller and you don’t have to pay it, but if you were to find a for sale by owner (FSBO) deal, the seller might not be at all amenable to paying the commission, meaning you’d be stuck for the bill for a deal that this agent didn’t even find you!
I had this happen on one occasion in which an agent in Florida, who if I said did the most minimal work that would have been a compliment. It was a scenario in which I was doing all the looking, filtering and so forth. This agent wanted to sue me for a commission on a FSBO he didn’t even find! Fortunately, I did not have any kind of agreement in force with him, so there was no leg for him to stand on. But, it still illustrates what I am talking about - he did virtually no work for me in finding the deal, but he expected to get a piece of the pie just the same.
So, how do you avoid this? Sign agency agreements only for a single property at a time – one that you are transacting, and just deal with the realities of the implied seller’s agency until then. That is, until you find an agent you can trust and for whom you’d like to give exclusive business.
So, that leaves us with a strategic challenge. Do you call all over town to individual agents, talking to them about their listings, or do you engage just one agent and give them your exclusive attention? The answer is a bit of both.
Calling individual agents is more expedient in the beginning, and the perfect way to source agents. It takes time to find a good agent to work with, and you just aren’t going to have access to one when you first go into a marketplace. So, you start by calling agents on their particular listings, and as you chat with them about the property, you also take the time to interview them for your affairs. Your “interviewing” can take the form of candid questions, and subtle, stealthy interactions designed to gauge them as potential agents.
Certain agents will immediately disqualify themselves by being abrasive, discourteous (particularly when they hear you are an investor) or apparently inexperienced. A whole host of others will disqualify themselves by not doing what they will say they will do. I can’t tell you the number of times I’ve had lengthy, impressive conversations with agents who then never bother to send listings or call me back. Apparently many agents don't want to do the hard work and prefer to pursue the comfy process of dealing with the buyer who is sitting in their office with a check in their hand.
I even had a situation where, not realizing I had dealt with a particular agent previously, I even went through their "failure to follow-through" process twice….with the same agent! In other words, not only did they peter out the first time, when I mistakenly opened up a transaction with them a second time, they petered out again. You wouldn't have expected it from their conversation though.
A final round will disqualify themselves shortly down the road. Perhaps you’ll get an initial round or two of listings or a couple of phone calls, but then they move on to what they think are bigger fish to fry. We out of state investors look like a tough project, and many investors just choose to work the easy angles with local preapproved buyers waiting to go.
In my experiences you will probably contact between 25 and 50 agents in a given market in order to find from 1 to 3 agents who are really top-rate. So remember those statistics. It's a lot of hard work and communication on your part, but when you find that top-notch agent, they really are worth their weight in gold.
Next time I will discuss a series of criteria to look for when seeking and interviewing an agent.
Until then, keep seeking those investments, and live your real estate dreams!
While I am a big fan of For Sale By Owner deals, there’s no doubt that the vast majority of real estate transactions take place through agents, so the agent angle is one you really must master.
Collectively, agents have made me about $250,000 over my last 4 deals – so, we’re not talking about small change. But, you are not going to access those kinds of deals if you simply try to grab properties & agents at random. If you just walk in the door and ask to speak to an agent you aren't going to succeed at much (except for perhaps getting frustrated!). It takes a certain amount of interpersonal skill, rapport, and instinct to pick an agent well.
Now, let me say that on whole, I really don’t have a lot of good to say about the real estate agent community. I’m not talking about specific agents, or even the industry as it wants to be. I’m talking about what I like to call the “nit whit factor” represented by the bulk of agents. I can say, with all sincerity, that some of the most repugnant and clueless people I’ve ever crossed paths with have been real estate agents. There’s just something in real estate sales that seems to attract a particularly poor crowd of people, and in many cases, people choose real estate for all the wrong reasons. I also think that certain factors within the real estate industry serve to propagate those problems.
Great agents are just that – fantastic professionals who are worth their weight in gold. The problem is, I think only about 1 out of 1,000 typical agents is any good, and only about 1 out of 100 solid agents is any good to an investor. Again, I am not trying to affront good, hardworking agents – it’s all the others that make up the bulk of the industry that I’m at odds with. It's almost comical how many agents just want to list a property, put it in the multiple listing service and wait for everyone else to do all the work...yet collect a commission check from that!
Buyer's Agents and Seller's Agents
Let’s begin by getting all you newcomers up to speed on the difference between a seller’s agent and a buyer’s agent. A seller’s agent works for the seller, and their duties and responsibilities are to the seller’s best interests. A buyer’s agent works for the buyer and their duty is to the buyer’s best interests. The problem is, when you call on a listing, by default you are dealing with a seller’s agent, and that leads to a lot of natural roadblocks and conflicts. Even when you have an agent who appears to be excitedly offering you listings and information, if you don’t have an agreement otherwise, seller’s agency is implied – so they are really still in the seller’s corner.
Unless you are fully comfortable with that arrangement, and representing yourself in negotiations, your best move is to get a buyer’s agent working for you, who can get you information on multiple listed properties, provide information on the comments in the MLS, etc.
But, buyer’s agency can have it’s problems as well. Do you remember what I said a moment ago about the real estate industry propagating certain problems? One of them is the notion of exclusive agency. That is, when you sign an agency agreement – buyer’s or seller’s, that person has an exclusive right to represent you. That works OK if you are a seller, because even though you only have one official agent, they are co-oping your listing to all the other agents through the multiple listing service. So, if your agent isn’t that productive you at least have all the agents seeing your property through the MLS.
With an exclusive buyer’s agent, however, if your agent isn’t productive, you are stuck. And, you’ll find that many agents want you to sign that agency agreement before they ever talk to you or supply leads. I've had agents on more than one occasion wanting me to sign an agency agreement before they ever even got to know me and my objectives!
The problem is, with exclusive agency even if YOU find the property, unless it was spelled out otherwise the agent would be entitled to a commission. So, if the agent doesn’t produce, and you end up scouring the area, they still expect to get a commission on the deal. In most cases, buyer’s agent commissions are paid by the seller and you don’t have to pay it, but if you were to find a for sale by owner (FSBO) deal, the seller might not be at all amenable to paying the commission, meaning you’d be stuck for the bill for a deal that this agent didn’t even find you!
I had this happen on one occasion in which an agent in Florida, who if I said did the most minimal work that would have been a compliment. It was a scenario in which I was doing all the looking, filtering and so forth. This agent wanted to sue me for a commission on a FSBO he didn’t even find! Fortunately, I did not have any kind of agreement in force with him, so there was no leg for him to stand on. But, it still illustrates what I am talking about - he did virtually no work for me in finding the deal, but he expected to get a piece of the pie just the same.
So, how do you avoid this? Sign agency agreements only for a single property at a time – one that you are transacting, and just deal with the realities of the implied seller’s agency until then. That is, until you find an agent you can trust and for whom you’d like to give exclusive business.
So, that leaves us with a strategic challenge. Do you call all over town to individual agents, talking to them about their listings, or do you engage just one agent and give them your exclusive attention? The answer is a bit of both.
Calling individual agents is more expedient in the beginning, and the perfect way to source agents. It takes time to find a good agent to work with, and you just aren’t going to have access to one when you first go into a marketplace. So, you start by calling agents on their particular listings, and as you chat with them about the property, you also take the time to interview them for your affairs. Your “interviewing” can take the form of candid questions, and subtle, stealthy interactions designed to gauge them as potential agents.
Certain agents will immediately disqualify themselves by being abrasive, discourteous (particularly when they hear you are an investor) or apparently inexperienced. A whole host of others will disqualify themselves by not doing what they will say they will do. I can’t tell you the number of times I’ve had lengthy, impressive conversations with agents who then never bother to send listings or call me back. Apparently many agents don't want to do the hard work and prefer to pursue the comfy process of dealing with the buyer who is sitting in their office with a check in their hand.
I even had a situation where, not realizing I had dealt with a particular agent previously, I even went through their "failure to follow-through" process twice….with the same agent! In other words, not only did they peter out the first time, when I mistakenly opened up a transaction with them a second time, they petered out again. You wouldn't have expected it from their conversation though.
A final round will disqualify themselves shortly down the road. Perhaps you’ll get an initial round or two of listings or a couple of phone calls, but then they move on to what they think are bigger fish to fry. We out of state investors look like a tough project, and many investors just choose to work the easy angles with local preapproved buyers waiting to go.
In my experiences you will probably contact between 25 and 50 agents in a given market in order to find from 1 to 3 agents who are really top-rate. So remember those statistics. It's a lot of hard work and communication on your part, but when you find that top-notch agent, they really are worth their weight in gold.
Next time I will discuss a series of criteria to look for when seeking and interviewing an agent.
Until then, keep seeking those investments, and live your real estate dreams!
Sunday, October 7, 2007
Locating Real Estate Investments (part 5) - Private Real Estate Investor Sites
Private Investor Sites
In every community and every city there are real estate investors who are selling properties. Often these are wholesale deals which the investor picked up at a substantial discount, who is marking it up to make a profit, but still leaving a good amount of equity on the table for another investor who wants to fix up the property.
In many cases today, these investors are getting pretty savvy and have websites and mailing lists publicizing their deals. They can be a great resource for you.
Here’s an example of one investor’s site in San Antonio:
http://www.buynowsa.com
I am not making any recommendation to them – I am merely listing them as an example of what’s available.
Here are a couple of other examples:
In Phoenix
http://www.invest-n-homes.com/
In Dallas
http://www.dfwinvestors.net/
Again, I am not making an referrals or recommendations - I am merely using these of examples of what you can find out there.
You can find these types of real estate investor sites by searching in Google for your city of preference and the words “real estate investor” or “we buy houses”
There are even national networks of investors that are either franchises or outfits that supply investors with websites for their businesses. http://www.Homevestors.com is a good franchise resource. InetUSA http://www.inetusa.com/ is one of the web-building companies for investors. Their organization has a national search feature to access all their clients’ listings.
If you are in a position to do so, join any local real estate investor’s associations (REIA’s) in areas where you want to invest – network and get to know investors that have property for sale there. Get on their mailing lists. You can access a list of local REIA's through the National Real Estate Investors Association http://www.nationalreia.com
So, until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
In every community and every city there are real estate investors who are selling properties. Often these are wholesale deals which the investor picked up at a substantial discount, who is marking it up to make a profit, but still leaving a good amount of equity on the table for another investor who wants to fix up the property.
In many cases today, these investors are getting pretty savvy and have websites and mailing lists publicizing their deals. They can be a great resource for you.
Here’s an example of one investor’s site in San Antonio:
http://www.buynowsa.com
I am not making any recommendation to them – I am merely listing them as an example of what’s available.
Here are a couple of other examples:
In Phoenix
http://www.invest-n-homes.com/
In Dallas
http://www.dfwinvestors.net/
Again, I am not making an referrals or recommendations - I am merely using these of examples of what you can find out there.
You can find these types of real estate investor sites by searching in Google for your city of preference and the words “real estate investor” or “we buy houses”
There are even national networks of investors that are either franchises or outfits that supply investors with websites for their businesses. http://www.Homevestors.com is a good franchise resource. InetUSA http://www.inetusa.com/ is one of the web-building companies for investors. Their organization has a national search feature to access all their clients’ listings.
If you are in a position to do so, join any local real estate investor’s associations (REIA’s) in areas where you want to invest – network and get to know investors that have property for sale there. Get on their mailing lists. You can access a list of local REIA's through the National Real Estate Investors Association http://www.nationalreia.com
So, until next week, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Thursday, September 27, 2007
Locating Properties (part 4) - Investor Oriented Websites and Communities
Today, I want to talk about investor-oriented resources and how they can help you locate good investments. There is no doubt that the Internet has had a tremendous positive effect on the career of real estate investors and helping them find deals. What we used to do by driving around and making phone calls can quickly be done online today. There are investor-oriented websites, online investor communities, and countless private investor websites in existence.
Investor-Oriented Websites
I’m a real fan of a couple of free investor-oriented websites. Unlike so many others, they don’t charge subscription fees, and you get tons of listings from private parties (as opposed to companies that don't really have properties to sell. Two of my favorites are:
www.Rehablist.com
www.Foreclosures-4-investors.com
Keep in mind that you can often find deals from consumers selling homes as well as investors wholesaling deals. Often, even real estate agents will have lucrative deals on these sites.
I'm not much of a fan of the paid foreclosure subscription services. There are a couple of good ones, but most of them have information that is either grossly outdated (read: useless) or otherwise inaccurate. Or, the information is often nothing more than what available to the public through other means for free!
Even the good subscription services can be out of date, and have scores of public information, so you have to take that into consideration. Plus, the fees tend to be really cost-prohibitive anyone but experienced investors who have enough activity to justify the cost. All that said, if you choose to use a paid foreclosure service, select your company wisely.
Real Estate Investing Communities
I’m also a fan of a handful of creative real estate investing communities online because their forums and classified ads can lead to impressive situations.
www.uslandco.com
www.creonline.com
I'll also put in a plug for my own real estate community just formed on a social networking site called Ning.com. It's very similar to facebook.com or myspace.com if you are familiar with those. It takes full advantage of contemporary Internet features such as photos video and "social networking" among members. My site is:
http://coast2coastinvestor.ning.com/
In invite you to join me, post your introductions, network, ask questions, etc.
Until my next post...live your real estate dreams!
William Flood
Investor-Oriented Websites
I’m a real fan of a couple of free investor-oriented websites. Unlike so many others, they don’t charge subscription fees, and you get tons of listings from private parties (as opposed to companies that don't really have properties to sell. Two of my favorites are:
www.Rehablist.com
www.Foreclosures-4-investors.com
Keep in mind that you can often find deals from consumers selling homes as well as investors wholesaling deals. Often, even real estate agents will have lucrative deals on these sites.
I'm not much of a fan of the paid foreclosure subscription services. There are a couple of good ones, but most of them have information that is either grossly outdated (read: useless) or otherwise inaccurate. Or, the information is often nothing more than what available to the public through other means for free!
Even the good subscription services can be out of date, and have scores of public information, so you have to take that into consideration. Plus, the fees tend to be really cost-prohibitive anyone but experienced investors who have enough activity to justify the cost. All that said, if you choose to use a paid foreclosure service, select your company wisely.
Real Estate Investing Communities
I’m also a fan of a handful of creative real estate investing communities online because their forums and classified ads can lead to impressive situations.
www.uslandco.com
www.creonline.com
I'll also put in a plug for my own real estate community just formed on a social networking site called Ning.com. It's very similar to facebook.com or myspace.com if you are familiar with those. It takes full advantage of contemporary Internet features such as photos video and "social networking" among members. My site is:
http://coast2coastinvestor.ning.com/
In invite you to join me, post your introductions, network, ask questions, etc.
Until my next post...live your real estate dreams!
William Flood
Thursday, September 20, 2007
Locating Properties (part 3) - National Real Estate Sites
Let's jump right in and take a look at how national real estate sites can be a good source of property leads.
There’s no doubt that real estate brokerages control the vast majority of listings of property for sale. Agent listings on national sites can have certain kinds of issues - among them outdated listings that don't get removed, they are still an important place to look.
There are some pretty well-know places to search:
www.Realtor.com. I don’t tend to use realtor.com to search for listings because I get frustrated with the amount of outdated information I find. It seems to me that about 7 or 8 out of every 10 listings on realtor.com are no longer for sale, but were never taken offline. I do use realtor.com to help find agents, to browse properties in areas in which I am interested to get a sense of value, and learn the communities and so forth. It has some pretty good search tools, so for that it’s useful. And, my comments withstanding, realtor.com is still among the top places to find property for sale.
Here's an FYI (for your information) - be watchful when you are browsing the online classifieds of regional papers. Often when you think you are browsing their reader-placed ads you end up just looking at realtor.com listings. Often you have to dig deeper in the newspaper's website than just the "property for sale" link to find the actual reader-placed classifieds.
The real gem, as far as real estate agent listings go, is being able to access the various multiple listings services. In some cases like Houston’s www.HAR.com, or Ohio's Lake Eerie region's www.firelandsmls.com the service is available to the public without any complication. Some others like Tidewater Virginia's www.hrmls.com provide a certain amount for free, but require either an agent's connection or the paying of a modest subscription fee.
Many links to local MLS services go right through agents' websites, and these can be accessed just as easily as those you can access directly. Searching for the term "MLS" in the area of your interest will generally bring up links, whether they are direct, or on an agency website.
Another FYI - if an agent forces you through a contact page to get your criteria – in other words, you really can’t access the MLS through their site without giving them your contact data. I’d move on. Your objective at this juncture is to research and locate properties, not to be forced into a contact with an agent.
That said, when you find a good agent to work with, they can send you automatically emailed listings that meet your criteria. This is a really useful service and probably the best reason to invest time and energy locating an investor-friendly agent. Probably the best tool I have at my disposal is the nearly daily flood of leads automatically generated by various MLS services and sent through these agents auto-emailings.
Homes guides are great to pick up when you are in an area. I don’t know if you are like me (my wife just laughs at this), but whenever I travel to a new location one of the first things I do is pick up all the homes guides at the grocery store or street corner. Thankfully, most have online versions. Here are three to get you started:
www.Homes.com
www.Homesandland.com
www.harmonhomes.com
Next time I'll be discussing private investor sites and providing a great collection of links to investors who have great deals - often at wholesale pricing - for other investors.
Until Next Time, live your real estate dreams!
William Flood
The Coast to Coast Real Estate Investor
There’s no doubt that real estate brokerages control the vast majority of listings of property for sale. Agent listings on national sites can have certain kinds of issues - among them outdated listings that don't get removed, they are still an important place to look.
There are some pretty well-know places to search:
www.Realtor.com. I don’t tend to use realtor.com to search for listings because I get frustrated with the amount of outdated information I find. It seems to me that about 7 or 8 out of every 10 listings on realtor.com are no longer for sale, but were never taken offline. I do use realtor.com to help find agents, to browse properties in areas in which I am interested to get a sense of value, and learn the communities and so forth. It has some pretty good search tools, so for that it’s useful. And, my comments withstanding, realtor.com is still among the top places to find property for sale.
Here's an FYI (for your information) - be watchful when you are browsing the online classifieds of regional papers. Often when you think you are browsing their reader-placed ads you end up just looking at realtor.com listings. Often you have to dig deeper in the newspaper's website than just the "property for sale" link to find the actual reader-placed classifieds.
The real gem, as far as real estate agent listings go, is being able to access the various multiple listings services. In some cases like Houston’s www.HAR.com, or Ohio's Lake Eerie region's www.firelandsmls.com the service is available to the public without any complication. Some others like Tidewater Virginia's www.hrmls.com provide a certain amount for free, but require either an agent's connection or the paying of a modest subscription fee.
Many links to local MLS services go right through agents' websites, and these can be accessed just as easily as those you can access directly. Searching for the term "MLS" in the area of your interest will generally bring up links, whether they are direct, or on an agency website.
Another FYI - if an agent forces you through a contact page to get your criteria – in other words, you really can’t access the MLS through their site without giving them your contact data. I’d move on. Your objective at this juncture is to research and locate properties, not to be forced into a contact with an agent.
That said, when you find a good agent to work with, they can send you automatically emailed listings that meet your criteria. This is a really useful service and probably the best reason to invest time and energy locating an investor-friendly agent. Probably the best tool I have at my disposal is the nearly daily flood of leads automatically generated by various MLS services and sent through these agents auto-emailings.
Homes guides are great to pick up when you are in an area. I don’t know if you are like me (my wife just laughs at this), but whenever I travel to a new location one of the first things I do is pick up all the homes guides at the grocery store or street corner. Thankfully, most have online versions. Here are three to get you started:
www.Homes.com
www.Homesandland.com
www.harmonhomes.com
Next time I'll be discussing private investor sites and providing a great collection of links to investors who have great deals - often at wholesale pricing - for other investors.
Until Next Time, live your real estate dreams!
William Flood
The Coast to Coast Real Estate Investor
Thursday, September 13, 2007
Locating Properties (Part 2) - Classified Sites
Hi Everyone. Welcome to another edition of the Coast to Coast Real Estate Investor. In this edition I'll be continuing my multi-part series on how and where to locate suitable investment properties out of state.
In this edition, I'll be exploring classified advertising sites and resources. Right on the heels of the For Sale By Owner (FSBO) sites are the big national classified advertising sites. My top pick is the well-known www.Craigslist.com. I’ve heard a lot of people complain that they can’t find deals on Craigslist or that only amateurs use it. That can’t be further from the truth. Any time you have a collection of sellers, you are going to have a certain percentage that are “don’t wanter” types that are really flexible. You just need to know what to look for.
The trick to Craigslist is learning how to search. Craigslist allows you to do keyword searches, so you need to look for terms that would pull up potential candidates. For example, searching for “owner relocating” or “out of state” often pulls up some interesting possibilities. It does take a certain amount of finessing to really work Craigslist searches, and I’m going to dedicate a future lesson on just how to do some very precise looking. For now, searching for common investor-oriented terms like “owner motivated” or “fixer upper” can produce fantastic results.
My second pick in classified sites is www.backpage.com. It’s very much like Craigslist, but less well known. It has the advantage that it pulls ads from local papers and free newsies. It’s also very searchable, which makes it a great tool. I also like www.classifiedads.com for the same reasons, although the data on there isn't as extensive as the other two.
Don’t forget local publications like newspapers and Pennysavers. Their classifieds are often online, and of course, you can pick up the publications when you are in an area or subscribe to them. Browsing the online classifieds of an out-of-state newspaper online is fine, although if it has search tools, it's a better situation. One thing to be aware of when you use out of state newspaper sites is that the real estate classified ads are often nothing more than listings pulled from www.realtor.com, and are not the same as the actual ads run by individual sellers. You often have to look a bit deeply to find the actual ads that are running in the printed version of the paper.
Next time I'll be delving into national real estate sites. They can be a wonderful resource.
Until next time - live your real estate dreams!
In this edition, I'll be exploring classified advertising sites and resources. Right on the heels of the For Sale By Owner (FSBO) sites are the big national classified advertising sites. My top pick is the well-known www.Craigslist.com. I’ve heard a lot of people complain that they can’t find deals on Craigslist or that only amateurs use it. That can’t be further from the truth. Any time you have a collection of sellers, you are going to have a certain percentage that are “don’t wanter” types that are really flexible. You just need to know what to look for.
The trick to Craigslist is learning how to search. Craigslist allows you to do keyword searches, so you need to look for terms that would pull up potential candidates. For example, searching for “owner relocating” or “out of state” often pulls up some interesting possibilities. It does take a certain amount of finessing to really work Craigslist searches, and I’m going to dedicate a future lesson on just how to do some very precise looking. For now, searching for common investor-oriented terms like “owner motivated” or “fixer upper” can produce fantastic results.
My second pick in classified sites is www.backpage.com. It’s very much like Craigslist, but less well known. It has the advantage that it pulls ads from local papers and free newsies. It’s also very searchable, which makes it a great tool. I also like www.classifiedads.com for the same reasons, although the data on there isn't as extensive as the other two.
Don’t forget local publications like newspapers and Pennysavers. Their classifieds are often online, and of course, you can pick up the publications when you are in an area or subscribe to them. Browsing the online classifieds of an out-of-state newspaper online is fine, although if it has search tools, it's a better situation. One thing to be aware of when you use out of state newspaper sites is that the real estate classified ads are often nothing more than listings pulled from www.realtor.com, and are not the same as the actual ads run by individual sellers. You often have to look a bit deeply to find the actual ads that are running in the printed version of the paper.
Next time I'll be delving into national real estate sites. They can be a wonderful resource.
Until next time - live your real estate dreams!
Thursday, August 30, 2007
How to Locate Properties (Part 1 - For Sale By Owner Sites)
Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor.
Today I am going to start a multi-part series on where to locate properties across the country. Let me begin by saying that as you start using any of the resources I’m providing - or any other - your ultimate job is to get to know the market in which you are investing. Don’t try to shortcut that by using a website! Your job is to look, and look, and look, and to research, and then research some more to get a clear understanding of prices, values, best communities in which to invest, and what’s happening in a given market.
Don’t jump into some deal prematurely without having a real good sense of where you are planning to buy. Don’t take anyone’s word that a property is worth a certain amount. Basically, don’t make the speculator’s mistake of buying anything just because you can.
For Sale By Owner Properties and For Sale By Owner Sites
I’m going to begin this series by discussing For Sale By Owner (FSBO) resources. I’m placing it at the top for a reason. In my opinion, working deals that don’t involve real estate agents gives you various advantages.
First, since a real estate commission is not involved, you don’t have that 6% or 7% complicating the deal. Often, when you see someone who is otherwise flexible and motivated when selling their property, it’s the closing costs, and in particular the real estate commission that they can’t afford to pay out of their bank account. So their price and/or terms will reflect the need to recap the real estate commission from the property’s equity. I’ve come across scores of deals in which the owner would virtually give away the house, or finance 100%, except they need an amount to cover closing and commissions. Keep in mind, that on a $150,000 house, that can represent $15,000, so we’re not talking about a small amount of change! When it’s for sale by owner, you bypass most of that challenge.
The second reason why I like for sale by owner situations is that you are dealing with the seller directly. If you are good with people – if you learn how to build rapport and dialogue with sellers it helps you put together deals. Agents are not typically going to disclose a seller’s situation, so when you can deal with an owner directly you have the benefit of diplomatically inquiring about the seller’s situation. A skilled investor will always dig into the situation of the seller – more so than the property itself. As the old saying goes, the deal is in the situation, not the property. When you find a motivated seller - perhaps someone who has relocated out of state, is in financial difficulty, divorcing, etc. - you are in a position to help them and put together a fantastic deal for yourself.
By way of example, let's say you've come across a seller who bought a property a year ago and was suddenly transferred to another state. They can't afford two house payments, have bled their bank account low, and are getting dangerously close to a foreclosure situation. The problem is, they no longer have the $12,000 to pay a real estate commission and closing costs. So, they try the FSBO route. What's really hurting them is the extra set of payments. Perhaps you could come in and offer a rent with option to buy or lease purchase arrangement (more on those in an upcoming edition on financing) or simply take over their payments (called a subject-to deal). Your solution would take the burden of the payments off their hands while getting you into a deal with little or no upfront money. It's truly a win-win situation!
One of my best deals - actually one of my first out of state purchases was a FSBO, in a situation very near to what I just described. I can't overemphasize how valuable the for sale by owner situation can be.
With all that in mind, here are some FSBO resources.
Two of the top FSBO sites are:
www.Buyowner.com
www.Forsalebyowner.com
There are others like www.FSBO.com and www.byowner.com. FSBO sites are pretty prolific, but the first two are really solid contenders with thousands of listings across the country. It’s also worth mentioning that there are FSBO guides you can pick up in cities when you travel.
In the next edition I will be covering the wealth of classified advertising that's available across the country both in print and online.
Until then,
Live Your Real Estate Dreams
Today I am going to start a multi-part series on where to locate properties across the country. Let me begin by saying that as you start using any of the resources I’m providing - or any other - your ultimate job is to get to know the market in which you are investing. Don’t try to shortcut that by using a website! Your job is to look, and look, and look, and to research, and then research some more to get a clear understanding of prices, values, best communities in which to invest, and what’s happening in a given market.
Don’t jump into some deal prematurely without having a real good sense of where you are planning to buy. Don’t take anyone’s word that a property is worth a certain amount. Basically, don’t make the speculator’s mistake of buying anything just because you can.
For Sale By Owner Properties and For Sale By Owner Sites
I’m going to begin this series by discussing For Sale By Owner (FSBO) resources. I’m placing it at the top for a reason. In my opinion, working deals that don’t involve real estate agents gives you various advantages.
First, since a real estate commission is not involved, you don’t have that 6% or 7% complicating the deal. Often, when you see someone who is otherwise flexible and motivated when selling their property, it’s the closing costs, and in particular the real estate commission that they can’t afford to pay out of their bank account. So their price and/or terms will reflect the need to recap the real estate commission from the property’s equity. I’ve come across scores of deals in which the owner would virtually give away the house, or finance 100%, except they need an amount to cover closing and commissions. Keep in mind, that on a $150,000 house, that can represent $15,000, so we’re not talking about a small amount of change! When it’s for sale by owner, you bypass most of that challenge.
The second reason why I like for sale by owner situations is that you are dealing with the seller directly. If you are good with people – if you learn how to build rapport and dialogue with sellers it helps you put together deals. Agents are not typically going to disclose a seller’s situation, so when you can deal with an owner directly you have the benefit of diplomatically inquiring about the seller’s situation. A skilled investor will always dig into the situation of the seller – more so than the property itself. As the old saying goes, the deal is in the situation, not the property. When you find a motivated seller - perhaps someone who has relocated out of state, is in financial difficulty, divorcing, etc. - you are in a position to help them and put together a fantastic deal for yourself.
By way of example, let's say you've come across a seller who bought a property a year ago and was suddenly transferred to another state. They can't afford two house payments, have bled their bank account low, and are getting dangerously close to a foreclosure situation. The problem is, they no longer have the $12,000 to pay a real estate commission and closing costs. So, they try the FSBO route. What's really hurting them is the extra set of payments. Perhaps you could come in and offer a rent with option to buy or lease purchase arrangement (more on those in an upcoming edition on financing) or simply take over their payments (called a subject-to deal). Your solution would take the burden of the payments off their hands while getting you into a deal with little or no upfront money. It's truly a win-win situation!
One of my best deals - actually one of my first out of state purchases was a FSBO, in a situation very near to what I just described. I can't overemphasize how valuable the for sale by owner situation can be.
With all that in mind, here are some FSBO resources.
Two of the top FSBO sites are:
www.Buyowner.com
www.Forsalebyowner.com
There are others like www.FSBO.com and www.byowner.com. FSBO sites are pretty prolific, but the first two are really solid contenders with thousands of listings across the country. It’s also worth mentioning that there are FSBO guides you can pick up in cities when you travel.
In the next edition I will be covering the wealth of classified advertising that's available across the country both in print and online.
Until then,
Live Your Real Estate Dreams
Sunday, July 29, 2007
Researching Markets in Which to Invest
Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor.
Last week I provided an 8-step formula for how to approach out of state investing. This week, I want to look in more depth at the first step – that of researching markets in which to invest.
Let me start by identifying what I think are three critical components that determine where an investor should be looking.
They are:
Last week I provided an 8-step formula for how to approach out of state investing. This week, I want to look in more depth at the first step – that of researching markets in which to invest.
Let me start by identifying what I think are three critical components that determine where an investor should be looking.
They are:
- Employment trends
- Housing factors
- Population shifts (particularly by baby boomers) -and-
- Overall affordability.
Employment Trends
Employment trends deal with whether an area is experiencing job growth, stagnation, or decline. Many areas I discuss are experiencing growth in employment, which brings people into an area for jobs, placing pressure on the existing stock of housing and pushes up rents and property values. Declines in employment have the opposite effect as is being seen in places like Detroit. Unless you are hedging for a turnaround in an area, your best bet is to find an area with good employment prospects, even if you are not seeking a job yourself.
Housing Factors
There are many factors related to housing. Among them are appreciation rates, valuations, the ratio between rent and mortgage payments, and the number of vacant units waiting to be filled.
Appreciation rate is probably the easiest to understand, probably because it was one of those things that was reported on so markedly during the housing boom. Appreciation represents how much a property is going up or down in value. On average, across the country, and over time, real estate seems to appreciate at about a 4% per year rates. But, when a market gets hot, that can go up into double digits, and that’s when things get promising.
Keep in mind that housing values can stagnate, and even go down – particularly if they ballooned too fast and defied any logic.
Valuation is another key component. In certain markets properties are so expensive that only the upper strata of the population can afford to buy. And, don’t make the mistake of thinking that an expensive area naturally means better appreciation. That is often not the case.
One of the factors related to valuation is the differential between a typical mortgage payment and the rent a property can command. For example, in pricey areas, it’s not uncommon to find average single family homes selling for well over $400,000. That means a mortgage in the ballpark range of probably $3,000 a month. But, rental rates on that same property might be in the range of $1900 a month, meaning a $1100 a month negative cash flow! In a less costly area, a house might run, $140,000, with a ballpark mortgage of $1,100. Rent in that area might be $1,000 a month, nearly covering the monthly payment.
Vacancy rates and the amount of housing inventory an area needs to absorb is another critical factor. Closely related to this is the time it takes a property to get sold or rented. Right now in Phoenix there is at least a six month glut in vacant property for sale. Combine that with the mass of properties that were overvalued on speculation and you find a bad combination – people renting properties for far less than their monthly carrying costs just to cover some of their expenses…because they know the property could take half a year or more to sell.
Let’s turn our attention to a variety of resources where you can find critical housing market data. My emphasis today is on resources that you can access for free.
Federal Government Resources
First and foremost is the US Census. You can access that at www.census.gov
Census data is not compiled yearly, and can be a couple of years out of date. But, it does paint an overall picture that’s reasonably current. Here are just a sample of the reports you can access with the Census:
- Housing Affordability
- Absorption Rate
- Income
- Demographics of an area
HUD’s Resource site at www.HUDuser.org
Here are just some of the reports you can access from HUD
- State of Cities Data System
- US Housing Market Conditions
- American Housing Survey
- Property Owners and Managers Survey
State and Local Government Resources
State Economic Development offices hold a wealth of information for states, cities, towns, and counties. You can access a complete list of state economic development offices at the Economic Development Administration’s Website www.eda.gov
Associations
The National Association of Realtors at www.realtor.org and the National Association of Home Builders www.nahb.org are two fantastic resources with a lot of research at your disposal.
Chambers of Commerce are the gateways to local areas, their merits, business climate and so forth. You can access chambers across the country at the World Chamber of Commerce website (www.commerce.com) or the US Chamber of Commerce (www.2chambers.com)
Local and State Real Estate Investment Associations (or REIAs)
Larry Goins, who is going to be our guest speaker next week www.larrygoins.com has a comprehensive list of REIA’s across the country on his website as does the National REIA at www.nationalreia.com.
Private Research Sites
Mostly, these tend to be fee-based, but Altos Research, which deals in Western states has a fantastic property valuation map that overlays value charts on Google maps.
Retirement Sites
Retirehomesmart.com and greatretirementspots.com are two tremendous resources if your strategy is to buy where boomers are retiring.
Relocation Sites
Sperlings bestplaces.net and findyourspot are both similar tools, being able to filter locations based on criteria you deem important. The Wall Street Journal’s www.Realestatejournal.com has a similar tool.
Other Websites of Value
Job sites like Monster.com and, in particular, the Riley Guide www.rileyguide.com often profile markets, with a bent towards job prospects, growth, cost, and quality of life.
Magazines
Where to Retire magazine is a must have if you place importance on population migration. Each issue is a storehouse of market profiles and ideas for places to invest. Live South, which focuses primarily on the South East, has a magazine and website by the same name has similar information to Where to Retire.
CNN, Forbes, Money Magazine, the Wall Street Journal and similar financial publications all put out real estate articles on a regular basis. Just recently, for example, Kiplinger profiled the ten top cities for empty nesters.
Books
Places Rated Almanac is a must if you want to select areas by your own criteria. It covers, among other factors, tax rates, job growth, and quality of life.
Where to Retire magazine puts out a series of books on buying strategies. You’ll find them advertised in the pages of the magazine.
That’s a lot on your plate – and remember, if you want to ask any questions or need more information, email me at whflood@yahoo.com and I will be happy to chat with you.
So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Friday, June 8, 2007
The Game Plan For Buying Properties Out of State
Welcome to another edition of the Coast-to-Coast Real Estate Investor.
Last week I wrapped up the overview of the various states to invest in. If you haven’t read any of those, or heard the Podcast versions yet you can go back and access them. The blog entries are located here in the archives, and the Podcasts can be accessed at:
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc
Those “where to buy property” episodes will be real useful to you for laying the groundwork on where to invest.
Today, I am covering a basic game plan for buying property out of state. This game plan is structured around long-term holding, but those of you interested in flipping properties can still make use of much of it. Today, I’ll be presenting the overview, and in the following weeks, I’ll be examining each step much more thoroughly.
So, let’s begin!
Step 1. Researching Markets –
Before you ever invest in an area other than your own home market, you need to have a clear idea of where you are going to invest…and why. Your reasoning can be as simple as the desire to buy a vacation home, or as calculated as trying to invest in a highly appreciating market. But, you need to be clear on your goals.
Begin with one market in mind. In the beginning, don’t try to chase all over the country after deals. With an entire country’s worth of real estate out there, you can get stretched way too thin and end up unproductive and totally frustrated. Simply put, you can’t know everything about every community, and there’s a lot of market research you need to undertake before you buy. Thus, you need to focus your attention. Believe me, I know this first-hand. You can easily fall into the trap of spinning your wheels looking at too many places at once and get more wrapped up in looking than buying! Being busy looking at properties will not make you wealthier – only buying them will.
So, where do you go to research markets?
My Podcast & Blog, of course are good places to get market information. As I noted at the beginning, the overviews presented over the last several weeks are good places to begin. And, down the road, I’ll be taking very intense, detailed looks at various areas.
Commercial sources are another great place to do your research. There are great magazines such as Where to Retire and powerful websites such as www.bestplaces.net that can provide all kinds of market information.
Government resources – the U.S. Census is a tremendous resource when it comes to digging up details on job growth, demographics, and housing prices among other things. State economic development offices and boards of realtors can help you get more localized information.
Step 2. - Locating properties
Locating properties is actually one of the easiest parts of the process. However, as I mentioned, it’s also the biggest trap because there is an endless supply of properties across the country; so, I will re-emphasize the importance of focusing your search.
Websites are the natural place to begin searching. One of the things that made out-of-state investing so possible now is the access to property listings on the Internet from sellers and realtors.
Craigslist (www.craigslist.com) is among my preferred places to look. If you haven’t come across Craigslist yet, it’s like the worlds biggest classified advertising site. For Sale By Owner sites, like www.fsbo.com are another place to look. FSBO’s are good because you are dealing with sellers directly and deals aren’t complicated by real estate commissions.
Real estate sites like www.realtor.com, and those available from virtually every real estate office are another logical choice. Realtors, with their access to multiple listing services have access to the main source of property listings, and a good share of brokerages allow the public to access the local multiple listing service (MLS) listings from their websites.
One commonly overlooked source of property leads is other investors. You’ll find investors with properties they are trying to flip, rentals they want to sell, and fixers they are trying to wholesale - so they can be a good source of leads. A side benefit is that they are the most common source of owner financing, so if you don’t want to go the traditional mortgage route, they offer a potential advantage.
Step 3. Buying properties
Keep in mind that whether you are buying a vacation home or trying to flip a property in a hot market, you are an investor. As an investor, the numbers must make sense in any deal. Always keep in mind that you need to buy right. That means getting good prices, good terms, or both. As an investor you can’t afford to buy at retail – or worse, above retail. Speculators do that in hot markets, but that’s more akin to gambling than investing.
Because of the need to get good deals, For Sale By Owners hold particular appeal. As I noted a moment ago, FSBO's are good because you are dealing with sellers directly, and deals aren’t complicated by real estate commissions. As an investor, in general, you will find that working with owners far easier than working through real estate agents.
That’s not to say you shouldn’t work through real estate agents. Realtors are the single largest source of properties for sale, so you can’t overlook working with them.
There is the issue, however, of whether you should work with one realtor exclusively (typically they will be your buyer’s agent) or whether you should talk to all the various listing agents who have the particular houses for sale.
In general, you’ll find it easier to contact the listing agents directly, but that also tends to be the harder route to go in terms of successfully buying something. Working with one specific agent and getting them to send you listings that meet your criteria is much more productive and will serve you better in the long run. On the other hand, it can be difficult to find a good agent. A good agent is worth their weight in gold, and it can take speaking to 20 or 30 agents before you find a good one. Plus as an investor you tend to be on a longer timeline than most agents expect; if you don’t buy, sooner or later they will move on to other clients.
On a completely different issue, buying condos versus single-family homes should be an issue you consider. Personally, I prefer condos in amenitied communities with things like a pool, tennis, etc. Buying a condo means you have to factor in the monthly condo fee, but that fee also takes a lot of maintenance issues off your plate, which is good when you are out of state. Single-family homes are generally the better investment, though. Keep in mind, however, that with a single-family house, sooner or later you’ll have to put on a new roof, take care of the landscaping, perhaps exterminate bugs – those are dealt with for you in a condo or townhouse. Over a long period of time, the cost of repairs versus those condo fees can be equivalent to each other
Step 4. Financing
If you are flush with money, cash flow, and credit, the subject of financing is probably not too much of a concern for you. You’ll be able to go out and get a mortgage of some type, and your main concern is getting the best rate and terms you can find.
If you are a typical buyer, probably with a middle income job, a family, and so forth, you are probably weak in one of those areas, so the subject of financing is probably much more important to you. To emphasize this point, a typical middle income buyer may find it reasonably easy to get a second home loan, but then run into a brick wall buying a third property. So, understanding the subject of finance is vital.
Owner terms – commonly referred to owner financing or creative financing is something every investor should study. Sooner or later you will run into a roadblock trying to qualify for traditional financing. At that point, if you don’t find alternative means to finance properties you’ll be stuck in the water. If an owner will offer owner financing where you make payments to him or her instead of wanting a cash sale, issues of your income, credit, or debt load may be irrelevant. It’s simply you and the seller at that point as opposed to you being scrutinized by a big money bank.
That’s not to say you won’t use traditional financing. There’s a place for that, too.
Mortgage brokers, who independently represent a variety of lenders, are often a best source for traditional financing. Simply put, if the broker can’t get you a loan, they don’t earn their commission, so there’s a good incentive there.
Banks, of course are natural sources. If you utilize a large national bank like Chase or Citicorp check to see if their mortgage department is licensed in the state where you want to buy. This can be more expensive than other routes, but there is a convenience factor because you can work from your local branch.
Local banks – that is, banks in the immediate area where you want to buy can be great places to find loans at good rates. Depending on the particular bank, they are often the most assertive lenders in the area, and often have decent terms and criteria – representing a bargain compared to other sources.
Step 5 – Don’t Forget the Details
Never forget the details you have to take care of when you have an accepted contract – these include surveys, home inspections, pest inspections, and appraisals. I have one important piece of advice - don't go with the affiliated companies of large banking operations. They are simply too expensive compared with independent services in the area. Countrywide, for example, partners with appraisers, title companies, pest inspectors, home inspectors, and so on. The fees for these “convenient” services can easily be double what you’d pay for the same service by selecting your own vendor.
Step 6. Closing -
You’ll need a title company to close. In some states the buyer gets to select the title company, in others it’s the seller’s prerogative If it’s yours, get references, and don't go with one affiliated with large mortgage company….again, too expensive compared to the overall market. That bedfellow arrangement is often nothing more than disguised greed waiting to take your money.
Part of the title company’s work is providing title insurance. Again, don’t go with the affiliates if you are using a large national mortgage company unless you are willing to pay a whole lot extra.
Step 7. Getting tenants
This is among the most important steps in the process. If you don’t get good tenants…and get them quickly, your investment will turn into a monthly money pit.
I do not recommend trying doing it your self. It just doesn’t make sense for you to try to secure and manage a tenant from hundreds of miles away. Some people do it successfully, but I am going to suggest you consider professional help in this arena. I’ve never understood why a landlord (even one with a local property) would try to undertake their own management to save $70 or $80 a month. Think about it -- where else can you get 24x7, legal, advertising, marketing support, etc. for about just a few dollars a month? I have a friend who owns several franchises. He pays his managers in the $30,000 range, and they don’t handle nearly the responsibility my property managers do. In my mind, professional property management is a secret bargain you need to discover.
First be aware that there is a different between tenant placement and property management. Most real estate agents who handle rentals are doing tenant placement. That is, they will find and qualify a tenant for you. For that, they will typically charge you 1 month’s rent. The problem is, you are left to manage the tenant, handle ongoing repairs, collect the rent, deal with potential eviction and a host of other concerns after the tenant is obtained. That’s not what you want.
What you really want is a property manager who not only can secure a tenant, but can handle the property on an ongoing basis. In my opinion you want to get the best property manager you can find because they have the best systems, contacts with reliable tradespeople for repairs, etc. A bad property manager is next to useless and can end up costing you money by being slow to get tenants, and sloppy with handling them, so get the best you can find. A good or bad property manager costs about the same amount, and that’s around 7-10% of rents.
In resort areas you may have the mixed blessing of short-term rentals. That’s a subject a bit too complex to go into in this edition, and I’ll save that for later. What I will note is that short term property management will be much more expensive than I’ve noted, and can run as high as 30% of your rents. It’s just the nature of the beast, and you need to decide whether to rent short-term or not.
A real blessing is when you can find an onsite property manager, or one that’s so closely affiliated with a community, it’s essentially the same thing. They have somewhat of a monopoly on getting tenants for that community, so they are usually the best game in town. It’s a double benefit if they also manage the home owner’s association because they really have their thumb on the full pulse of issues like maintenance.
Step 8. Handling vacancies and negative cash flow
You need to be properly primed to handle an out of state rental. Like any investment, thinking it will be rented 100% of the time is unrealistic. Consequently, you need to be prepared for the inevitable vacancies and likelihood of negative cash flow, unless it’s in more of a working class rental area. If you are prepared for that going in, you’ll do OK. If you don’t allow for that, you’ll get stung.
Keep in mind that the better the property is for appreciation, the worse it tend to be for cash flow. A resort property may not cash-flow at all, but might appreciate 10% per year. A blue-collar rental house may have decent cash flow, but little appreciation potential.
Given a typically priced and financed deal, a simplistic way to think of the financial realities of solid white-collar home is that in year 1 you’ll have a negative cash flow. In year 2 you’ll approach break even. In year 3 you’ll have a slight, but insignificant positive, and from there on you should see a small but increasing positive cash flow. That again is simplistic, but at least sets the stage for appropriate thinking. A little reserve cash will go a long way to your being able to hold on to that property.
So, it’s eight steps. That will give you a sense of what processes it takes to successfully invest out of state. As we go over the next few weeks, I’ll be taking intimate looks at each of those stages, providing much more depth, and supplying lots of resources.
You won’t want to miss a single edition!
Have a great day, and live your real estate dreams!
Last week I wrapped up the overview of the various states to invest in. If you haven’t read any of those, or heard the Podcast versions yet you can go back and access them. The blog entries are located here in the archives, and the Podcasts can be accessed at:
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc
Those “where to buy property” episodes will be real useful to you for laying the groundwork on where to invest.
Today, I am covering a basic game plan for buying property out of state. This game plan is structured around long-term holding, but those of you interested in flipping properties can still make use of much of it. Today, I’ll be presenting the overview, and in the following weeks, I’ll be examining each step much more thoroughly.
So, let’s begin!
Step 1. Researching Markets –
Before you ever invest in an area other than your own home market, you need to have a clear idea of where you are going to invest…and why. Your reasoning can be as simple as the desire to buy a vacation home, or as calculated as trying to invest in a highly appreciating market. But, you need to be clear on your goals.
Begin with one market in mind. In the beginning, don’t try to chase all over the country after deals. With an entire country’s worth of real estate out there, you can get stretched way too thin and end up unproductive and totally frustrated. Simply put, you can’t know everything about every community, and there’s a lot of market research you need to undertake before you buy. Thus, you need to focus your attention. Believe me, I know this first-hand. You can easily fall into the trap of spinning your wheels looking at too many places at once and get more wrapped up in looking than buying! Being busy looking at properties will not make you wealthier – only buying them will.
So, where do you go to research markets?
My Podcast & Blog, of course are good places to get market information. As I noted at the beginning, the overviews presented over the last several weeks are good places to begin. And, down the road, I’ll be taking very intense, detailed looks at various areas.
Commercial sources are another great place to do your research. There are great magazines such as Where to Retire and powerful websites such as www.bestplaces.net that can provide all kinds of market information.
Government resources – the U.S. Census is a tremendous resource when it comes to digging up details on job growth, demographics, and housing prices among other things. State economic development offices and boards of realtors can help you get more localized information.
Step 2. - Locating properties
Locating properties is actually one of the easiest parts of the process. However, as I mentioned, it’s also the biggest trap because there is an endless supply of properties across the country; so, I will re-emphasize the importance of focusing your search.
Websites are the natural place to begin searching. One of the things that made out-of-state investing so possible now is the access to property listings on the Internet from sellers and realtors.
Craigslist (www.craigslist.com) is among my preferred places to look. If you haven’t come across Craigslist yet, it’s like the worlds biggest classified advertising site. For Sale By Owner sites, like www.fsbo.com are another place to look. FSBO’s are good because you are dealing with sellers directly and deals aren’t complicated by real estate commissions.
Real estate sites like www.realtor.com, and those available from virtually every real estate office are another logical choice. Realtors, with their access to multiple listing services have access to the main source of property listings, and a good share of brokerages allow the public to access the local multiple listing service (MLS) listings from their websites.
One commonly overlooked source of property leads is other investors. You’ll find investors with properties they are trying to flip, rentals they want to sell, and fixers they are trying to wholesale - so they can be a good source of leads. A side benefit is that they are the most common source of owner financing, so if you don’t want to go the traditional mortgage route, they offer a potential advantage.
Step 3. Buying properties
Keep in mind that whether you are buying a vacation home or trying to flip a property in a hot market, you are an investor. As an investor, the numbers must make sense in any deal. Always keep in mind that you need to buy right. That means getting good prices, good terms, or both. As an investor you can’t afford to buy at retail – or worse, above retail. Speculators do that in hot markets, but that’s more akin to gambling than investing.
Because of the need to get good deals, For Sale By Owners hold particular appeal. As I noted a moment ago, FSBO's are good because you are dealing with sellers directly, and deals aren’t complicated by real estate commissions. As an investor, in general, you will find that working with owners far easier than working through real estate agents.
That’s not to say you shouldn’t work through real estate agents. Realtors are the single largest source of properties for sale, so you can’t overlook working with them.
There is the issue, however, of whether you should work with one realtor exclusively (typically they will be your buyer’s agent) or whether you should talk to all the various listing agents who have the particular houses for sale.
In general, you’ll find it easier to contact the listing agents directly, but that also tends to be the harder route to go in terms of successfully buying something. Working with one specific agent and getting them to send you listings that meet your criteria is much more productive and will serve you better in the long run. On the other hand, it can be difficult to find a good agent. A good agent is worth their weight in gold, and it can take speaking to 20 or 30 agents before you find a good one. Plus as an investor you tend to be on a longer timeline than most agents expect; if you don’t buy, sooner or later they will move on to other clients.
On a completely different issue, buying condos versus single-family homes should be an issue you consider. Personally, I prefer condos in amenitied communities with things like a pool, tennis, etc. Buying a condo means you have to factor in the monthly condo fee, but that fee also takes a lot of maintenance issues off your plate, which is good when you are out of state. Single-family homes are generally the better investment, though. Keep in mind, however, that with a single-family house, sooner or later you’ll have to put on a new roof, take care of the landscaping, perhaps exterminate bugs – those are dealt with for you in a condo or townhouse. Over a long period of time, the cost of repairs versus those condo fees can be equivalent to each other
Step 4. Financing
If you are flush with money, cash flow, and credit, the subject of financing is probably not too much of a concern for you. You’ll be able to go out and get a mortgage of some type, and your main concern is getting the best rate and terms you can find.
If you are a typical buyer, probably with a middle income job, a family, and so forth, you are probably weak in one of those areas, so the subject of financing is probably much more important to you. To emphasize this point, a typical middle income buyer may find it reasonably easy to get a second home loan, but then run into a brick wall buying a third property. So, understanding the subject of finance is vital.
Owner terms – commonly referred to owner financing or creative financing is something every investor should study. Sooner or later you will run into a roadblock trying to qualify for traditional financing. At that point, if you don’t find alternative means to finance properties you’ll be stuck in the water. If an owner will offer owner financing where you make payments to him or her instead of wanting a cash sale, issues of your income, credit, or debt load may be irrelevant. It’s simply you and the seller at that point as opposed to you being scrutinized by a big money bank.
That’s not to say you won’t use traditional financing. There’s a place for that, too.
Mortgage brokers, who independently represent a variety of lenders, are often a best source for traditional financing. Simply put, if the broker can’t get you a loan, they don’t earn their commission, so there’s a good incentive there.
Banks, of course are natural sources. If you utilize a large national bank like Chase or Citicorp check to see if their mortgage department is licensed in the state where you want to buy. This can be more expensive than other routes, but there is a convenience factor because you can work from your local branch.
Local banks – that is, banks in the immediate area where you want to buy can be great places to find loans at good rates. Depending on the particular bank, they are often the most assertive lenders in the area, and often have decent terms and criteria – representing a bargain compared to other sources.
Step 5 – Don’t Forget the Details
Never forget the details you have to take care of when you have an accepted contract – these include surveys, home inspections, pest inspections, and appraisals. I have one important piece of advice - don't go with the affiliated companies of large banking operations. They are simply too expensive compared with independent services in the area. Countrywide, for example, partners with appraisers, title companies, pest inspectors, home inspectors, and so on. The fees for these “convenient” services can easily be double what you’d pay for the same service by selecting your own vendor.
Step 6. Closing -
You’ll need a title company to close. In some states the buyer gets to select the title company, in others it’s the seller’s prerogative If it’s yours, get references, and don't go with one affiliated with large mortgage company….again, too expensive compared to the overall market. That bedfellow arrangement is often nothing more than disguised greed waiting to take your money.
Part of the title company’s work is providing title insurance. Again, don’t go with the affiliates if you are using a large national mortgage company unless you are willing to pay a whole lot extra.
Step 7. Getting tenants
This is among the most important steps in the process. If you don’t get good tenants…and get them quickly, your investment will turn into a monthly money pit.
I do not recommend trying doing it your self. It just doesn’t make sense for you to try to secure and manage a tenant from hundreds of miles away. Some people do it successfully, but I am going to suggest you consider professional help in this arena. I’ve never understood why a landlord (even one with a local property) would try to undertake their own management to save $70 or $80 a month. Think about it -- where else can you get 24x7, legal, advertising, marketing support, etc. for about just a few dollars a month? I have a friend who owns several franchises. He pays his managers in the $30,000 range, and they don’t handle nearly the responsibility my property managers do. In my mind, professional property management is a secret bargain you need to discover.
First be aware that there is a different between tenant placement and property management. Most real estate agents who handle rentals are doing tenant placement. That is, they will find and qualify a tenant for you. For that, they will typically charge you 1 month’s rent. The problem is, you are left to manage the tenant, handle ongoing repairs, collect the rent, deal with potential eviction and a host of other concerns after the tenant is obtained. That’s not what you want.
What you really want is a property manager who not only can secure a tenant, but can handle the property on an ongoing basis. In my opinion you want to get the best property manager you can find because they have the best systems, contacts with reliable tradespeople for repairs, etc. A bad property manager is next to useless and can end up costing you money by being slow to get tenants, and sloppy with handling them, so get the best you can find. A good or bad property manager costs about the same amount, and that’s around 7-10% of rents.
In resort areas you may have the mixed blessing of short-term rentals. That’s a subject a bit too complex to go into in this edition, and I’ll save that for later. What I will note is that short term property management will be much more expensive than I’ve noted, and can run as high as 30% of your rents. It’s just the nature of the beast, and you need to decide whether to rent short-term or not.
A real blessing is when you can find an onsite property manager, or one that’s so closely affiliated with a community, it’s essentially the same thing. They have somewhat of a monopoly on getting tenants for that community, so they are usually the best game in town. It’s a double benefit if they also manage the home owner’s association because they really have their thumb on the full pulse of issues like maintenance.
Step 8. Handling vacancies and negative cash flow
You need to be properly primed to handle an out of state rental. Like any investment, thinking it will be rented 100% of the time is unrealistic. Consequently, you need to be prepared for the inevitable vacancies and likelihood of negative cash flow, unless it’s in more of a working class rental area. If you are prepared for that going in, you’ll do OK. If you don’t allow for that, you’ll get stung.
Keep in mind that the better the property is for appreciation, the worse it tend to be for cash flow. A resort property may not cash-flow at all, but might appreciate 10% per year. A blue-collar rental house may have decent cash flow, but little appreciation potential.
Given a typically priced and financed deal, a simplistic way to think of the financial realities of solid white-collar home is that in year 1 you’ll have a negative cash flow. In year 2 you’ll approach break even. In year 3 you’ll have a slight, but insignificant positive, and from there on you should see a small but increasing positive cash flow. That again is simplistic, but at least sets the stage for appropriate thinking. A little reserve cash will go a long way to your being able to hold on to that property.
So, it’s eight steps. That will give you a sense of what processes it takes to successfully invest out of state. As we go over the next few weeks, I’ll be taking intimate looks at each of those stages, providing much more depth, and supplying lots of resources.
You won’t want to miss a single edition!
Have a great day, and live your real estate dreams!
Friday, June 1, 2007
Where to Invest (Part 5) – The Mid Atlantic and New England
Welcome to another edition of the Coast-to-Coast Real Estate Investor.
Last week we discussed the Midwest, and how although it’s not a raging market, you can make sensible investments there. To make last week’s material short, look at properties in the Midwest as kind of a blue-chip investment that plug along at steady rates and produce solid cash flow.
This week we’re going to look at the Mid-Atlantic and New England areas – another set of regions for which that “blue-chip” nametag could apply.
Make no bones about it – that great megalopolis from Washington, DC and up through most all of New England is pricey. And, much of it – DC, New York, Boston, Hartford, Philadelphia, etc., has suffered the effects of speculative buying, running prices up so high that the markets are priced out of the range of the median buyers in the area. Prices in the big cities are more related to the effects of the greater fool theory, which I’ve talked about in prior episodes, than any real sense of value. What’s more important, is those markets have stalled and in a lot of cases we’re seeing prices decline. In my book, it had to happen.
Despite the Mid-Atlantic region and New England areas being pricey, there are opportunities for investment if you know where to look. Plus, with the sizable populations in the area’s huge cities – who tend to be priced out of the housing market at this point – the natural result is the population moving further out in order to find affordable housing. That means the more reasonably-priced regions outside of the core metro areas are getting increased attention – and that kind of demand pressure will cause those prices to rise.
With that in mind, let’s start in Maryland.
The Eastern Shore of Maryland – which is the area of land east of the Chesapeake Bay, for the longest time was a sleeper. There was just this mental barrier – despite the existence of the Chesapeake Bay Bridge - to crossing the Bay. That ended about 5 years ago, and populations spread to the other side. Some of it is concentrated close to the bridge for commuting to Annapolis, Baltimore, and Washington, DC, but the real prospects stem from the interest by retirees and baby-boomers who are moving to the more rural areas.
It’s a pleasant quality of life on the shore – small towns dot the landscape, and only a couple of small cities exist there, and it’s pretty water-oriented. That kind of bucolic combination makes for a perfect retirement choice. Prices have risen substantially over the last 5 years, but there’s still a lot of reasonably-priced real estate on the shore, and many areas have yet to be discovered. I’ll add in most areas of Delaware – particularly the rural areas into this discussion.
Additionally, I can’t forget discussion of the ocean resorts like Ocean City, MD and Rehobeth, DE. While most of the resort property is sky-high at this point, there are pockets – for example around Ocean City’s bayside (not oceanside) that still offer some value for the typical investor.
On a final Maryland note, certain areas of Western Maryland, particularly Hagerstown are promising because they are commutable to the outer reaches of DC growth, and have much better pricing than the DC suburbs…and the benefit of rural quality of life.
Next is Pennsylvania
In Pennsylvania I will point to the Amish Country in and around Lancaster. People fleeing the congestion of Philadelphia often pick the Amish Country as their favored destination. Make no bones about it – the Lancaster region has grown substantially because of that migration, and prices have moved accordingly. It used to be that one could find houses all day long in the low $100’s; the entry point now is closer to $200,000, but that doesn’t mean you can’t find property well under that. In particular, row houses in Lancaster and many of the other smaller cities and towns can still be had for even under $100,000 and make good rental units. Fixer-upper country property is still available at modest prices as well…and all of it in my book is destined for constant appreciation.
Harrisburg and York, Pennsylvania are two other good choices. York is undervalued by many standards, and is quickly gaining speed as a commuting point for people working in northern Baltimore. It’s the perfect combination – reasonable values and a do-able commute.
I’m also a fan of Harrisburg. It’s the capital city of Pennsylvania, which always bodes well for employment – eventually translating into buyers and renters. Prices are still modest by national standards, and people are quickly choosing Harrisburg as an alternative to living in the congestion of places like Philadelphia. Row houses in rental neighborhoods can run as low as the 30’s (sometimes lower), and singles can be had in solid rental areas right around $70,000.
New England States
I’m going to lump all the New England States – New York, Connecticut, Vermont, New Hampshire, Massachusetts, Rhode Island, and Maine into somewhat the same ballgame. I think the perception is that all of New England is priced beyond reason, and to a certain extent, that is not a bad interpretation.
But, as expensive as New England is, if you dig, you can find nuggets of gold. Principally, you need to look well away from the obvious choices like Boston or Hartford and into the rural areas. There are exceptions to that, but the rural areas and small towns – and in particular inland - away from commuting rage to the big cities are where the prices are within investor criteria. These are areas that will benefit from quick appreciation as populations in those states migrate and retirees look for better quality of life.
In New York, you’ll find scattered nuggets around the Finger Lakes region. Some of the cities along Lake Ontario show promise price-wise. Buffalo comes to mind as having some of the better-priced property in the country…and good rental rates as compared to prices. But, winters there are definitely an issue that must be factored in - and in my book could all but eliminate consideration of locations along Lake Ontario.
Rhode Island is tough if you are price-oriented as I am. The state is simply so small that much of it is commutable to Providence and Boston - and feels the effects. It’s a very popular state as well, with a stretch of coastline, and a favorite of the rich and famous. All of that seems to keep prices quite high.
In Massachusetts, believe it or not, you can still find some gems along the southern coast south of Boston. They’re rare, and of course disappear quickly, but if you value that New England maritime feel, this is one place you can look.
Inland, in smaller cities and towns like Springfield, and even the university city of Amherst (college towns are generally a good option), you’ll find good investment opportunities.
Connecticut has a plethora of small cities from which to choose. Torrington on the west side of the state, Putnam on the East, and even Manchester right outside of Hartford are all examples of reasonably priced Connecticut towns. As with all of New England, the rural areas are getting increased attention as people seek to escape the rat races of the big cities.
Vermont – You’ll need to go pretty rural, but investor-priced properties can be located in certain of the smaller towns and cities. Rutland and Barre are two locations to consider, but for the most part, unless you are willing to take on negative cash flow for a higher priced property, or go deeply rural and wait for appreciation to catch up, VT is rugged, rural, and pricey.
New Hampshire –Laconia, near Lake Winnipesaukee in New Hampshire’s Lakes Region is promising because of its proximity to the water. Beyond that, you have to get pretty far into the country to find modest investments
Maine - Maine is like the other New England states – you’ll find deals in the smaller towns and cities, particularly inland. However, Maine has a couple of exceptions that are noteworthy. Portland, the capital city, which is also waterfront, still has some pickings. Plus, there are quite a number of small towns dotting the coast, where if you look – and especially if you are willing to get into the $200,000 range - you can find a good property. And, there is a smattering of smaller cities and towns located along tributaries and rivers that bring the water-orientation into play. In places like Belfast, Bangor, Bucksport you’ll often find occasional nuggets, although you have to spend time to locate them.
As I wrap up with Maine, I’ll mention a side benefit to buying in the Mid-Atlantic and New England, and that is the availability of historic property, particularly the fixer-uppers that you can often find. Yes, rehabbing a historic property takes its own set of skills and values, but there are distinct advantages to buying historic buildings. Much of this I’m going to save for a later episode, but there are significant tax credits available (credits, not deductions) for owning and rehabbing historic property. Plus, the rarity of a historic property creates an unusual level of desire/demand along with associated pricing.
So, that will give you a sense of what’s available and the kinds of tactics you need for investing in the Mid-Atlantic and North East. There are plenty of unique finds, if you know where and how to look. Plus, the stability and population situation in those areas can make for solid long-term value.
Next week, I’ll be leaving the discussions of locations behind and turn to an overall game-plan of what you need to do to invest out-of-state successfully. It’s the first of the how-to lessons, and one you won’t want to overlook.
Have a great day, and live your real estate dreams!
Last week we discussed the Midwest, and how although it’s not a raging market, you can make sensible investments there. To make last week’s material short, look at properties in the Midwest as kind of a blue-chip investment that plug along at steady rates and produce solid cash flow.
This week we’re going to look at the Mid-Atlantic and New England areas – another set of regions for which that “blue-chip” nametag could apply.
Make no bones about it – that great megalopolis from Washington, DC and up through most all of New England is pricey. And, much of it – DC, New York, Boston, Hartford, Philadelphia, etc., has suffered the effects of speculative buying, running prices up so high that the markets are priced out of the range of the median buyers in the area. Prices in the big cities are more related to the effects of the greater fool theory, which I’ve talked about in prior episodes, than any real sense of value. What’s more important, is those markets have stalled and in a lot of cases we’re seeing prices decline. In my book, it had to happen.
Despite the Mid-Atlantic region and New England areas being pricey, there are opportunities for investment if you know where to look. Plus, with the sizable populations in the area’s huge cities – who tend to be priced out of the housing market at this point – the natural result is the population moving further out in order to find affordable housing. That means the more reasonably-priced regions outside of the core metro areas are getting increased attention – and that kind of demand pressure will cause those prices to rise.
With that in mind, let’s start in Maryland.
The Eastern Shore of Maryland – which is the area of land east of the Chesapeake Bay, for the longest time was a sleeper. There was just this mental barrier – despite the existence of the Chesapeake Bay Bridge - to crossing the Bay. That ended about 5 years ago, and populations spread to the other side. Some of it is concentrated close to the bridge for commuting to Annapolis, Baltimore, and Washington, DC, but the real prospects stem from the interest by retirees and baby-boomers who are moving to the more rural areas.
It’s a pleasant quality of life on the shore – small towns dot the landscape, and only a couple of small cities exist there, and it’s pretty water-oriented. That kind of bucolic combination makes for a perfect retirement choice. Prices have risen substantially over the last 5 years, but there’s still a lot of reasonably-priced real estate on the shore, and many areas have yet to be discovered. I’ll add in most areas of Delaware – particularly the rural areas into this discussion.
Additionally, I can’t forget discussion of the ocean resorts like Ocean City, MD and Rehobeth, DE. While most of the resort property is sky-high at this point, there are pockets – for example around Ocean City’s bayside (not oceanside) that still offer some value for the typical investor.
On a final Maryland note, certain areas of Western Maryland, particularly Hagerstown are promising because they are commutable to the outer reaches of DC growth, and have much better pricing than the DC suburbs…and the benefit of rural quality of life.
Next is Pennsylvania
In Pennsylvania I will point to the Amish Country in and around Lancaster. People fleeing the congestion of Philadelphia often pick the Amish Country as their favored destination. Make no bones about it – the Lancaster region has grown substantially because of that migration, and prices have moved accordingly. It used to be that one could find houses all day long in the low $100’s; the entry point now is closer to $200,000, but that doesn’t mean you can’t find property well under that. In particular, row houses in Lancaster and many of the other smaller cities and towns can still be had for even under $100,000 and make good rental units. Fixer-upper country property is still available at modest prices as well…and all of it in my book is destined for constant appreciation.
Harrisburg and York, Pennsylvania are two other good choices. York is undervalued by many standards, and is quickly gaining speed as a commuting point for people working in northern Baltimore. It’s the perfect combination – reasonable values and a do-able commute.
I’m also a fan of Harrisburg. It’s the capital city of Pennsylvania, which always bodes well for employment – eventually translating into buyers and renters. Prices are still modest by national standards, and people are quickly choosing Harrisburg as an alternative to living in the congestion of places like Philadelphia. Row houses in rental neighborhoods can run as low as the 30’s (sometimes lower), and singles can be had in solid rental areas right around $70,000.
New England States
I’m going to lump all the New England States – New York, Connecticut, Vermont, New Hampshire, Massachusetts, Rhode Island, and Maine into somewhat the same ballgame. I think the perception is that all of New England is priced beyond reason, and to a certain extent, that is not a bad interpretation.
But, as expensive as New England is, if you dig, you can find nuggets of gold. Principally, you need to look well away from the obvious choices like Boston or Hartford and into the rural areas. There are exceptions to that, but the rural areas and small towns – and in particular inland - away from commuting rage to the big cities are where the prices are within investor criteria. These are areas that will benefit from quick appreciation as populations in those states migrate and retirees look for better quality of life.
In New York, you’ll find scattered nuggets around the Finger Lakes region. Some of the cities along Lake Ontario show promise price-wise. Buffalo comes to mind as having some of the better-priced property in the country…and good rental rates as compared to prices. But, winters there are definitely an issue that must be factored in - and in my book could all but eliminate consideration of locations along Lake Ontario.
Rhode Island is tough if you are price-oriented as I am. The state is simply so small that much of it is commutable to Providence and Boston - and feels the effects. It’s a very popular state as well, with a stretch of coastline, and a favorite of the rich and famous. All of that seems to keep prices quite high.
In Massachusetts, believe it or not, you can still find some gems along the southern coast south of Boston. They’re rare, and of course disappear quickly, but if you value that New England maritime feel, this is one place you can look.
Inland, in smaller cities and towns like Springfield, and even the university city of Amherst (college towns are generally a good option), you’ll find good investment opportunities.
Connecticut has a plethora of small cities from which to choose. Torrington on the west side of the state, Putnam on the East, and even Manchester right outside of Hartford are all examples of reasonably priced Connecticut towns. As with all of New England, the rural areas are getting increased attention as people seek to escape the rat races of the big cities.
Vermont – You’ll need to go pretty rural, but investor-priced properties can be located in certain of the smaller towns and cities. Rutland and Barre are two locations to consider, but for the most part, unless you are willing to take on negative cash flow for a higher priced property, or go deeply rural and wait for appreciation to catch up, VT is rugged, rural, and pricey.
New Hampshire –Laconia, near Lake Winnipesaukee in New Hampshire’s Lakes Region is promising because of its proximity to the water. Beyond that, you have to get pretty far into the country to find modest investments
Maine - Maine is like the other New England states – you’ll find deals in the smaller towns and cities, particularly inland. However, Maine has a couple of exceptions that are noteworthy. Portland, the capital city, which is also waterfront, still has some pickings. Plus, there are quite a number of small towns dotting the coast, where if you look – and especially if you are willing to get into the $200,000 range - you can find a good property. And, there is a smattering of smaller cities and towns located along tributaries and rivers that bring the water-orientation into play. In places like Belfast, Bangor, Bucksport you’ll often find occasional nuggets, although you have to spend time to locate them.
As I wrap up with Maine, I’ll mention a side benefit to buying in the Mid-Atlantic and New England, and that is the availability of historic property, particularly the fixer-uppers that you can often find. Yes, rehabbing a historic property takes its own set of skills and values, but there are distinct advantages to buying historic buildings. Much of this I’m going to save for a later episode, but there are significant tax credits available (credits, not deductions) for owning and rehabbing historic property. Plus, the rarity of a historic property creates an unusual level of desire/demand along with associated pricing.
So, that will give you a sense of what’s available and the kinds of tactics you need for investing in the Mid-Atlantic and North East. There are plenty of unique finds, if you know where and how to look. Plus, the stability and population situation in those areas can make for solid long-term value.
Next week, I’ll be leaving the discussions of locations behind and turn to an overall game-plan of what you need to do to invest out-of-state successfully. It’s the first of the how-to lessons, and one you won’t want to overlook.
Have a great day, and live your real estate dreams!
Friday, May 25, 2007
Where to Invest (Part 4) - The Midest
Welcome to another edition of the Coast-to-Coast Real Estate Investor!
Last week I discussed the Pacific Northwest. This week I’m going to take you on an unusual investor’s look at the Midwest region.
Before I begin, let me set the stage for understanding the Midwest as an investing arena. Unlike a lot of markets which over the last few years have seen meteoric appreciation - particularly in the Sunbelt - the Midwest tends to be, on whole, a very conservative and stable market. Appreciation rates don’t tend to spike astoundingly, or come crashing down with a vengeance. Instead, in states like Ohio and Michigan appreciation plugs along at constant rates around 4% per year (in good years or bad). While that may not seem like much when compared to a burst of 15% or 18% rate like so many places experienced, the effects of compounding, over time, make consistency equate to a great effect. It’s very much like holding a blue-chip stock over time as opposed to short-term trading of a volatile high-tech stock.
I’ll also note that, because Midwest prices are pretty reasonable compared to national averages, and because the area is still slanted towards industry and blue-collar employment, you tend to have good rental prospects, both in terms of access to renters and rents that do a good job of covering carrying costs.
Another item to understand is that while many areas of the country have been experiencing migration to them, many Midwest areas have seen population leave. That may sound like exactly the wrong social phenomena that one wants to see as an investor; but it leads to an interesting development if you look at the situation of different angles. That is, you find truly motivated sellers – people who want/need to leave the area and are willing to bargain with you on price and or terms for their property. And, as I noted above, you tend to have a willing body of renters at your disposal.
Much of the population shift is due to employment. The Midwest has for too long been dependent on industry – particularly heavy industry like the automotive field - and that base of employment is on the wane. It’s waning either because production is being downsized or because it’s being outsourced overseas. When a major factory or employer closes down, time and again, an entire town ends up going into decline as a result. It’s a clear, yet brutal example of microeconomics at work. The crux of the challenge is, that often the culture in these towns is such that they just can’t seem to think beyond the factory providing them with jobs. To them, when the factory closed, the world just came to an end!
I’m not trying to make any kind of journalistic or economic commentary here. I’m just trying to point out that this kind of ebb in industrial employment changes the landscape, and when it does, it usually leads to temporary (although the area’s culture may not perceive it as such) economic devastation. Fortunately, the powers that be in most Midwestern states have finally awaked to the need to break their dependence on heavy industry, and move towards service-based commerce - particularly high tech - to encourage local economies and job growth. That transition is changing the landscape all over the Midwest.
That kind of transition is coming…albeit slowly…but it is coming to a lot of areas. In the meantime, I believe there is a ‘perfect storm brewing’ as fellow investor Steve Zahala, from here in Columbus notes, that in the short run looks dire, but is really creating a great opportunity for investors who position themselves to take advantage of it. While everyone is lamenting job loss, economic hardship, and a historical rise in foreclosure (Columbus and Indianapolis currently tie for having the highest foreclosure rates in the country), a unique set of circumstances for the investor are being created.
Case in point – in Northern Ohio there’s a modest-sized town called Lorain, which is the site of a struggling Ford plant that finally closed about two years ago. The loss of Ford shattered the town economically. At first glance, it’s appears to be practically a welfare town. On the other hand, the town is right on the shore of Lake Eerie…a beautiful town, really…and it’s just a matter of time before the town figures out there’s more to itself than Ford, and rises like a Phoenix from the ashes. But right now, property values are depressed and exceedingly low. Imagine, though, five or ten years from now if Lorain is reborn. Consider the picture of Lorain as city with a diversified economy, based on services and information instead of heavy industry, and if it leveraged the proximity to Lake Eerie and encouraged tourism. Can you imagine what would happen to the prices of homes that, today, nobody seems to want?
While that transition is taking place, you can buy a bargain property, acquire it with near historically-low interest rates, in some cases get government assistance with buying and/or renting the property. Then you merely need to bide your time until the tide turns for Lorain.
With that in mind, let’s begin our Midwest examination in my current home state of Ohio.
Ohio
When you think of Ohio, don’t mentally picture the feet of snow typically associated with places like Cleveland. No doubt, Cleveland and northern Ohio is tough climate in which to live, but not all of Ohio is like that. Moreover, even along the Lakes, it’s not like that year-round, and that’s where the secret of the Midwest lays.
I’ll start in my city of Columbus. I’m from the DC/Baltimore area, so I know what a large metropolitan area is like. What’s interesting about Columbus is that it has all of the amenities of a large urban area (major university, ethnic dining, fabulous nightlife and shopping) but still maintains the feel of a small town. It’s also the capital of Ohio, which means a strong local economy. Add to that it being home to Ohio State University, which is one of the largest schools in the country, and you have a grab bag of solid conditions.
While Columbus a fair-sized city, it’s not overwhelming to live here. It’s possible to live in the country around here, but be downtown enjoying world-class amenities in 30 minutes or less. And, as a near-slogan goes here, Columbus is a great place to raise a family.
Prices are very reasonable, with condos in white-collar areas beginning in the 60’s and single-family homes that can be had for under $100,000. Fixers, even in decent professional neighborhoods can dip into the 70’s, so there’s ample opportunity for the fix and flip types.
A bit further north, the cities and towns along Lake Eerie are a definite consideration. If you’ve never experienced the Great Lakes during the summer months, you are in for a real treat. The scenery and water-related activity rival that anywhere in the country. If you can get past the obvious issues of wintertime weather around the lakes, you have 3 other seasons that are just amazing.
It’s at this point I will give Cleveland it’s due – it’s one of those turnaround cities that today is very dynamic and hip…not to mention having miles of beautiful Lake Eerie shorefront. Urban living is getting increasingly popular, with lofts and condos being developed all the time (urban lofts and condos are generally a good investment, when they are priced sensibly), and solid suburban housing is available throughout the metro area at modest prices.
Also look to the towns that dot the Lake both east and west of Cleveland. From my experiences, I’ll note Vermillion, Huron, and Lorain. I’ll also point out the areas known for their water recreation – Port Clinton, Marblehead, Lakeside, and the Lake Islands in the same area. The Lake Islands are noted for having more marina space than in all of San Diego California!
Southern Ohio around Dayton and Cincinnati is another option. Dayton is one of those cities that is ripe for a turnaround. Nearby Springfield is even more so. Imagine being able to buy a good-boned fixer-upper property for under $20,000? How long would you expect prices like that to last once the city jettisons its dependence on heavy industry and all the associated downfall that came with stemming from the last two decades? It’s starting as we speak!
Cincinnati, like Cleveland has already begun its turnaround, has had an amazing urban revival downtown and along its riverfront. It’s getting increasingly popular as a destination city, and that’s having a spillover effect on people wanting to live there permanently. Like Columbus, Cincy is an amalgam of smaller communities and towns, many with very reasonable prices, and a high quality of life. Country folks can be in-town in fifteen minutes, and urban dwellers have all they need to choose from in terms of city life.
Michigan
As I noted earlier, if you’ve never been to the Great Lakes in the summer, you are in for a real eye opener. Being from the East Coast, I refused to believe the Lakes would hold any allure for me until I saw Lake Michigan in the summer. Honestly, one would think they were in the Caribbean – turquoise blue, crystal clear water…sunsets to die for…sugar sand beaches. The only thing missing are the palm trees. Honestly, it’s amazing! In my opinion, it’s only a matter of time before the Lakes get discovered – particularly by those who can’t afford the seaside, or who are apprehensive about hurricanes. Just consider what’s happened in the Chesapeake Bay region on the east coast and I think you’ll see a harbinger of things to come along the Great Lakes.
Michigan has shoreline along nearly a full three of its four major borders. First, look to the western side along Lake Michigan. The Traverse City area is a good start, but consider the small towns north and south of there along the entire waterfront area. On the east side of the state, commonly referred to as “the thumb”, you’ll find the towns that dot Lake Huron. Finally, you have the Upper Peninsula that has Lake Superior on the north side and Lake Michigan on the south.
As you might expect, direct waterfront, anywhere in Michigan is pricey, but not to the level that you’d find it in other locations. What’s interesting…move even slightly off the water and prices drop considerably.
Indiana
Indiana has a little bit of Lake Michigan shoreline and along with that has a handful of small towns that have good prospects. Valparaiso, Portage, Chesterton are a tad inland from the shore, but worth mentioning because, while on the outskirts of the Lake, get clear benefit from Chicago’s growth. More and more they are becoming commuter towns into eastern Chicago.
Wisconsin
Starting south of Milwaukee you have some great lakefront towns like Racine and Kenosha. Then, look to the small towns north of Milwaukee and south of Green Bay along Lake Michigan such as Sheboygan. Additionally, look north of Green Bay all the way up through to the Upper Peninsula of Michigan. These towns are finally starting to take full advantage of their proximity to the Lake, and you see a push towards their draws related to recreation and retirement. As with all Great Lakes towns, winter is an issue, and if you don’t like snow or ice fishing, the Lakes won’t hold much appeal. But for seasonal homes, and ones that hold promise for appreciation due to proximity to water recreation, there is tremendous value in these areas.
Missouri
St. Louis is experiencing a strong urban renaissance. So, condos and lofts, as well as rehabs in up-and-coming neighborhoods, are what to pay attention to. That’s not to say that the entire metro area doesn’t represent a lot of value – prices are very modest in St. Louis and new construction is everywhere, but the hot market is in-town.
Branson – Branson has been a tourist Mecca for a couple of decades now. In some ways, it’s like a ‘clean’ version of Las Vegas, known for its family-safe live entertainment, dinner buffets and amusement parks. Even two or three years ago, Branson was exciting and dynamic as it existed, but the recent completion of Branson Landing – a mixed retail, entertainment, condo complex along Lake Taneycomo has virtually changed the character of the city, bringing a sense of chic to the town.
Instinctively the growth of Branson makes me put anything in the nearby Lake of the Ozarks area on my radar as well as turning my attention to Springfield, MO about 30 minutes north (I’ll also mention Springfield and Joplin in the context of Route 66 which is garnering a lot of tourist fanfare). And, because Branson borders Arkansas, I’ll also go back and re-emphasize close-by Arkansas towns I mentioned in a prior edition – Eureka Springs, Bentonville, and Mountain Home.
So, that will give you a sense of the kind of unique finds that may be available to you in the Midwest. In a lot of ways, it’s a different kind of investing than the Sunbelt I’ve discussed to this point – but that doesn’t negate potential value in Midwest states. It just takes a different investor mentality to work the area effectively.
Next time, in Part 6 of my final installment of these regional examinations, I’ll be tackling the Mid-Atlantic and Northeast states.
Have a great day, and live your real estate dreams!
Last week I discussed the Pacific Northwest. This week I’m going to take you on an unusual investor’s look at the Midwest region.
Before I begin, let me set the stage for understanding the Midwest as an investing arena. Unlike a lot of markets which over the last few years have seen meteoric appreciation - particularly in the Sunbelt - the Midwest tends to be, on whole, a very conservative and stable market. Appreciation rates don’t tend to spike astoundingly, or come crashing down with a vengeance. Instead, in states like Ohio and Michigan appreciation plugs along at constant rates around 4% per year (in good years or bad). While that may not seem like much when compared to a burst of 15% or 18% rate like so many places experienced, the effects of compounding, over time, make consistency equate to a great effect. It’s very much like holding a blue-chip stock over time as opposed to short-term trading of a volatile high-tech stock.
I’ll also note that, because Midwest prices are pretty reasonable compared to national averages, and because the area is still slanted towards industry and blue-collar employment, you tend to have good rental prospects, both in terms of access to renters and rents that do a good job of covering carrying costs.
Another item to understand is that while many areas of the country have been experiencing migration to them, many Midwest areas have seen population leave. That may sound like exactly the wrong social phenomena that one wants to see as an investor; but it leads to an interesting development if you look at the situation of different angles. That is, you find truly motivated sellers – people who want/need to leave the area and are willing to bargain with you on price and or terms for their property. And, as I noted above, you tend to have a willing body of renters at your disposal.
Much of the population shift is due to employment. The Midwest has for too long been dependent on industry – particularly heavy industry like the automotive field - and that base of employment is on the wane. It’s waning either because production is being downsized or because it’s being outsourced overseas. When a major factory or employer closes down, time and again, an entire town ends up going into decline as a result. It’s a clear, yet brutal example of microeconomics at work. The crux of the challenge is, that often the culture in these towns is such that they just can’t seem to think beyond the factory providing them with jobs. To them, when the factory closed, the world just came to an end!
I’m not trying to make any kind of journalistic or economic commentary here. I’m just trying to point out that this kind of ebb in industrial employment changes the landscape, and when it does, it usually leads to temporary (although the area’s culture may not perceive it as such) economic devastation. Fortunately, the powers that be in most Midwestern states have finally awaked to the need to break their dependence on heavy industry, and move towards service-based commerce - particularly high tech - to encourage local economies and job growth. That transition is changing the landscape all over the Midwest.
That kind of transition is coming…albeit slowly…but it is coming to a lot of areas. In the meantime, I believe there is a ‘perfect storm brewing’ as fellow investor Steve Zahala, from here in Columbus notes, that in the short run looks dire, but is really creating a great opportunity for investors who position themselves to take advantage of it. While everyone is lamenting job loss, economic hardship, and a historical rise in foreclosure (Columbus and Indianapolis currently tie for having the highest foreclosure rates in the country), a unique set of circumstances for the investor are being created.
Case in point – in Northern Ohio there’s a modest-sized town called Lorain, which is the site of a struggling Ford plant that finally closed about two years ago. The loss of Ford shattered the town economically. At first glance, it’s appears to be practically a welfare town. On the other hand, the town is right on the shore of Lake Eerie…a beautiful town, really…and it’s just a matter of time before the town figures out there’s more to itself than Ford, and rises like a Phoenix from the ashes. But right now, property values are depressed and exceedingly low. Imagine, though, five or ten years from now if Lorain is reborn. Consider the picture of Lorain as city with a diversified economy, based on services and information instead of heavy industry, and if it leveraged the proximity to Lake Eerie and encouraged tourism. Can you imagine what would happen to the prices of homes that, today, nobody seems to want?
While that transition is taking place, you can buy a bargain property, acquire it with near historically-low interest rates, in some cases get government assistance with buying and/or renting the property. Then you merely need to bide your time until the tide turns for Lorain.
With that in mind, let’s begin our Midwest examination in my current home state of Ohio.
Ohio
When you think of Ohio, don’t mentally picture the feet of snow typically associated with places like Cleveland. No doubt, Cleveland and northern Ohio is tough climate in which to live, but not all of Ohio is like that. Moreover, even along the Lakes, it’s not like that year-round, and that’s where the secret of the Midwest lays.
I’ll start in my city of Columbus. I’m from the DC/Baltimore area, so I know what a large metropolitan area is like. What’s interesting about Columbus is that it has all of the amenities of a large urban area (major university, ethnic dining, fabulous nightlife and shopping) but still maintains the feel of a small town. It’s also the capital of Ohio, which means a strong local economy. Add to that it being home to Ohio State University, which is one of the largest schools in the country, and you have a grab bag of solid conditions.
While Columbus a fair-sized city, it’s not overwhelming to live here. It’s possible to live in the country around here, but be downtown enjoying world-class amenities in 30 minutes or less. And, as a near-slogan goes here, Columbus is a great place to raise a family.
Prices are very reasonable, with condos in white-collar areas beginning in the 60’s and single-family homes that can be had for under $100,000. Fixers, even in decent professional neighborhoods can dip into the 70’s, so there’s ample opportunity for the fix and flip types.
A bit further north, the cities and towns along Lake Eerie are a definite consideration. If you’ve never experienced the Great Lakes during the summer months, you are in for a real treat. The scenery and water-related activity rival that anywhere in the country. If you can get past the obvious issues of wintertime weather around the lakes, you have 3 other seasons that are just amazing.
It’s at this point I will give Cleveland it’s due – it’s one of those turnaround cities that today is very dynamic and hip…not to mention having miles of beautiful Lake Eerie shorefront. Urban living is getting increasingly popular, with lofts and condos being developed all the time (urban lofts and condos are generally a good investment, when they are priced sensibly), and solid suburban housing is available throughout the metro area at modest prices.
Also look to the towns that dot the Lake both east and west of Cleveland. From my experiences, I’ll note Vermillion, Huron, and Lorain. I’ll also point out the areas known for their water recreation – Port Clinton, Marblehead, Lakeside, and the Lake Islands in the same area. The Lake Islands are noted for having more marina space than in all of San Diego California!
Southern Ohio around Dayton and Cincinnati is another option. Dayton is one of those cities that is ripe for a turnaround. Nearby Springfield is even more so. Imagine being able to buy a good-boned fixer-upper property for under $20,000? How long would you expect prices like that to last once the city jettisons its dependence on heavy industry and all the associated downfall that came with stemming from the last two decades? It’s starting as we speak!
Cincinnati, like Cleveland has already begun its turnaround, has had an amazing urban revival downtown and along its riverfront. It’s getting increasingly popular as a destination city, and that’s having a spillover effect on people wanting to live there permanently. Like Columbus, Cincy is an amalgam of smaller communities and towns, many with very reasonable prices, and a high quality of life. Country folks can be in-town in fifteen minutes, and urban dwellers have all they need to choose from in terms of city life.
Michigan
As I noted earlier, if you’ve never been to the Great Lakes in the summer, you are in for a real eye opener. Being from the East Coast, I refused to believe the Lakes would hold any allure for me until I saw Lake Michigan in the summer. Honestly, one would think they were in the Caribbean – turquoise blue, crystal clear water…sunsets to die for…sugar sand beaches. The only thing missing are the palm trees. Honestly, it’s amazing! In my opinion, it’s only a matter of time before the Lakes get discovered – particularly by those who can’t afford the seaside, or who are apprehensive about hurricanes. Just consider what’s happened in the Chesapeake Bay region on the east coast and I think you’ll see a harbinger of things to come along the Great Lakes.
Michigan has shoreline along nearly a full three of its four major borders. First, look to the western side along Lake Michigan. The Traverse City area is a good start, but consider the small towns north and south of there along the entire waterfront area. On the east side of the state, commonly referred to as “the thumb”, you’ll find the towns that dot Lake Huron. Finally, you have the Upper Peninsula that has Lake Superior on the north side and Lake Michigan on the south.
As you might expect, direct waterfront, anywhere in Michigan is pricey, but not to the level that you’d find it in other locations. What’s interesting…move even slightly off the water and prices drop considerably.
Indiana
Indiana has a little bit of Lake Michigan shoreline and along with that has a handful of small towns that have good prospects. Valparaiso, Portage, Chesterton are a tad inland from the shore, but worth mentioning because, while on the outskirts of the Lake, get clear benefit from Chicago’s growth. More and more they are becoming commuter towns into eastern Chicago.
Wisconsin
Starting south of Milwaukee you have some great lakefront towns like Racine and Kenosha. Then, look to the small towns north of Milwaukee and south of Green Bay along Lake Michigan such as Sheboygan. Additionally, look north of Green Bay all the way up through to the Upper Peninsula of Michigan. These towns are finally starting to take full advantage of their proximity to the Lake, and you see a push towards their draws related to recreation and retirement. As with all Great Lakes towns, winter is an issue, and if you don’t like snow or ice fishing, the Lakes won’t hold much appeal. But for seasonal homes, and ones that hold promise for appreciation due to proximity to water recreation, there is tremendous value in these areas.
Missouri
St. Louis is experiencing a strong urban renaissance. So, condos and lofts, as well as rehabs in up-and-coming neighborhoods, are what to pay attention to. That’s not to say that the entire metro area doesn’t represent a lot of value – prices are very modest in St. Louis and new construction is everywhere, but the hot market is in-town.
Branson – Branson has been a tourist Mecca for a couple of decades now. In some ways, it’s like a ‘clean’ version of Las Vegas, known for its family-safe live entertainment, dinner buffets and amusement parks. Even two or three years ago, Branson was exciting and dynamic as it existed, but the recent completion of Branson Landing – a mixed retail, entertainment, condo complex along Lake Taneycomo has virtually changed the character of the city, bringing a sense of chic to the town.
Instinctively the growth of Branson makes me put anything in the nearby Lake of the Ozarks area on my radar as well as turning my attention to Springfield, MO about 30 minutes north (I’ll also mention Springfield and Joplin in the context of Route 66 which is garnering a lot of tourist fanfare). And, because Branson borders Arkansas, I’ll also go back and re-emphasize close-by Arkansas towns I mentioned in a prior edition – Eureka Springs, Bentonville, and Mountain Home.
So, that will give you a sense of the kind of unique finds that may be available to you in the Midwest. In a lot of ways, it’s a different kind of investing than the Sunbelt I’ve discussed to this point – but that doesn’t negate potential value in Midwest states. It just takes a different investor mentality to work the area effectively.
Next time, in Part 6 of my final installment of these regional examinations, I’ll be tackling the Mid-Atlantic and Northeast states.
Have a great day, and live your real estate dreams!
Wednesday, May 16, 2007
Where to Invest (Part 3) - The Far West and Pacific Northwest
Welcome to another edition of the Coast-to-Coast Real Estate Investor. In the last edition I discussed the desert southwest states. In this edition I’m going to continue looking at the West, this time with the Far West and Pacific Northwest states.
Let me begin by discussing an important influence – I want to point out a significant demographic shift that effects the Western US. California investors, retirees, and those fleeing the state for various reasons (ie. crime, congestion, etc.) tend to go north to Oregon and Washington, and to adjacent states east. Thus the California population shift has dramatic effects on the neighboring states. We’ve seen some of that with Arizona and Nevada.
With that in mind, let’s go back to Nevada and consider some areas other than Las Vegas.
Nevada
Last edition, I mentioned Las Vegas. Today, I’ll begin by discussing Reno, which I believe will share the destiny of Las Vegas. As Vegas continues to be popular, with associated escalating prices, I believe that Reno will quickly fall next in line as the choice city in the state – and, it has a better quality of life. Currently, condos can be had for the low $100’s, so pricing is still good.
California
I ended the last edition by talking about the areas in and around Palm Springs and Indio California as representing the kinds of desert towns that are picking up steam as far as retiree interest.
Today, I’ll mention another interesting California area. It’s the town of Ridgecrest, and has what are undoubtedly, California’s best prices. The town is in the middle of the Mohave Dessert, and has seen better days. However, fixer uppers can be had as low as the 30’s, making the pricing incomparable in the state. The town has good proximity to two military bases, which is good for the landlord, and is a reasonable drive to Bakersfield. With dessert communities all the rage right now, I think there’s a reasonable bet on Ridgecrest.
Speaking of Bakersfield, that town isn’t a bad bet, either, with prices for condos and single-family homes starting around the 160’s and being a good sized California dessert town to boot.
Northern California - Crescent City in particular, in the extreme northwest corner of the state is a really interesting situation. It’s a coastal town - in California - with prices for fixers and mobile homes with land beginning under $100,000. It probably shares more in common with Oregon and Washington State than it does with Southern California, but the value there is abundantly clear.
Oregon
No mention of Oregon is complete without discussing Portland. Portland is a hot, hip city, driven by the affinities of young professionals, and people relocating from Silicon Valley, San Francisco, and Los Angeles. It’s a bit pricier than many areas I mention, with condos starting in the mid 100’s and single family homes in the high 100’s, but by today’s standards, even that’s cheap. And, Portland is in many ways like Los Angeles – it’s the kind of hip, urban hotspot with so much demand that prices can’t help but rise.
As you get away from Portland, much of Oregon tends to be rural or small town. That said, let me note that there are various coastal and rural areas where you’ll come across mobile homes, often with land. I am not too much of a fan of mobiles, but if it’s a purely lifestyle issue (ie. water view), or if the price is low enough (ie. Below the 30’s), then it could be an interesting buy.
Oregon has a long length of Pacific coast. Certain coastal towns offer opportunities. Look towards: Gold Beach (ocean view land for about $150K), Lincoln City, and Reedsport.
Small Cities also are good options with substantial quality of life and good values. Eugene, Bend, and Salem - Oregon’s capital city, famed for its wineries around Willamette Valley – are all good options. I’ll note that capital cities, in general are wise choices because jobs are plentiful and local economies, which are driven by government spending, are generally robust.
Washington
Along the Oregon/Washington border is Vancouver, Washington (not to be confused with Vancouver, British Columbia) which is getting a lot of retirement attention. While it’s essentially part of the Portland metro area, the feel is miles apart.
Seattle is a lot like Portland – one of those hot, hip cities that always have an influx of young professionals. Because of its amenities – cool urban environment, proximity to water, etc., it’s destined to keep appreciating. Certain cities are just like that. Prices in Seattle begin around $140 for small condos.
Pockets of pretty good value exist around Seattle & Puget Sound, which is otherwise pretty pricey. Bellingham, Bremerton, and Olympia are three good places to look. There’s a lot of water up there, so if water view, frontage or access is your thing, that entire region is one place to concentrate.
A lot of Washington State is pretty rural, so be prepared for that. Rural and coastal areas, like Oregon, are often populated with mobile homes, on their own land. These can represent an interesting investment if carefully selected.
On the coast is Ocean Shores with water view land in the low 100’s. Properties a bit more inland will run in the mid 100’s, but are very nearby to the water. A bit inland, but with water access is the small city of Aberdeen. Aberdeen is right on the edge of Grey’s Harbor, which is a fairly large body of water off the Pacific. Prices are very reasonable there.
If mountains are more your style, then consider Spokane, which is on the Idaho border and getting a lot of retiree attention.
Idaho
Speaking of Idaho, Coeur D’ Alene is an amazing real estate investment success story. About 15 years ago, property in that area was almost being given away. In fact, I wrote my first book entitled “Homes From $3,000; Land from $100 an Acre” which featured, among other areas Western Idaho and Coeur D’ Alene in particular. Today, with only a few exceptions, it takes about $200,000 to buy into that community. The telltale signs were always there – high recreational use; lots of people talking about retiring there; good river access and lots of recreation. It shows what can happen…perhaps inevitably happens…in a well-selected area.
For the most part, the entire state of Idaho has all of those same factors. Small cities and large towns offer the lifestyle that is the wave of the 21st century, and lots of rural real estate abounds for those in pursuit of even more seclusion. Quality of life is good, recreation is plentiful, and the state is getting lots of attention by prospective buyers.
Utah
Utah has much the same set of factors as Idaho. Geographically, it ranges from having similar characteristics as Idaho – mountains, rivers, etc., to desert scenery that rivals the best of Arizona or Nevada. Even in the large cities of Provo and Salt Lake City you’ll find value – and those same cities are become investment and relocation hot spots.
Smaller cities like Ogden are worthy of your attention, and tourist/recreation towns like St. George and Park City have exciting potential because the demand in those areas is rising so quickly.
I’ll wrap up with that. Next time, in Part 4 of my look at various states, I’ll continue the survey by exploring the Midwest.
Have a great day, and live your real estate dreams!
Let me begin by discussing an important influence – I want to point out a significant demographic shift that effects the Western US. California investors, retirees, and those fleeing the state for various reasons (ie. crime, congestion, etc.) tend to go north to Oregon and Washington, and to adjacent states east. Thus the California population shift has dramatic effects on the neighboring states. We’ve seen some of that with Arizona and Nevada.
With that in mind, let’s go back to Nevada and consider some areas other than Las Vegas.
Nevada
Last edition, I mentioned Las Vegas. Today, I’ll begin by discussing Reno, which I believe will share the destiny of Las Vegas. As Vegas continues to be popular, with associated escalating prices, I believe that Reno will quickly fall next in line as the choice city in the state – and, it has a better quality of life. Currently, condos can be had for the low $100’s, so pricing is still good.
California
I ended the last edition by talking about the areas in and around Palm Springs and Indio California as representing the kinds of desert towns that are picking up steam as far as retiree interest.
Today, I’ll mention another interesting California area. It’s the town of Ridgecrest, and has what are undoubtedly, California’s best prices. The town is in the middle of the Mohave Dessert, and has seen better days. However, fixer uppers can be had as low as the 30’s, making the pricing incomparable in the state. The town has good proximity to two military bases, which is good for the landlord, and is a reasonable drive to Bakersfield. With dessert communities all the rage right now, I think there’s a reasonable bet on Ridgecrest.
Speaking of Bakersfield, that town isn’t a bad bet, either, with prices for condos and single-family homes starting around the 160’s and being a good sized California dessert town to boot.
Northern California - Crescent City in particular, in the extreme northwest corner of the state is a really interesting situation. It’s a coastal town - in California - with prices for fixers and mobile homes with land beginning under $100,000. It probably shares more in common with Oregon and Washington State than it does with Southern California, but the value there is abundantly clear.
Oregon
No mention of Oregon is complete without discussing Portland. Portland is a hot, hip city, driven by the affinities of young professionals, and people relocating from Silicon Valley, San Francisco, and Los Angeles. It’s a bit pricier than many areas I mention, with condos starting in the mid 100’s and single family homes in the high 100’s, but by today’s standards, even that’s cheap. And, Portland is in many ways like Los Angeles – it’s the kind of hip, urban hotspot with so much demand that prices can’t help but rise.
As you get away from Portland, much of Oregon tends to be rural or small town. That said, let me note that there are various coastal and rural areas where you’ll come across mobile homes, often with land. I am not too much of a fan of mobiles, but if it’s a purely lifestyle issue (ie. water view), or if the price is low enough (ie. Below the 30’s), then it could be an interesting buy.
Oregon has a long length of Pacific coast. Certain coastal towns offer opportunities. Look towards: Gold Beach (ocean view land for about $150K), Lincoln City, and Reedsport.
Small Cities also are good options with substantial quality of life and good values. Eugene, Bend, and Salem - Oregon’s capital city, famed for its wineries around Willamette Valley – are all good options. I’ll note that capital cities, in general are wise choices because jobs are plentiful and local economies, which are driven by government spending, are generally robust.
Washington
Along the Oregon/Washington border is Vancouver, Washington (not to be confused with Vancouver, British Columbia) which is getting a lot of retirement attention. While it’s essentially part of the Portland metro area, the feel is miles apart.
Seattle is a lot like Portland – one of those hot, hip cities that always have an influx of young professionals. Because of its amenities – cool urban environment, proximity to water, etc., it’s destined to keep appreciating. Certain cities are just like that. Prices in Seattle begin around $140 for small condos.
Pockets of pretty good value exist around Seattle & Puget Sound, which is otherwise pretty pricey. Bellingham, Bremerton, and Olympia are three good places to look. There’s a lot of water up there, so if water view, frontage or access is your thing, that entire region is one place to concentrate.
A lot of Washington State is pretty rural, so be prepared for that. Rural and coastal areas, like Oregon, are often populated with mobile homes, on their own land. These can represent an interesting investment if carefully selected.
On the coast is Ocean Shores with water view land in the low 100’s. Properties a bit more inland will run in the mid 100’s, but are very nearby to the water. A bit inland, but with water access is the small city of Aberdeen. Aberdeen is right on the edge of Grey’s Harbor, which is a fairly large body of water off the Pacific. Prices are very reasonable there.
If mountains are more your style, then consider Spokane, which is on the Idaho border and getting a lot of retiree attention.
Idaho
Speaking of Idaho, Coeur D’ Alene is an amazing real estate investment success story. About 15 years ago, property in that area was almost being given away. In fact, I wrote my first book entitled “Homes From $3,000; Land from $100 an Acre” which featured, among other areas Western Idaho and Coeur D’ Alene in particular. Today, with only a few exceptions, it takes about $200,000 to buy into that community. The telltale signs were always there – high recreational use; lots of people talking about retiring there; good river access and lots of recreation. It shows what can happen…perhaps inevitably happens…in a well-selected area.
For the most part, the entire state of Idaho has all of those same factors. Small cities and large towns offer the lifestyle that is the wave of the 21st century, and lots of rural real estate abounds for those in pursuit of even more seclusion. Quality of life is good, recreation is plentiful, and the state is getting lots of attention by prospective buyers.
Utah
Utah has much the same set of factors as Idaho. Geographically, it ranges from having similar characteristics as Idaho – mountains, rivers, etc., to desert scenery that rivals the best of Arizona or Nevada. Even in the large cities of Provo and Salt Lake City you’ll find value – and those same cities are become investment and relocation hot spots.
Smaller cities like Ogden are worthy of your attention, and tourist/recreation towns like St. George and Park City have exciting potential because the demand in those areas is rising so quickly.
I’ll wrap up with that. Next time, in Part 4 of my look at various states, I’ll continue the survey by exploring the Midwest.
Have a great day, and live your real estate dreams!
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