The Coast to Coast Investor

Wrapup on Financing Escapade

2009-08-21T15:59:00.002-05:00

If you've been following me on Twitter: http://twitter.com/wflood you probably already know the outcome. But, if not, here it is:

25 lenders
4 Government programs
2 private lenders
No financing commitments...I had to cancel the deal.

Actually, I went back to the sellers for the 3rd time and proposed owner financing. I noted that most lenders didn't want to touch their market because of the level of foreclosure. I reminded them that they'd already dropped the price from $115,000 to $95,000 to $84,500 and I was the only bite. I pointed out that first-time home-buyers were probably not going to be interested in a mid-century fixer-upper, and that non-owners like myself simply could not get reasonable financing. I noted to the agent that I was distressed in thinking that the property would probably only get sold for something like $50,000 to a wholesale investor with cash.

Still...and this always befuddles me...they would rather take half the original asking price to get cash than to get full price paying healthy interest. I'm not off, either; there's a house down the street in short sale for $49K, so the are clearly competing now with that.

So, I honestly failed in the quest to buy the house, by taking on this public creative financing excapade. What does that mean? Well, success literature abounds with commentary on failure just being a form of feedback and that one must get back in the saddle and learn from it. In this case, I hope my commentary will help you learn from it just as much.

With that in mind...here's my learning outcome:

This is just a reminder that investors must deal with sufficiently motivated sellers. This seller was simply not motivated enough to consider terms.
And a wakeup call to me -- I've been correct in my strategy for the last 18-24 months to simply ignore and bypass the traditional lending community and focus solely on owner financed deals. There's really nothing of use in the lending community (in my opinion) for long-term investors.
On the other hand, right now is one of those unique times when cash is king, and cash-paying investors are "cleaning up" by buying properties at 40%-50% of their realistic value. Lenders I talked to confirmed those figures - deep pocket, cash paying investors are buying portfolios of bank-foreclosed houses (10 to 20 at a time) for as little as 40 cents on the dollar (even at realistic appraisal).
There's always another property, and the deal of the century comes along about every two weeks (I think that's from Gary Keller's book). No sooner did I cancel the contract on this deal then I came across one equally good, and within a mile of it. That one had just gone under contract, but it had owner financing candidly mentioned (10% down, 7% rate) right in the advertisement. It was in turn-key shape, and while it was significantly more than the one I had pursued and was already under contract - it was a wonderful beakon to demonstrate to anyone reading this that no single deal, whether obtained or failed to be had is the end-all of one's investing. Just jump back in and start digging again.

(I do have to admit I am disappointed, though...it was a darned cool house!!) Put a smile there -- time to get this horse moving again.

Status Update on Financing

2009-07-24T07:42:00.003-05:00

So, sixty days into the financin search. Let's see where we stand...

FHA 203K is out. The main program is only for owner-occupants now. The loophole for a non-profit requires that the housing rehab entity be in the non-profit for two years before applying.

USDA financing...no window. Main program is for owner-occupants only. The provision for rental housing providers requires a multi-unit property, and appears to require the borrower to live in one unit.

Conventional - nearly every conventional lender I approached is still holding to the 4 properties/4 mortgages or less requirement even though Fannie Mae loosened up the requirements.

HomePath/Homesteps - referred to them as the holy grail or investor financing. Supposedly have a 10% down program. That's only for the first investment. With more than 4 properties, they want 25% down and --- get this --- 3 to 6 months reserve for payments for every property I own! In my book, they are the antithesis of a creative lender.

Found at least one portfolio lender that would lend even though I have more than 4 properties/mortgages, but they won't allow secondary borrowing of any kind. The down payment requirement was 25% to 30%, and it had to come from my cash. They would not even allow a partner to put up the funding unless they were on the loan and deed. The potential private lenders I've approached do not want to be on the 1st mortgage, nor on the deed.

Most every portfolio lender I've uncovered is really a hard money lender which I won't use. It appears that basically, banks aren't really lending on mortgages. If they can't sell the mortgage, they won't offer it. It may not help my financing situation, but it's certainly illuminating to see how our banking system is really doing business now. Once upon a time a bank took in your money as a deposit and lent it out in the form of loans. Apparently, that's not happening right now...perhaps on credit cards, but not on mortgages.

My recent foray was to look at Farmers Home Administration loans. They are clearly owner-occupant only. The loan must be for the primary residence and no other dwellings can be owned.

My plan is to keep digging into some more banks, but really need to turn my attention to private lenders. Anyone want to put $84,000 to work or know someone who does?

Views the Palm Springs Property and Chatted with the Agent About Financing

2009-07-02T09:31:00.001-05:00

Went to view the Palm Springs house yesterday and chatted with the Realtor about the financing situation. I clarified that with more than 4 properties, most conventional lenders won't touch me.

He confirmed that the real estate industry is really up in arms because the stimulous money (you remember...that nearly 1 trillions dollars given to the banks...) is not being used for what was required of it. Banks are doing everything but lending.

He's going to scan his network of contacts to see if he can find any creative lenders with portfolio loans. Better yet, I suggested, individuals who might be interested in getting a good return. Divide and conquer - 10 people willing to lend $10,000 will put the deal together, although that would be logistically messy!

My next stop is the Farmers Home Administration to see what their current state of lending affairs is for rural communities, but non-owner buyers.

Wheel Spinning Right Now

2009-06-17T08:47:00.002-05:00

I haven't uncovered anything under the rocks yet. It really is a tight lending market beyond belief. Here's what I've run across so far after talking to about a half dozen lenders:

While Fannie Mae and Freddie Mac loosened up their requirements as to the number of properties one can hold (to 10), lenders have not followed suit...at least not the ones the brokers I've contacted deal with. They are still restricting to a mere 4 properties owned and/or mortgages held. That disqualifies me from virtually all of the well-known lenders.

The loophole I was pursuing with FHA looks closed. Yes, a non-profit can apply for an FHA 203K rehab loan, but they must have at least 2-years of low-income redevelopment and rental provision experience. That's not in my history, and I would be just forming the non-profit.

I'm still trying to get word from USDA on the rural rental lending guidelines to see if there's any stipulation for a single-family unit. The instructions denote multi-family (4 or more units), but I'm trying to find out if there are exceptions.

I just got an offer in the mail from from a national lender for up to $15,000, unsecured for up to 60 months at a supposed 9.88% fixed. Not great, but could be useful for the rehab funds. I believe in divide and conquer, so this lead, while not all that great could go in the file earmarked as a credit line for the rehab....maybe down payment funds if I can find a lender who doesn't care about the source of down payment.

Anyone interested in lending $84,900?

First stop on the financing quest

2009-06-08T07:42:00.002-05:00

You utilize every resource available to you. I began with my circle of influence.

My first stop was a friend and business partner who indicated an interest in putting about $25,000 to work. If he's willing to do it, the amount would be sufficient for the 25% down payment if I could get a bank first mortgage. In fact, it would be enough for the down payment and a portion of the renovation costs. No commitment yet.

My second stop was the realtor who sold me my personal residence. He used to play professional football and is still connected to that industry. Like I said...you use every resource you have at your disposal! This contact is really promissing because of his connections. He had indicated on a number of occasions that he knew players who were interested in real estate but who didn't want to buy properties themselves. So, I candidly mentioned I would be interested in talking with them and that I would be interested in amounts anywhere from about $18,000 to approximately $100,000 secured by the property.

My job is to keep on top of him - apparently pro football players are exceedingly busy, even off-season, and he suspects it will take a while to connect with any of them.

I also contacted a mortgage broker in Palm Springs who was supposed to be a "creative" lender who could put deals together where others couldn't. When I explained my situation, he didn't skip a heartbeat in telling me he couldn't deliver. While he did have investor financing that required 25% down, the number of properties I hold disqualifies me for his financing sources. He doesn't do FHA 203K loans, so I need to look for another lender for that. He does do USDA loans, but knows nothing about what I believe is a rabbit in a hat I want to pull - namely utlizing a loophole in USDA loans set up for non-profit corporations. You see, many (not all) USDA loans are for first-time home buyers. But, there is a provision for non-profits who provide reasonable housing to apply for loans. Between this being a somewhat historic rehab, somewhat rural, and that I can rent it to seniors or modest-income folks, I think there's a chance for one of those loans if I form a non-profit corporation. Alas, he knows nothing about that avenue, so I have to do some groundwork there first.

So, out of the gate, I've planted two seeds for private money, but no commitments yet. One lender seems to have been a waste of time.

Week one ends with nothing solid.

A personal creative financing quest

2009-06-01T10:01:00.005-05:00

Does creative financing still work? Right now? In June of 2009, in the worst economic climate in 60 years?

I'm going to set out to prove that it does, and at the same time create for you an incredible learning experience on how to finance properties.

With that in mind, let's take journey together. I'm going to get away from the instruction for a while. Basically, for the next several weeks, I'm going to chronical my personal, real-world, nearly real-time experiences trying to put the financing for a deal together.

Those of you who know me personally, know that I am a big fan of Robert Allen's classic book from the 1980's, The Challenge. I'll go so far to say that, in my opinion, it's probably the single best beginner's real estate investing book ever written, because it takes away all the excuses people usually create for themselves. I won't ruin the book by telling you what it's about, but I will say, "get a copy!"

That said, I always wondered what it would be like to be part of such a challenge, and I've often toyed with the idea of creating one of my own. So... here I am...in a bassackwards way...challenging myself, publically. Tounge in cheek, I say, it's time to "put up" or "shut up", put a bit of my reputation on the line, and see if I can do what I know how to do. And, all the while providing you with a roadmap for how to do it yourself!

You see, I believe with every fiber of my being that knowledge of creative financing is the most vital tool a real estate investor can posess. I professed that - even during the crazy bubble of easy money...those days where you could get 110% financing for any purchase just by fogging up a mirror when you breathed on it. I knew that "easy" conventional money was fun, but that it wouldn't last. What's an investor to do now - when, even if an investor loan is available, you probably wouldn't want the terms? In my book, it's right back to what I've preached all along - the assertive use of creative financing.

The question is, does creative financing still work? In particular, can it work in this real estate climate? The skeptics - even lots of the supposed investing gurus - say that none of the old-school creative financing stuff is viable anymore. The worst skeptics say that the days of real estate, as a viable investment are over. Do you believe that drivel? What the skeptics don't understand, never did understand, is that mortgage bubbles aren't the secret to successful real estate investing. Our secret weapon is knowledge of creative ways to finance purchases.

I'm going to set out to prove that creative financing is still the investor's secret weapon. My objective is to show, once and for all, through personal experience and illustration that creative financing can still be done. My objective is to demonstrate - to you...through this deal - if I can creatively finance a purchase, in this lending climate, in this economy, in this housing market, then it can be done at any time, and by anyone. The excuses will be torn down once and for all.

So, here's what I'm up against;
the property is a single family home in the Palm Springs area. It's a keeper, about 2/3 rds of market value, with a purchase price of $84,500. It will need about $15,000 in rehab which I'm also trying to finance.

Here are my basic parameters:

The seller accepted my contract which cast a 120 day net to obtain financing suitable to me.
The seller does have the right to take backup offer which can accelerate the 120 days to 30.
I am commited to no more than 5% of my own money into the deal.
There is no avenue at the moment for seller financing. The seller and I have been down that road three times - no owner carry, no lease option, no land contract. He needs the cash proceeds. So, it appears the funds will have to come from the outside.
I won't utilize hard money because it's too expensive for a long-term hold. Can't stand hard money anyway!
I never, never, never look to my personal residence or retirement account to pledge as collateral for an investment. I've always been commited to the idea that your personal residence and your retirement (liquid) funds should remain sacred.
Beyond that, I will investigate any combination of financing that I can put together to make the deal work.
Did I mention that this is an out-of-state purchase, in one of those notoriously down markets in California? Salt on the wound there.

The clock is already ticking...........

Renting as a form of Investment Financing

2009-05-20T12:24:00.003-05:00

With last week's final notes in mind, let’s talk a bit about this idea of renting a person’s property as opposed to trying to buy it. I think too many investors shy away from renting or leasing because they don’t perceive any economic benefit. To them, if they don’t own it, it doesn’t count. Nothing could be further from the truth.

The Bundle Rights and Controlling a Property
In reality, ownership is just a social construction. What I mean by that is that man has invented the concept of ownership, which is nothing more than a system by which a huge bundle of rights is transferred from one person to another. But, renting or leasing is also a transfer of rights…just not as many. The important thing to the investor, is control – not necessarily ownership.

Here’s a bizarre way of thinking about this. If you were on your last day of living, it doesn’t matter whether you live in the Taj Majal or in a singlewide mobile home. You can’t take it with you. So, this supposed “ownership” is not permanent; ultimately, the benefits you enjoy last only as long as you do. There are many places on the planet (Hawaii is one of them) that recognize this transience, and never grant ownership of real estate, but rather convey it only on long-term (i.e 99 year) leaseholds.

There are also many times when the economics of renting something make far more sense than paying the full price to buy. MBA types with degrees in finance know this intrinsically. I’m going to assume you don’t, but let me prove the point.

An Extreme Case
Would you see the benefit in this:
A condo owner has a vacant two bedroom unit in a nice professional community; let's say it's worth about $125,000. He owes no money on a mortgage, but can't afford the carrying costs of utilities, condo fees, and property taxes. This owner agrees to rent it to you for just the amount to cover the condo fees and taxes, which are, let's say, $275 total. Can you see the benefit of being able to rent that nice property for a mere $275 a month as opposed to trying to buy it? The mortgage along would run $750! And, you'd have to add the $275 to it since you'd be responsible for the taxes and other costs anyway. Which would you rather pay?

A More Realistic Scenario
Right now, in Phoenix, it’s fully possible to lease a $199,000 house for about $850 a month. Even at a 2% interest rate, allowing for taxes and insurance, you can’t beat monthly cost. And, property isn’t really appreciating in Phoenix right now, so buying doesn’t get you much in they way of that benefit. At 7.25% interest, the carrying costs of a $199,000 mortgage, with taxes and insurance would be about $1500 a month. As a result, renting that property saves $650 a month, or $7,800 a year.

With a little bit of savvy marketing, you could probably sublet that property for $975 a month, for a $125 a month positive cash flow. If you tried to do the same under the mortgage I just mentioned, it would be a $525 a month loss! It doesn’t take a Harvard MBA to see the advantages!

What to Look For
Working this technique takes a couple of things. First, you must ensure the owner allows you to sublet the property. You also don’t want to pay any more getting into one of these deals than is customary for renting a property. In most markets, that’s a 1-month security deposit, and first month’s rent. If a seller wants double security deposit, or first and last months rent plus security, they are probably not motivated enough. You need to find the person who isn’t trying to profit, but has a pressing need that you can solve…and is glad for your help.

Coaching Slots Available for Summer!!
Right now, I am taking reservations for private training and coaching for folks during summer. Spaces are limited! If you are working on deals and need guidance, or trying to learn the world of real estate investing and want one-on-one help, give me a shout:

william@thecoasttocooastinvestor.com
614-886-8233

Financing (Part 8) - How to Think Like a Creative Financier

2009-05-13T13:52:00.002-05:00

Today, I’m continuing my multipart series on how to finance properties, but I want to take a bit of a different approach in this post. Let's take a step away from specific technique for a moment (in my next blog post, you'll clearly see why), and look at the backdrop of what makes creative financing possible.

During the heyday of low interest, everyone-qualifies for a mortgage conventional financing, nearly anyone who had a desire to buy a second home or investment could. But, times are different now, and the sub-prime mortgage game is over, probably dead and buried.

As I noted in the last postings, it’s difficult for even the best-qualified investor to get decent investor financing for a purchase right now, and when they can, they probably don't want it because of the terms. Just recently, I came across a supposedly "liberal" lender...a well known outfit in the forclosure financing game...who wanted 6 months of reserve for each owned property in order to finance through them!

And, sooner or later, no matter how qualified you are, you will run into a ceiling on what you can borrow conventionally. So, if you want to continue investing past your own qualification ceiling, you need to find additional ways than just banks and mortgages companies to finance your deal.

So, the successful national (or local) investor needs a repertoire of tools at their disposal for the financing of property purchases. These are the kinds of tools I've been discussing, and will continue to provide to you.

So, with this different approach for this blog entry, I want to begin today by introducing you to two concepts that I think are absolutely critical to your understanding of creative financing…and to investing in general.

Creative Thinking
Part of the process of financing properties is creative thinking – thinking outside of the box in terms of how you craft a deal.

The Don’t Wanter
If you’ve been around real estate investing for any time, you’ve no doubt heard about dealing with motivated sellers. In fact, the bottom line on buying a good investment is generally not in the property, but in the situation.

During the go-go buying frenzy in which people were literally tripping over each other to buy something, it was not uncommon for a property to sell within hours…no sign, no MLS listing, and for far more than it was worth. In fact, I was just reading in Kiplingers today that speculative buying in Bakersfield, CA caused the average price of a property to go from $99,000 in 2002 to over $280,000 in 2005. That, of course, was not sustainable, and you simply can’t win the investment game that way. And, as we know, many, many wanna-be investors have gone belly up after chasing those kinds of deals.

Instead, you need to listen to the age-old sage of investment buying, which is to make your money going into the deal. Or, to put it another way, an investor buys with the expectation that what they are buying will go up in value.

That kind of buying right inevitably involves working with a seller who is in need of selling, and helping them to solve their property-related problems.

Now, this is where I depart from the myriad of investors, who in my opinion, are more of the vulture mindset. So often investors are labeled disparingely because they have no qualms in taking advantage of people who are down on their luck. I’d go so far to say that vulture mentality among investors is more the norm than the exception…and quite frankly I don’t want listeners and students of mine going down that path.

But, you can build yourself a profit while helping other people --- it’s the age-old win-win. In fact, I believe that you will find your highest and best long-term profit within the solution to the problem that the seller needs.

Case in Point
A seller has moved out of state and is saddled with 2 house payments. It’s been 5 months with the property on the market, and no bites. The seller is facing another $950 house payment, their savings are depleted, and they don’t know what to do. As an investor, perhaps the best choice you could offer them is to rent their property for enough to cover their mortgage (combined with absolutely no rent hassles) as long as they allow you to sublet to your own tenant.

If this was a newer property, it’s a far better solution than trying to discount the price --- because they probably have no equity, and discounting is not a viable option. Most people could not sell at a loss and write a check to sell their property, particularly if a 6 or 7% real estate commission was involved. Under a rent/sublet arrangement, you get the property under immediate control, can make some monthly cash flow - - and they are immediately relieved of the burden of the house payments. Combine this with an option to buy (which I'll discuss in a later blog post) and you could have the benefit of control and cash-flow now and equity later. It's truly win-win!

Another Entrepreneurial Opportunity - the Import/Export Business

2009-04-01T12:57:00.004-05:00

Make Money in The Import Export Business
Today, I am going to take a sideroad off the real estate highway for just a while. This isn't real estate-related, but since we are all opportunity seekers, I'm promoting it just the same. Better than that, I have an online class coming up that can teach you how to do it!

Those who know me well know that I'm not just about real estate, but about empowering home-based entrepreneurs in a variety of fields. Perhaps you follow my other entrepreneurial blog The Entrepreneurial Highway (http://entrepreneurialhighway.blogspot.com/) about businesses other than real estate. Anyway, right now, a lot of people are leery of the economy and real estate isn't on their radar right now. That's OK...anyone can respect that. There's a world of opportunity out there; not just real estate....this is one of my pet businesses, and I want to make it available to you.

An Ideal Home-Based Business
How would you like to make thousands of dollars, get access to tax-deductible travel, interact with cultures all over the world, and do it all with little or no risk?

If you answered, yes, yes, and yes, the the Import/Export business is what you've been looking for.

Import/export, or International Trade as it's often referred to is one of those ideal businesses that so many people are searching for. Imagine a business where you can make hundreds - or even thousands of dollars a month - right from home and your computer.

Picture a business where you can involve yourself with amazing products and cultures from all over the world, make money, and even be able to travel (if you like) in a tax-deductible way! Envision being able to buy products that sell themselves and sell them for 10 or 20 times what you paid! World traders can do that.

Learn Import Export Online
At the request of a ton of people who missed out on a prior class, who've been begging me to teach this class for them, I'm going to offer it online starting on Wednesday April 22.

In the course, you will learn the how to import and export and will be introduced to how put trade deals together. Not only will you learn, but through hands-on real-world projects, you'll be able to actually identify an international trade opportunity and bring that opportunity to fruition. And, I'll personally counsel you on how to apply the skills you are learning to work your chosen trade deal. In other words, if you are willing to take on the challenge, you can put together your first trade deal right during the class...who knows there might be some nice dollar signs in that first deal!

And, if you follow the podcast or blog, you know that I don't skimp! The class runs a full 12 weeks - that's 12 lessons that will teach you the full A-Z of the import/export business....hands-on...with my private feedback when you need it.

It's fully online, so you can work on the lessons whenever and wherever you can access the Internet. That's the beauty of an online class.

The best part is that I'm keeping the cost way, way down. I'm beta-testing an online course platform, so if you are willing to be a bit of a "guinea pig" with the software, you can get into the class for only $179. That's more than most people pay for a one-day workshop, and this is going to run a full 12 weeks.

Please pass this message along. There are a lot of people out there right now who need ways of making extra income, replacing their income and so forth. This may be exactly what they are looking for.

Details
Course begins Wednesday, April 22, 2009
Course Tuition: $179 (can be paid by credit card)
To register, or if you'd like to reach me to ask questions, feel free to call or email me (614) 886-8233 and whflood@yahoo.com I'm happy to answer any questions you have.

If You Are Facing Foreclosure

2009-02-25T10:54:00.002-05:00

If you are facing foreclosure....READ THIS!
If you know anyone who is facing foreclosure...READ This!
If you can pass this along to everyone you know who might be effected by a foreclosure...GET IT IN THEIR HANDS

This is just a quick post - and I want to do my part to spread the word about a way to stall foreclosure that's getting a lot of press.

Those who know me pretty closely know that I have an axe to grind over what many are calling the "sins of Wallstreet" being paid for by mainstreet. You see, this foreclosure mess isn't really about lending as much as it is about Wallstreet wanting to get their hands on, and monetize the one sector of the economy they couldn't formerly touch....the real estate world. They found their way, though, and it was through the world of "mortgage backed securities" that took mortgage instruments and diced and sliced them up into lots of "servicable" pieces.

You see, most people think that a bank is holding the mortgage they obtained. In truth, all kinds of pieces of it were sold off to various investing entities. The interest stream was bought by one outfit, and principle stream by another. The origination put money in some hands, and other fees went somewhere else. To make matters worse, these slided and diced pieces were packaged with pieces from other loans into these "mortage backed securities". It takes a forensic accountant to figure out any of this.

And, don't get me started with the hundreds of billions that were given to...added like salt to a wound...to the Wall Street. They made money going and coming out while individual buyers are paying the price losing their properties.

But...in the morasse of slicing and dicing of the loans apprently rests one of the best foreclosure-stalling strategies available to a homeowner. It's in demanding that the lender "produce the note" or simply put....dig up the note that supposedly shows a particular person is the borrower on a particular property. Apparently, they can't! Producing that paperwork can take months of research, and a foreclosure can't take place if they can't prove that a person owed the money or is the borrower of record.

Here are a couple of video links to explain it. I'm trying to do my part to spread the word about this...put some power back in mainstreet!

http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=12195482

http://www.youtube.com/watch?v=kswEb-iVsms

I am not a lawyer, and I am only reporting what I hear with this, but my jaw dropped when I did, and I knew others needed to hear about it. PASS IT ALONG!

Financing (part 7) Wrap Arounds Loans (also known as all inclusive deeds of trust)

2008-11-03T08:25:00.002-05:00

A wrap around loan, commonly referred to as a wrap envelopes an existing loan and any equity into one loan payment. This is sometimes rather difficult process to grasp, so if you would like to ask any questions or seek clarification on key points, email me at whflood@yahoo.com and I will be happy to answer your questions.

So...How Does a Wraparound Loan work?
Let’s say a seller owns a property worth $100,00 and has an existing loan of $60,000. That loan is at 6% and has 23 years remaining to pay. The payment is $400 a month. He is willing to finance the remaining $40,000. But, rather than setting it up where you take over the existing loan and he accepts a second mortgage, he wants to set it up as a wraparound loan. It would work like this:

He sets up the loan terms on $100,000 at 7.5% for 30 years, payable at $700 a month. You pay him the $700 each month. He pays out his original mortgage payment of $400 and keeps the remaining $300 for payment on his equity.

You may be asking, “what’s the difference between the wrap and him just accepting a 2nd mortgage?” Actually, there are several reasons. First, he is in a more secure position because he is ensuring the underlying first is getting paid. And, if you noticed an odd detail or two, it’s actually to his financial advantage – he pays out at 6%, but collects at 7.5%. Thus, he is getting 1.5% on money that isn’t even his! And, the existing loan is due to be paid off in 23 years, but you would be paying for 30 years, so he gets 7 years of money even when the underlying loan is paid off!

Now, wraps can be tricky and there are some pitfalls such as the original owner failing to pay the underlying loan. It’s a good idea to get a trust company or bank trust office involved to make sure everyone is doing what they say. You wouldn’t want to make your payments only to find out the seller isn’t paying the underlying loan! So, you’d set it up so your payment would be made to the trust office. That office would, in turn, pay the underlying loan and send the seller his proceeds every month. It will cost a few dollars a month to set that up, but it is well worth it!

Next time, we’ll be continuing the discussion on creative financing by looking at Land Contracts, Options, Lease options & lease purchases, Private money & partnerships (equity sharing), Hard money, Selling notes, and the use of unsecured credit lines.

Until next time, this is Bill Flood, your host for the Coast to Coast Real Estate Investor. Live your real estate dreams!

Financing (part 6) - Subject To's

2008-06-24T17:00:00.003-05:00

In the place of the non-qualifying (or qualifying) assumable loan is another – more complicated – strategy for taking over existing loan obligations. It is commonly referred to in real estate investing circles as taking the loan "subject to" the existing mortgage.

A purchase contract can be written to buy the property “subject to” the existing loan, which means taking over the obligation of the owner. While this may sound similar to an assumption, it has a clear difference. With an assumable loan, you are contractually taking over the obligation to pay. The loan, in essence, transfers to your name. When a loan is taken “subject to”, the original borrower is actually still on the note and obligated to pay if you don’t. You can see that would be a dicey situation, and it’s best for both parties in the transaction to have legal advice as to what’s involved.

The Due on Sale Clause Landmine

Commonsense legalities aside, there are a few landmines related to subject-to deals. Since most loans today have a due on sale clause, which means the loan balance is due and payable upon sale or transfer of the property, taking over a loan "subject to" can still cause that clause to be invoked which can lead to a big financial mess. Because of this, subject to strategies are best done with the advisement of your attorney.

There are a lot of investors today who use the subject-to approach to take over people's payments and avoid having to get new financing. Typically, these investors are targeting homeowners in the early stages of defaulting on their loan. Their idea is to either give the owner some cash and/or take over the payments without formally assuming the loan. Their general game plan is to either:

a) try to mask the transaction from the bank so the bank won't know the property has been transferred, which would potentially lead to the loan being called, or;

b) simply not worrying about the bank at all, doing the subject to deal, and operating from the premise that the bank won't call a loan that is being paid on time, etc.

Both of these approaches assume that a bank will ultimately be or feel better off with an investor who is keeping up the payments rather than a homeowner who is slipping into foreclosure. Along with that belief is that a bank won't call a loan when it's performing, so the due on sale clause is somewhat meaningless....that calling a loan never happens when the payments are being made, and certainly not in this market.

Banks Do Call Loans - Don't Let Anyone Tell You it Never Happens

Let me tell you -- banks can and do call loans due and payable all the time under subject-to and similar arrangements. I just came across one in Phoenix within the last month, with the investor faced with the foreclosure. More important - it's really the original home seller who is now faced with the foreclosure because his name is still on the loan! Again...lots of landmines, and this technique should be guided by some professional legal advice.

But it's Popular with Wholesalers

I'll also note that investors who utilize the subject-to approach regularly are principally short-term "flipping" types of investors. The reason why the due on sale clause doesn't worry them is that they don't plan on holding the house long enough for the bank or anyone else to uncover that it's been transferred. These types of investors are in, get their money, and get the property in the hands of someone else before any of this potentially matters. But, for the long-term investor who wants to build wealth, the chances are, the due on sale clause is likely to rear it's head at some point. Then, you either have to negotiate with the bank to put your name on the loan (assume it) or get refinanced real quickly.

The Bottom Line

So, the bottom line on subject-to deals: useful for the short term investor, not so good for the long-term holding-type investor, and always have a lawyer in your corner.

Financing (part 5) - Assumptions

2008-05-21T18:59:00.003-05:00

To assume a loan means you are legally taking over responsibility for its payment. In other words, you are agreeing to take on someone else's loan, transfer the obligation to you, and make the payments from that point forward. When available, assumable loans are just about an investor's best friend!

The Good Old Days!
There is an issue, however. Prior to the mid 1980’s all government loans were assumable, and many conventional ones were as well. At one time, there were even many "non-qualifying" assumable loans for which you only had to sign your name to take over.

Assumable Loans Today
By the end of the 1990’s most existing assumable loans were either paid off or refinanced away. And, nearly all new loans, conventional or government had clauses denying the ability for someone to assume the loan (these are called a due on sale clauses). So, you have the compound effect of most older assumables being gone one way or another, and new loans not allowing for assumption. Still, there are a few of the older assumables still around, and occasionally you'll find them.

What's On the Horizon
Today, however, we see a resurgence in assumable loans both government-backed and private. Essentially all of them are what are known as “qualifying assumables” which mean that the purchaser has to go through some semblance of qualification before taking over the loan. In that pre-1980 era there existed that non-qualifying variety, where all a person had to do was sign their name to take over the note. Those days, unfortunately, are gone. Today, even when you can find an assumable loan, you'll be scrutinized as to your income, debt, credit and so forth. The good new is that qualifying for an assumable loan is generally easier and less thorough than for getting a brand new loan.

What to Look For
Perhaps the best-known assumptions are available with Federal Housing Administation (FHA) loans and Veterans Administration (VA) loans. Currently, FHA loans can be assumed with modest lender approval, but only for owner occupants. Investors may not assume them - but my belief is that will eventually change. VA loans can be assumed by anyone as long as they go through the qualifying process and are approved by the lender. It's also important to note that many conventional lenders (not government-backed) are offering assumable loans once again...of course, expect qualification to be part of the process.

Understand the Benefits of Assumable Loans
The beauty of assuming a loan is that you don't have to pay points, loan origination fees, and junk lender fees to get the loan. Keep in mind that with a brand new loan origination, you could get hit with up to 3% of the loan amount just for various lender fees and requirements. That's a hefty amount to pay in addition to a down payment. With an assumable, you only pay a small (often only a few hundred dollars) assumption fee. You don't even typically pay for an appraisal unless you want one! The bottom line is, it's a relatively easy form of financing to access.

It's All in the Numbers!
What's even more valuable is related to the math behind an existing loan. You are probably aware that in the early days most of your payment goes towards interest, with very little contributing towards the principal payoff. That ratio starts to change around year 7 of a 30-year loan, and by year 15, the principal and interest portions are equal. Past year 15 and the principal portion is the larger amount.

Often people get all hung up on the interest rate of a new loan in the current climate - say, 6.75% versus what's usually a higher rate for an existing assumable loan. Let's say, 8.25%. The untrained eye will alway say the lower rate would be the better deal. That may be the furthest thing from the truth. What if the assumable only had 14 years remaining to pay? With the new loan nearly all of your payment is going to interest (makes the bank fat). With the assumable, more than half is going into your principal paydown (basically the same as putting it in the bank!). And, you don't have 30 years to wait to pay it off -- you only have 14. Run the numbers and you'll find tens of thousands of dollars saved because it was the old loan-holder who paid all of that interest.

So, keep your eyes and ears open for assumability of loans. If you find one, look at the numbers. In most cases you'll find you have stumbled onto a real treasure.

Financing (Part 4) Owner Firsts, Owner Seconds, and Balloon Notes

2008-04-14T07:08:00.003-05:00

Structuring Owner Finanancing With Owner First Mortgages and Owner Held Second Mortgages

You start to get real resourceful with owner financing when you consider the ways you can address first mortgages and/or second mortgages in creative fashion. For example, an owner might not be willing to hold 100% owner financing, but want 30% down and be willing to carry the rest as owner financing. You might seek out the 30% you need with a bank loan or a line of credit.

In reverse, perhaps you can get a conventional mortgage for 70% of the purchase price, but don’t have the 30% down payment. You might be able to work out owner financing with the seller for that 30%, in effect making it a no money down transaction. Many banks don't like to do this right now, but that's not universal, and I predict that once the credit crunch is over, it will be a technique back is common use.

Balloon Loans

Generally, with owner financing the seller doesn’t want to drag out the payments for 20 or 30 years. In many cases, they are willing to take the monthly payments but want to be cashed out sooner, and being sensitive to their needs will help you structure financing that works for both of you (win-win). You’ll do this through the use of a “balloon” loan which stipulates that the balance is due and payable at a certain point before the loan is actually paid off.

Let’s say our seller above is willing to do owner financing. But, she doesn’t want to carry the loan any more than 7 years. So, there would be a balloon clause in the seller financing that states the remaining balance is due to her at the seven year mark. We can still structure the payments on a 20 or 30 year schedule to keep the payments low, but at year 7 we have to pay it off.

The tougher the credit market, the more valuable owner financing becomes - learn these techniques because they can make the difference between being able to finance and property and not getting it at all.

Financing (part 3) - Owner Financing

2008-04-02T18:59:00.000-05:00

Knowledge of owner financing techniques is what separates professional real estate investors from the speculators who, while they could (emphasis on could in the 2008 mortgage market) qualify for traditional mortgages really don’t know much about the real estate investment game beyond the commonplace.

Owner financing is the original form of creative financing. Historically, owner financing was actually more common than financing through institutions, and its important to note that. It’s only over the last 3 or 4 decades that conventional financing has usurped the use of owner financing and I have full confidence that owner financing will come back into vogue more now that the mortgage world is in tumoil.

What do we mean by owner financing? Well, perhaps a corollary example would help you understand the principles. Let’s say you find a classic car for sale for $10,000. The owner owns it outright and you want to buy it. But, you don’t have $10,000. So, you make an offer to the owner to pay $800 a month for 14 months. That totals $11,200 - $10,000 for the car and $1,200 as “interest” for the privilege of paying over time.

This is a simplistic example, and requires that the owner’s car loan be paid off for it to work effectively. As well, the seller will more than likely requiring some kind of security instrument that states he has the right to repossess the car if you don’t complete payment. But, as simplistic as it is, it shows how the process works.

Now, on to a property purchase. The principle works the same way. Let’s say you have found a seller of a property you want to buy. She owns it free and clear and is selling it for $70,000. Rather than pay her $70,000 in cash, or get a loan from a bank for $70,000 you suggest paying her $542 a month for twenty years at 7% interest.

She would get a good return (7% in this case), secured by something she knows and understands – her property. If you default on the loan, she can foreclose and take the property back.

How can this benefit you as an investor? You can acquire a property without the cost, qualification, and scrutiny of a conventional loan. You can get a below market rate while at the same time providing a better than market return to the seller.

What’s more important is that, in a tough credit market like we have now, where investor mortgages are like pulling wisdom teeth to get, you can finance a transaction. That means you get to buy and the seller gets to sell – which is what keeps deals flowing. Moreover, there’s a degree of likelihood that you won’t even need to qualify for the financing because it’s a function of whether the seller has faith in you or not – and, they probably wouldn’t know how to qualify you efficiently anyway.

So, you have a wonderful potential package of benefits – financing when you couldn’t get it otherwise, a good rate, and little to no qualification issues. At the same time, the seller gets the property sold, and gets a good return on the equity the economy has given her through her property. It’s a good case of the win-win.

Financing Part 2 - Insitutional Financing

2008-03-12T11:15:00.002-05:00

Traditional Mortgage Instruments

Let’s begin by looking at the traditional mortgage marketplace. No investor would turn their back on conventional financing, particularly when the mortgage marketplace is good. The problem is, right now, it’s not, which is why I’ll be spending so much time on upcoming posts about alternative financing. Still, it only makes sense for investors to know as much as possible about traditional mortgages, particularly when it’s so tough to obtain conventional money. The more you know, the better off you’ll be when seeking out conventional money.

Traditional mortgages can be broken down into 2 categories:

Government-backed loans underwritten by either the Federal Housing Administration (the FHA) or by the Veteran’s Administration (the VA) and conventional mortgages that are, in essence underwritten by investors.

What’s important to note about FHA loans is that the organization opened it’s doors up more for second home/vacation home purchases over the last decade, and even developed more programs accessible by investors. It’s somewhat the same with VA – programs available for purchases other than one’s primary home are now available.

Conventional lending over the last ten years went absolutely crazy. Qualifications all but diminished, interest rates fell to a low of around 4%, and money was creatively offered by even the biggest lenders. As short as two years ago, it was common to see investor money for 100 to even as high as 125% of the purchase price being offered. But as quickly as those lenient doors opened, they closed within these last two years. Common terms for investor financing today is 10% down, with several months of reserves – and that’s if you are a good credit risk! I will note, however, that the credit markets are easing a bit and some more creative terms are beginning to pop up. I’ve recently seen multiple lenders offering a product based on 70% of the appraisal value as opposed to 70% of purchase price. Thus, if you can buy low enough (or are dealing with a rehab project) you can get virtually the entire thing financed.

To be effective with conventional lending, it’s important to understand and know how to work with first and second mortgages. Most people think that if they want to finance a property with 100% financing, they need a loan for 100% of the purchase price. In reality, the more likely scenario would be a first mortgage for, say, 80% of the purchase price, and a second mortgage for 20% of the purchase price. This is called a blended loan, and the rationale behind them is that in a case of default, the holder of the first mortgage is in a more secure position since the house is worth more than the loan balance. The holder of the second mortgage is in more jeopardy because their loan represent that top 20% that could get wiped out in a foreclosure auction with a low-ball price. That’s why the second mortgage has a much higher interest rate than the first – because it’s riskier.

It’s also important to note two additional things. First, is that the lower the first mortgage balance is to the property’s value, the more likely you will get qualified. In other words, an your chances of getting financed for a 70% first mortgage are higher than for a 90% first mortgage. If you had the 30% in cash to put down, most banks would be willing to talk with you regardless of a lot of negative financial factors you might have. If you don’t have the cash, that’s where the second loan comes in, and the qualification really takes place more on that loan. The next item is that a blended loan will help you avoid the payment of mortgage insurance, which is generally required on a first mortgage with a balance of higher than 80% of the properties value. That’s really an unnecessary expense to your monthly payment and you should look at ways to avoid it.

At any rate, being able to talk coherently and deal in combinations of loans is your route to securing traditional financing for higher loan amounts. You can think in terms of many combinations – here’s just one example: a 70/25/5, which means a combination of a 70% first loan, a 25% second loan, and 5% down.

It’s important to note that blended loans – at least those where both loans were offered by the same lender have virtually disappeared in this credit crunch, but I have faith they will return in short order.

Another piece of the traditional lending puzzle is that of home equity lines of credit and home equity loans. The difference between the two is fairly simple. Home equity lines of credit are much like credit cards. You are extended an open line of credit. You pull from that line as you need it. As you pay down your balance, the payment amount drops and your available balance goes up accordingly. With a home equity loan, it’s a fixed loan, you are loaned the money, and you have a fixed period of time to pay it back, generally with fixed payments.

Both home equity lines and loans are good options because they are relatively easy to qualify for, and in most cases can be had with little to no lender fees. Whereas a mortgage for $70,000 might cost you $1500 in appraisals, title insurance, underwriting and other “junk” fees, a $70,000 line of credit may cost you a mere $300 in underwriting.

The downside to both is that they require an equity cushion in the property – normally you will have difficulty getting a home equity line or loan for more than 90% of the property’s value if it’s a residence, and it’s common right now to see 80% for an investment property. It’s also important to note that they will be at higher interest rates than standard mortgages. Figure a full 1-3% in interest rates over the cost of a regular mortgage in most cases.

One of the great benefits of a home equity line for an investment purchase, is that when you pay down the loan and open up your available credit, that’s money you can access for another purchase.

And, both lines and loans are good ways to pull your own equity out of a property for purchases or other investment needs. One of the really amazing things about holding property over the long haul is that you don't have to sell a property to get cash from it. With sufficient equity, you can refinance and pull out cash and keep the property too! It's a clear case of having your cake and eating it too. Plus, money borrowed in this way is not taxable. If you sell a property, you pay hefty taxes on the profits. If you refinance, it's tax-free money!

Until next time....

Contact me at william@thecoasttocoastinvestor.com if you have any questions you'd like answered.

Financing Investments in the Current Climate

2008-03-03T06:18:00.002-05:00

Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor.

Today, I’m going to begin a multipart series on how to finance properties. Knowledge of creative financing techniques is a dying art, and given the current credit crunch is absolutely necessary to finance your acquisitions. I want to do a brain dump on how to finance deals whether it's with conventional finacing or with the dozens of other techniques that don't involve banks and mortgage companies!

Let's go back 5 or 6 years. With the advent of mortgages at 5%, interest only, and the only qualification being you needed to fog up a mirror when you breathed on it, other forms of financing really fell by the wayside.

But, times are different now, and the sub-prime game is all but over. It’s essentially difficult for even the best qualified investor to get 100% institutional financing for purchase right now. 95% financing is remotely available to those with good credit, income and assets, but even that is shrinking to the point of non-existance. Ten percent down is the norm for those with good credit, and often lenders want 6 to 12 months of payments in reserve. You can see that, right now, institutional financing is problemmatic at best - useless at worst.

Another problem, which is exacerbated by out of state buying is that sooner or later, no matter how qualified you are, you will run into a ceiling on what you can borrow conventionally. So, if you want to continue investing past your own qualification ceiling, you need to find ways other than banks and mortgages companies to finance your deal. Buying a second home with conventional funding is still pretty do-able, so if you haven't pursued a second or vacation home, that's something that should be on your radar. Getting into your first true investment property, on the other hand, will pose lots of new challenges related to financing.

So, the successful national (or local) investor needs a repertoire of tools at their disposal for the financing of property purchases.

Creative Thinking
I am always amazed at the current crop of supposed real estate gurus who are touting that the old-school real estate methods are dead. This self-proclaimed experts want to convince you to buy expensive websites, subscribe to high-dollar leads subscriptions and a myriad of other tools that you supposedly can't live without in the current real estate game. In fact, the reality is that the old school folks had it right all along! Go back to the early books on real estate investing and you will find all you need to be successful investing...over your lifetime. Sure, things change, but the underlying bedrock principles never change.

One of those bedrock skills is having a creative mindset when it comes to making deals - and in particular, to financing properties. Bank financing is not the only way to go, and you need to be open to many different avenues for how you can put a deal together. For example, over the next few editions, I'll be talking about lease options, least purchases, owner financing, credit lines...this list is quite long.

A creative mindset recognizes that there's more than one way to get a job done. It's the old adage of "looking outside of the box" for novel ways of solving a problem. By way of example, could you actually be better off renting a person's property as opposed to buying it? Could there be a way of making payments to the owner at zero percent interest? Could you control a property for several months without having to make payments? These are all the kinds of strategies I'll be discussing.

Win-Win
Another of the old school philosophies that I consider to be bedrock is that your deal making needs to be win-win...that is, to benefit both parties. I'll take that thinking one step further and suggest that your highest and best deal will be found when you uncover and try to solve the seller's problem.

Right now, there are thousands of people all over the country with their budgets strained due to escalating mortgage payments...losing their homes to foreclosure...who had to move out of state to pursue direly needed employment but who've now been saddled with two house payments. You can come in and solve those problems in a way that truly helps the other party while at the same time creates a winning opportunity for you.

This, again, is where I differ from the current crop of gurus who seem to be all about grabbing as much equity as possible so they can flip a property and take a Caribean cruise. I've seen vulture investors who think absolutely nothing about putting the proverbial "little old lady" out in the street through a one-sided deal that benefits them while taking advantage of the homeowner...and there are gurus out there who have no trouble in professing such tactics. That's unfortunate, because you don't have to be a vulture. Win-win always has been, and always will be the best strategy by which to operate your investing, and is the crux of nearly any kind of creative financing. I'll say it again...you don't need to take advantage of people. You will find your highest and best deal by solving the problems of the seller - that your best profit-making solution will be found in the solution of the owner's problem if you have a creative eye.

So come with me over the next couple of weeks and learn dozens of ways to put deals together with and without banks. From this point forward your investing need not be driven by what's going on in the mortgage market!

Get in touch if you have any questions:
william@thecoasttocoastinvestor.com

Until next time, this is Bill Flood, for the Coast to Coast Real Estate Investor. Live your real estate dreams!

A Summary of the Free Services Available to You Through the Coast-to-Coast Real Estate Investor

2008-02-04T17:47:00.000-05:00

I wanted to spend some time giving you a central description of all of the free services that The Coast-to-Coast Real Estate Investor offers. All of these I’ve mentioned at one point or another in my blog or Podcast, but I thought it would be prudent to give you all of them in one central place. It just seemed important to collect everything into one location where I can put it all out there to you.

Let me begin with the Coast-to-Coast Real Estate Investor website. The site is very much under construction, as I have concentrated most of my energies on the blog and Podcast. What you’ll soon find on the website is a central source to access all of the Coast to Coast Real Estate Investor resources instead of having to access each one separately.

The address for the website is: www.thecoasttocoastinvestor.com.

Of course, there’s this blog. The purpose of the blog is to provide continuous real estate investor information and training for those who want to learn how to invest in any marketplace. If you look back on some of the recent editions of the blog you’ll see articles such as a multi-part series on valuing property remotely, and how to find properties in which to invest. In coming editions I’ll be discussing financing, working with professionals like realtors and property managers, and will constantly discuss up-and-coming markets for your purchases.

The Coast-to-Coast Real Estate Investor Blog address is: http://www.coast2coastinvestor.blogspot.com/
(of course that’s in your browser window currently!)

My intention with both my blog and Podcast was to make them ad-sponsored and keep them free to the public. Each time you access the blog you’ll see useful real estate-related advertisers on the blog pages, so pay them a visit and learn what they have to offer.

Then, there’s my flagship, the audio Podcast available at http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc

The Podcast is a weekly audio informational and training broadcast on how to invest in real estate; it’s indispensable whether you invest at home, or anywhere in the country. One of the beauties of the Podcast is that most of the time I run it in a “live” call-in format, similar to a radio call-in show. So, you can come on live, ask questions, and interact with me, or my guests directly. And, if you can’t be on live, you can listen to or download the episodes to your computer or MP3 player.

I’ve had episodes on subjects ranging from how to value property remotely to hiring property managers to creative financing, and am starting to bring in guest speakers – people to fill up your Rolodex as resources. There’s always more to come.

To be a live show, you'll need to make sure you've registered with my Podcast host www.talkshoe.com, and you've logged in for the evening.

The Coast-to-Coast Real Estate Investor audio Podcast link is:
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc

You can also go to www.talkshoe.com and search for "real estate investing" or "coast to coast". The show will display about halfway down the list.

To get on a live call-in show, you'll need the following information to access the show:

Phone Number: (724) 444-7444My Talkcast ID: 20058

Registration is free, and only takes a couple of seconds, but you'll want to do it in advance of the show. On the night of a show, to get on live just dial the number and you'll be prompted for the Talkcast ID# and the PIN you set up when you registered. You don't need a microphone on your PC because you'll use your phone, and if you are shy about speaking you can even use Talkshoe's chat window to type! It's a really simple program to use, and you'll feel like you are on a live call-in radio show.

If you just want to listen or download a broadcast, you can just go to Talkshoe and look for my broadcast. All the previous episodes are there for your benefit.

Keep in mind that you’ll want to get my weekly bulletin so you’ll know when the broadcast is running and what the subject will be. I’ll give you the information for getting my bulletin in just a moment.

One service I am really proud to offer is the set of audio discussion boards for the Coast-to-Coast Real Estate Investor. There are many text-based discussion boards for real estate investing available (including mine), but I’ve taken the concept to the next level – now you can have discussions with investors and professionals in audio rather than text. The idea came to me like an epiphany – that people miss out on a great deal of value in communication when it’s just typing. The subtleties of having a conversion – like inflection and volume communicate so much…not to mention that speaking is less time-consuming than typing! It's much more like a face-to-face…or at least a phone conversation then any text board can offer. So, now you have a place where you can actually talk to other real estate investing folks, ask questions, have discussions, listen to and learn from others’ conversations and so forth.

I use a wonderful service now in it’s second version called www.Vaestro.com.

The link to my real estate forum is: www.vaestro.com/viewforum-371

Keep the link handy – it’s easier to access all the boards if you have the link rather than trying to use Vaestro's searching tool.

You do not need to register to participate in the boards, but to make use of it, you will need a microphone and speakers. If you don't have one, a headset microphone runs as little as about $8 at places like Best Buy or Circuit City. Do yourself a favor and invest a couple of bucks for the opportunity to tap into this one-of-a-kind resource.

Finally – and something that I am really excited about - is my social networking platform for the Coast-to-Coast Real Estate Investor. In case you are not familiar with the term social networking, I’ll mention the Internet phenomena of Myspace.com and Facebook.com – those you may have heard of. If not, social networks are communities where like-minded people can get together to meet, interact, socialize around favorite topics (in this case real estate investing), network, learn, and access hosts of resources. They are the latest thing on the Internet, and are hot, hot, hot!

So, if you are a www.facebook.com or www.myspacecom user, you'll love this! It's the Facebook for real estate investing! If you aren’t a www.facebook.com or www.myspace.com user…you’ll love this!

I'm using a wonderful easy-to-use social networking site called www.Ning.com.

The web address for the Coast-to-Coast Real Estate Investor community is: http://coast2coastinvestor.ning.com/

One of my big objectives with the site is to develop a central resource of investor-friendly lenders and private money investors. If you grasp how difficult the credit market is right now, you’ll understand how valuable this resource is going to be. And, don’t be shy to contribute to it!

My Ning site is really in it’s infancy, so I’d like to encourage all of you to jump in there and get it off to an exciting start. Remember – like all these other resources, it’s free!

Finally, I want to affirm that you are welcome to get in touch with me directly. Every day, I have investors and newbies contact me with a variety of questions. Some have basic questions regarding investing concepts, and others have questions regarding specific deals. Sometimes, they are just making contact for networking, and that’s fantastic!

Whatever your motivation, feel free to contact me at william@thecoasttocoastinvestor.com

Additionally, please pass along all this information to your friends and associates. I welcome having new folks join the group. Send along their (or your) contact information and I’ll get it into my mailing list for my weekly bulletin that announces the Podcast topic and any upcoming news. As well, if you know of anyone who is interested in real estate investing, whether beginner or otherwise, please tell them about these resources. And, have them contact me at william@thecoasttocoastinvestor.com so I can include them in the mailings, and let them know of upcoming episodes and provide the other resources I have available.

Once again, you are your associates can contact me at william@thecoasttocoastinvestor.com

Have a great week,
William Flood

Valuing Property Remotely (part 4)

2008-01-22T18:36:00.000-05:00

Online Valuation Sites

I know my next piece will be at odds with what a lot of investors believe, but there are good, valuable resources on the internet to help you ascertain value. They are useful IF you put them in context of all that I’ve mentioned, and don’t try to use them as a substitute for something like a true appraisal. Sites like www.zillow.com can be inaccurate, and they have their limitations. But, don’t overlook their usefulness in giving you ballpark information…just don’t rely upon them for professional opinion. As of now there is nothing available online, free, paid, or otherwise that substitutes for a professionally-crafted appraisal where an individual is scrutinizing the property face-to-face. It just doesn’t exist.

With that caveat, I’ll recommend four valuation sites:

www.zillow.com is the most widely known, and probably the site that gets the most criticism. But, if you understand it’s an estimator, and doesn’t replace a true appraisal, it’s a very useful tool. One thing that’s really useful for the remote investor are the birds-eye views that allow you to look at the property from a satellite photo, and see the surrounding area. I’ve come across more than one property in Arizona that otherwise looked good, but ended up backing up to a highway – or worse, a junkyard, which I caught on the Zillow aerial view.

www.domania.com by lending tree is another good site. The free “solds” listing is really a good tool. And, for $30 you can get a reasonably complete property report that borders on being an appraisal, or can be automatically put with a realtor to get comps.

www.Cyberhomes.com by Fidelity is another really good tool. What’s particularly helpful with this site is the valuation map which gets pulled up automatically when you input data. So, not only do you see estimates for the property in question, but also for all the adjacent houses as well.

The national real estate firm of Coldwell Banker (www.coldwellbanker.com) has a good valuation tool, and a unique “Live Market Data” interactive map where you can zoom in to an area and it will pull up the listings for sale in that map coordinate. It’s a fantastic visual way of seeing what’s going on in an area and its surrounds. Trulia (www.trulia.com) is a similar service.

Also, if you are not using something like Zillow or Cyberhomes which provide a map, Google’s satellite map tool is really useful for getting arial views. That helps with locating the unit in its environs. For example, you can see where a house is located in proximity to a community lake or whether it backs up to a freeway.

All of these recent blog entries on valuation are a lot to consider - if you have any questions, email me at william@thecoasttocoastinvestor.com and I can help you with anything or answer any questions you have.

My next series of blog entries is going to be absolutely vital for you - they are about property financing, and given the current credit situation in the country, you need to learn how to finance properties using traditional and creative means. Financing is the one thing that is going to make or break deals over the next couple of years, so you'll want to get these postings.

So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Valuing Property Remotely (Part 3)

2008-01-09T08:35:00.000-05:00

Local Auditor Sites

Local auditor sites are very helpful. In many counties and municipalities across the country the local property tax auditor’s information is online and available for public access. Now, you have to understand that what you see on an auditor’s site might require some interpretation. A tax assessment is different from an appraised value (assessments are typically lower), and auditor’s values have a reputation for being inaccurate. But, it’s still good data, and if you learn how assessed value is computed, it can provide you with at least a reasonable figure for comparison. What’s even more valuable, though, is if the auditor provides the prices at which units have sold. For example, here in Columbus, our auditor goes back the last 3 or 4 transactions, so we can accurately see what people paid for a property. That can be amazingly helpful when you are crafting an offer, particularly if a bank foreclosure is involved.

Another area where certain auditor’s software is tremendously helpful is when they’ll map values or sold prices. Again, here in Central Ohio, we’re blessed with a system that will do that. I can pull up a neighborhood map that will show each lot, what it’s assessed value it, what it last sold for and when. You can do your own comps that way, really easily!

Title Company Reports

Title Companies can often provide a property abstract free of charge that will provide you with information about assessed value (most of it will come right from the auditor’s site) as well as any liens on the property. How can this be useful? Let’s say you know a property is an estate sale, and is worth $150,000 with an existing loan that has only $40,000 remaining. That situation could be ripe for an aggressive price because there’s lots of equity, or potential owner financing. If you found out it had a loan of $149,000 it’s a different situation.

Now, title companies will not wantonly give out preliminary property reports for free. You have to be very much a two way street – start by meeting with them and finding the one that you’d do your business with. See if they can easily produce this kind of information for you and would be willing to do so if you committed to them being your title company. And, don’t overdo it. You don’t send 15 properties to a title company for their reporting. You check on the one or two that really interest you enough to put a contract on. Additionally, the more business you send their way in the form of closings and referrals, the more they will be willing to reciprocate by running quick reports for you!

Appraisals

Appraisals, of course, are the best option, but appraisals cost money. Nothing substitutes for a hand-crafted, professionally addressed appraisal. Those run anywhere from about $200 to about $400 for a residential property. So, if you are really serious about a property, you might want to consider ordering an appraisal (and will have to pay for one if a bank loan is involved). It’s money well-spent if you want to know what a property should really be worth and to utilize that data in your negotiations on price. Three hundred dollars invested in an appraisal is a bargain if you manage to get a $300,000 house for $240,000.

There are a handful of sites that will do "appraisals" online running in the area of approximately $50. I don't place a tremendous value in these, because they are primarily relying on the same kinds of data I'm describing to you in these blogs on property valuation. Sure, they will save you some time, and they may get you data you could not normally access. In that sense they provide a good service. But they are not, in fact, full appraisals, so don't get suckered into thinking they are. Nothing substitutes for a real person going to the property and inspecting it inside and out to see what's really going on. Keep in mind a simple issue -- a property's condition will blatently influence its value, and no online service can uncover that; it's something that a real person needs to do.

Until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!

Valuing Property Remotely (Part 2)

2007-12-19T14:31:00.000-05:00

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!

Valuing Property Remotely (part 1)

2007-11-09T11:30:00.000-05:00

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!

Finding and Working With Agents for Out of State Purchases (Part 2)

2007-10-23T10:27:00.001-05:00

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!

Finding and Working With Good Agents for Out of State Purchases (Part 1)

2007-10-11T17:30:00.000-05:00

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!

Locating Real Estate Investments (part 5) - Private Real Estate Investor Sites

2007-10-07T17:23:00.000-05:00

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!

Locating Properties (part 4) - Investor Oriented Websites and Communities

2007-09-27T16:29:00.000-05:00

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

Locating Properties (part 3) - National Real Estate Sites

2007-09-20T10:30:00.000-05:00

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

Locating Properties (Part 2) - Classified Sites

2007-09-13T16:49:00.000-05:00

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!

How to Locate Properties (Part 1 - For Sale By Owner Sites)

2007-08-30T18:48:00.000-05:00

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

Researching Markets in Which to Invest

2007-07-29T13:55:00.000-05:00

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:

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!

The Game Plan For Buying Properties Out of State

2007-06-08T09:21:00.000-05:00

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!

Where to Invest (Part 5) – The Mid Atlantic and New England

2007-06-01T10:51:00.000-05:00

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!

Where to Invest (Part 4) - The Midest

2007-05-25T10:30:00.000-05:00

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!

Where to Invest (Part 3) - The Far West and Pacific Northwest

2007-05-16T20:24:00.000-05:00

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!

Where to Invest (Part 2)

2007-04-06T20:11:00.000-05:00

Welcome to another edition of the Coast to Coast Real Estate Investor. In this edition we’re on to Texas and the far west!

In the last edition, I mentioned Texas briefly. I want to start this episode by going back and looking in some more depth at the state. Texas, in my mind, represents the best investment value in the continental United States. Prices are among the lowest in the country, and you get good value for the money. And, that fact is coupled with an amazing quality of life

Now, understand that Texas has come into the sights of all those speculators who wrecked the Las Vegas and Phoenix markets, sending them sky-high. As those markets got too expensive, those same investors turned their attention to Texas because of the perceived value.

Personally, I don’t think the same thing can happen in Texas because there’s simply too much land – to much room to build. However, Texas is attracting a lot of attention, and prices are rising steadily, fortunately at sustainable rates. Appreciation is solid, but it’s not hyper-appreciation, and that makes a difference.

San Antonio and Austin are attracting the most attention – Austin is attracting the most attention because of its culture. It’s the state capital, home of the University of Texas, home of Dell and other high-tech businesses, and has a very hip young culture. You have great selection of properties ranging from inexpensive in-city condos, to country property, to recreation communities near Lake Austin. No doubt, with all of these factors present, Austin will continue to be a hot spot for people relocating.

San Antonio is…well, to say beautiful probably doesn’t do it justice. You’d never know, from impressions, that San Antonio is the 4th largest city in Texas. The best way to understand San Antonio is to experience it – to go on the world-renown Riverwalk and experience the unique ambiance. Housing values are extremely good, and new construction abounds in the greater market area – with some new builds starting under $100K

If being too close to the city is not your thing, there are a myriad of smaller towns & cities nearby that have great investment potential. Consider San Marcos, Bexar, Canyon Lake (which is a golf and lake community) and New Braunfels.

The obvious two cities – Texas’ largest are Dallas and Houston, and well worth considering.

The Dallas – Fort Worth metroplex has an amazing amount of real estate available – and at decent prices. Prices for single family homes can go as low as the 70’s even in decent neighborhoods. Condos can be had as low as the 30’s, and I’ve even seen units in the 20’s! Dallas has some very nice recreational areas around the various large lakes such as Lakeworth and Lake Lewisville.

Houston stretches from clear inland locales to bordering the coast of the Gulf of Mexico. The Bay Area Houston region in and around Clear Lake in the south east of the city is a water-oriented area bordering the Gulf. Areas like The Woodlands and Lake Conroe at the opposite end, on the north west provide planned communities, golf, and lakes for water recreation.

While looking around Houston, don’t forget the Texas coast – the one area of the country I know of where an average family can afford waterfront property! If you can handle the hurricane issue, consider looking at Galveston, Corpus Christie, and the towns that dot the area in between.

Other areas in Texas also hold interesting situations. Small towns and small cities abound, and at bargain basement prices. El Paso, for those of you who are interested in desert living is quite similar in geography to what you’d find in New Mexico, but at about 2/3 of the cost. Many of the more rural towns are getting more cosmopolitan as retirees are taking up residence, but not to the extent that prices are flying high.

As we move west into New Mexico, I’ll point out the beautiful small city of Las Cruces. The Mexican and Native American influences that so often draw retirees and people traveling to the desert SW are present and visible in Las Cruces, but the city still represents a tremendous value. Las Cruces is very close to El Paso, TX, has a university in town, and is only an hour in to Mexico, so it benefits from the presence of those features. There are other small towns nearby, such as Alamagordo, which are also attracting attention of retirees looking for small desert towns.

Albuquerque still represents good value, although the prices have climbed pretty steeply in the last 3 or so years. The way to consider Albuquerque in your mind is to see that, as place like Phoenix and Las Vegas get out of reach for most people, attention turns to Albuquerque because it consistently has lower prices. Thus, it’s an alternative of choice for people seeking the desert lifestyle.

With that in mind, let’s move into Arizona and talk about Phoenix. Once upon a time, Phoenix was a bargain-priced city as far as housing goes. Today, it’s one of the most expensive markets in the country. Can someone still get a ‘buy’ in Phoenix? The answer is yes. For one, condo conversions – where a developer has taken an apartment complex and converted into condo units – abound, and in fact, have been overbuilt. It’s very common to find developers offering no down payment, no mortgage payments for 6 months or even a year, no 1st year taxes or condo fees. I’ve seen incentives on a $120,000 condo of up to $8,000!

Look also to the region 30 minutes south of Phoenix – Queen Creek, Florence, Casa Grande, and Coolidge. Today, in 2007, these areas are still considered to be far enough outside of the city to be inconvenient, but at the same time were overbuilt. As a result, the prices are almost half of what they are in the metro area, but the region is destined to grow and become more populated.

Tucson has always been a couple of steps behind Phoenix in terms of attention. In fact, until about 2005, Tucson wasn’t really much on the radar of investors or retirees. That’s not the case now – not since Phoenix went sky-high. Appreciation is running 10-12% per year as I write this in 2007. That said, reasonably priced property is still available, but continues to climb. Now is a good window of opportunity, because Tucson prices are driven by what’s happening in Phoenix and it’s not going to be long before Tucson and Phoenix are on par.

Another great area in Arizona is the town of Lake Havasu, which is on the border between AZ and Ca. It’s a recreational area, with a lot of water activity. Condos are readily available in the low $100s and single family homes can be had in the upper $100’s.

In Nevada, you see the same forces in Las Vegas as you do in Phoenix. Condo conversions are a best-buy because they were overbuilt and incentives are generous. Condos are about the only property you can buy in Las Vegas for under $200,000. An alternative to pricey Vegas is Laughlin, which has some of the same characteristics of Vegas (such as casino gambling, shows, and large world-class hotels), but is smaller, is a safer environment, has a riverfront and more reasonable pricing. Bullhead city, close by, is another choice.

I’ll wrap up this edition by talking about one last desert area, and that is Palm Springs, California. Believe it or not, the Palm Springs/Indio/Cathedral City area of California still represents a solid value in desert resort real estate and will no doubt continue to appreciate as people choose the area for relocation & retirement. As areas like Las Vegas and Phoenix get out of reach, areas like Palm Springs, Lake Havasu, and Laughlin will be next in line for substantial growth and appreciation.

I’ll wrap up with that – next time, I’ll continue with the examination by moving through the West and into the Pacific Northwest.

Have a great day, and live your real estate dreams!

Where to Invest (Part 1)

2007-04-02T14:00:00.000-05:00

You know, people ask me all the time – where should I invest? What are the hot markets? Are there places that have any good deals left?

Well, that’s where I am going to take you today; this posting is the first in a two-part overview I’m going to write on what markets have good potential. In this part I, I’ll be taking a look at the first 4 of several states that have fantastic investment potential. Part II and forward will continue the examination to the states I don’t cover today.

But, first, I want you to understand some of the forces that are driving the areas I'm highlighting. If you’ve read the prior two postings, you saw the references I made to places like Phoenix and Las Vegas. Understand that those fast and furious run-ups were more driven by speculation than anything else. Fix and flip style investors (actually, more appropriately the “buy and flip” speculators), primarily from California were going into those markets en-masse buying property with the expectation that another investor (probably of the same mentality) would come in an pay them more money…because they expected someone to come behind them…well you get the picture.

If there ever was the definition of a bubble, that was it, and bubbles do burst. Enough said.

I don’t look place much credence on those forces. Oh sure, I am keenly aware that money can be made under those circumstances, but that’s speculation, and speculation leaves a lot of debris. Trying to second-guess speculative forces is tricky, and quite simply, it’s not sustainable. Only those that get in early make any money…and those that are too late…well, please turn out the lights!

I am an investor (and I am assuming you are as well), and not a speculator. Investors, by definition buy with the expectation that things will increase in value over time, but we are not subscribers to the greater fool theory. We rely on valid, sustainable market forces and good value to give us a return on investment over time. We rely as much as we do on our own negotiation and knowledge of a given market as we do on rampant forces over which we have no control.

With that in mind, the most fundamental economic force is supply and demand, and the greatest market force that plays into supply an demand as far as real estate goes is the designs of the baby boomer population and what they are doing – housing wise – as they approach retirement.

There are, depending on who is counting, some 70-80 million baby boomers in the age range from 60 down to about 45. There are clear paths this population is taking in buying properties for their retirement and recreation. Simply put, as a group, they are in a position to buy their dream homes, and they are doing it. Any coastal area, for example, has seen a healthy run-up in values in the last 10 years, mainly because boomers are buying homes in coastal locations.

The interesting thing is, there is still about 15 years of boomer migration yet to happen. Those later bloomers may not get a house on the beach simply because they are too expensive now. But, it is clear that certain areas will become the next ones in line for late boomer interest. Anything near the water, for example…be it ocean, lake, or river is attracting attention. Any area noted for recreation – golf for example, is going to be on the radar.

With that basic premise in mind, I want to cover a preliminary set of 4 states that are attracting this kind of evident attention, and in a broad way point you to areas within those states to pay attention to. I am going to be somewhat general in this and the next blog. My intention in later postings is to get into some intense depth on a state by state, city by city basis. For now, I want to merely build a framework of where you ought to be paying attention.

I’ll begin on the East coast, and work my way South and West. I’ll begin my discussion with SouthEast Virginia

Virginia’s proximity to the Metropolitan Washington DC area makes it a perfect retirement choice for people who are from DC. Chances are, they’ve vacationed in places like Virginia Beach and Williamsburg, and their thoughts turn to that area as a life destination.

Richmond Virginia, is still a sleeper, although the area has seen a run-up in prices over the last 10 years. On a national average basis, though, Richmond homes are less costly than average, and you get a lot of house for the money. It’s not uncommon to find a relatively new SFH for about $160,000 in a nice neighborhood. One particularly notable characteristic of the Richmond metro area is the multitude of planned recreational communities.

Tidewater Virginia – Williamsburg, Newport News, Hampton, Norfolk, and especially Virginia Beach probably represents one of the best values in coastal living in the country. The western edge at Williamsburg is pretty pricey at this point unless you look towards rural housing. Move towards the east to what is knows as the “peninsula” and it gets more suburban, less elite, and less expensive. Hampton is a real sleeper of a waterfront town that has just now blossomed. It has a beautiful harbor, and attracts a big boating population. The city is going through its second renaissance, and has some pretty grand plans for downtown.

Portsmouth & Norfolk have all the trappings of a major city, but are packaged like small towns. The area is virtually surrounded by water, and there’s a lot of renaissance in older areas at still-great prices. Chesapeake, Virginia is a bedroom community that has some pretty good values by Tidewater standards. Virginia Beach is both a resort, and a traditional city once you get off the shoreline, and while it’s gotten much more expensive than in decades past, there’s still a lot of value there. In all of these cities you have a good pick of condos, townhouses, and single-family homes.

Next, let’s move down the coast to North Carolina.

The areas collectively known as the Albemarle Sound still offer a great deal of opportunity both in terms of price and in potential growth. The outer banks areas – areas like Nags Head or Cape Hatteras are probably out of the reach of anyone unless they have deep pockets. But, get into areas like Elizabeth City, Washington, or New Bern, and you’ll find beautiful port towns, at reasonable prices, and still within a short drive of the oceanfront. No doubt, these areas are positioned for increased activity and we are beginning to see it now.

Charlotte is a major urban area – part of the new South that is still reasonable in terms of cost, has an amazing volume of amenities and quality of life, and abundant housing. Just yesterday, I found a 2 bedroom condo, in a complex with a pool and tennis for under $30,000!

The Research Triangle area – Raleigh/Durham/Chapel Hill also benefits from the New South phenomena, the effects of several major universities, a “tech” economy, and has the pricing and quality of life that still make it a treasure find.

South Carolina – nearly all of it is still priced amazingly well by national averages. The coastal areas are still affordable – even Hilton Head has condos under 150K. Look to areas around Charleston and Myrtle Beach which both have good quality of life, lots of amenities, and abundant housing in all price ranges. Columbia, the capitol city, is a real sleeper and I feel waiting to be discovered. My personal secret is the college town of Clemson and it’s surrounds – truly beautiful, affordable, and just now beginning to grow.

Georgia looks a lot like South Carolina in many ways – throughout the state there’s a great quality of life, and you can pick anything from a large city in Atlanta (which still holds promise), to college towns like Athens, which are great investment areas, or even the coast – such as around Savannah which holds good investment promise.

In my next edition I am going to profile the state of Florida. South Florida and certain other parts have followed the bubble-burst of many locations, but Florida as a whole still has an amazing amount to offer.

Until next time - follow your real estate dreams!

William Flood
Your Coast to Coast Real Estate guide

Why Look Beyond Your Backyard?

2007-03-16T12:57:00.001-05:00

I thought I would begine my first real edition presenting reasons for why a real estate investor would want to look beyond their backyard for properties.

If conventional wisdom - if the gurus and supposed experts - suggest you should stay within about a 30 minute radius of your home, why do we see people investing in distant areas? Is it really a bad idea, or is there something else you should know?

First, let me assure you that it isn’t a bad idea…in reality, it’s the opposite…it’s a very good idea. Understand that the late-night infomercial guys (I have nothing against them, by the way), and most of the real estate authors in print are presenting their material for novices and newbies. For the beginner, with little to no experience, concentrating on the backyard is vitally sensible! Folks who are not yet familiar with cash flow, financing, and managing properties do themselves great justice by staying local until they get their feet a bit wet. If, say, you’ve never rented and managed a property before…never experienced the realities of that, then their is great sensibility in staying localized.

But, once an investor like you gets comfortable with the process - particularly being able to detach yourself emotionally from a property and deal with it analytically and business-like, then there’s no fully compelling reason to stay in your home market.

In fact, a motivated investor can miss out on tremendous opportunities by not following strong markets and/or staying with sinking ones. Think about the kind of profits made by investors who took advantage of Las Vegas from 2002-2006. Property there appreciated at times by up to 50% per year! That meant a person could have bought a $150,000 house in a given year, and seen it rise to $225,000 the next…and into the $330’s the year after that! Now that market has slowed, but the signals were there and clear to the public all along. Perhaps you even heard the news from time to time and pondered your own investments there.

Diversification is another reason why out-of-state investing can make a great deal of sense. I reside in Columbus, OH. Our market here is stagnant at best; however, I have properties in places that are appreciating at 10-12% per year, so overall my returns are positive. It’s the same benefit you’ve heard about diversifying a stock portfolio — don’t put all your eggs in one basket. If something happens in one market, you can offset it with returns from another.

Pricing comes immediately to my mind as a draw to many areas across the country. Even today, there are places that have single family homes in the high thirty thousand range. While these are not premier properties by any stretch of the imagination, we’re not talking about war-zone properties either. In many cases, they are solid older homes in rural areas that have not inflated like larger markets. The midwest comes immediately to mind as a region where these kinds of bargains abound.

There are intrinsic benefits as well. An underlying current to The Coast to Coast Investor is that people are naturally drawn to areas they associate with the good life. In other words, you might really want to own a beach house, mountain home, or place by the lake….just because. Not only is that energizing for you, but you are not alone - retirees, in a position to buy their retirement nest, are turning to those kinds of areas for the same reason. And, greater demand by those that want those properties means higher appreciation. Just look at what happened to Florida over the last few of years.

That brings me to a special discussion for those of you in a financial position to buy second, vacation, or retirement homes. Mortgages for those purchases are only marginally more expensive that for a primary residence, and there are substantial tax benefits to owning them. Plus, they need not sit vacant to qualify as your “second home”. You can rent them as long as you meet the guidelines for qualifying the unit as your second home (currently having 2 weeks of exclusive use for yourself per year). It’s important to note that, according to the National Association of Realtors, nearly 35% of all new home purchases in the 2005-2006 time period were of the vacation/second home variety. That means that people increasingly have the financial wherewithall to buy vacation homes, and more important, the willingness to act on the desire. That means more and more recreational areas will see appreciation as baby boomers buy their retirement dream homes.

There are a lot of factors that can make a remote purchase desirable - employment relocation, change of geography or culture…the list could probably be endless given people’s motivations. The short of it is, there are many, many reasons why out-of-state investing makes good economic and strategic sense. All that conventional wisdom you’ve hears or read about may have been for someone at a different place in their investing…don’t let it pigeon-hole you into a limited mindset about your own investing.

Feel free to contact me or comment if you want to dig into this issue more.

Until next time….

Bill Flood

Welcome to The Coast to Coast Investor

2007-03-11T19:54:00.000-05:00

OK…today is inauguration day for the Coast-to-Coast Investor.

So, what’s this blog all about anyway? My intention here is to create a one-of-a-kind blog dedicated to real estate investors who are interested in investing outside of their backyards.

After getting the blog successfully launched, I’ll be pairing it with a Podcast, which I’ll introduce in a future edition. A website is in the works, and a book on out-of-state investing is forthcoming.

Since this is as much my blogging initiation as it is the launch of The Coast to Coast Investor, I thought I’d provide a bit of insight on where I’m going with this thing. What’s the purpose, anyway? Let me start by noting that I am an out-of-state investor myself. In fact, I never had much interest in investing in my backyard. There are just too many exciting, compelling places to invest – recreational areas, the beaches, golf course communities in nice sunny places…you get the idea!

The challenge is, nothing has been written out there that discusses how to do this kind of investing successfully. In fact, the opposite is true – investing authors plainly discourage investing beyond one’s hometown. You are probably familiar with Carleton Sheets the famous real estate guru with the popular TV infomercial; open any of his materials, and within a few pages you’ll find advice to keep investing activities within a 30-minute radius.No doubt, there’s a good argument for investing on the home-front, but many investors, like myself, prefer other locales. Many…perhaps you are one of them…want to pursue hot markets. Those who went in to Phoenix and Las Vegas over the last five years made tons of money! Sunbelt locations like those certainly have a bunch of factors that make them more intrinsically appealing than, say, Detroit or Camden.

I started my out-of-state investing like many people – with a vacation property. One property in Florida led to another; then it was Virginia Beach, then another, another. In all sincerity, I buy these properties probably because of wanderlust. Whenever I vacation somewhere, I always envision living there full-time, and to me the best way to plan for that eventuality is to own something in the community.

Over several years and scores of additional properties, I have developed strong systems (golly, I hate that word…it sounds like I should be promoting one of those late-night infomercials) for locating, acquiring, financing, selling, renting, and managing remote properties. In fact, many of my units I’ve never even seen! That may seem crazy – and it probably is unless you know what you are doing. This place exists to show you how.

A large part of this blog will be part educational/training in nature. Another facet will be to provide you with resources ranging from real estate agent contacts to financing to other valuable tools you’ll need to be effective. I’ll profile locations and their markets. Finally, to provide edification, I’ll narrate deals I’ve been involved in, or which I am pursuing so you can see, first-hand, how they are done.

I’m glad to have you on the journey…it’s going to be an exciting one!

Bill Flood