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 There are a couple of good ones, but most of them have information that is either grossly outdated (read: useless) or otherwise inaccurate.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Even the good subscription services can be out of date, and have scores of public information, so you have to take that into consideration.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
Thursday, September 27, 2007
Thursday, September 20, 2007
Locating Properties (part 3) - National Real Estate Sites
Let's jump right in and take a look at how national real estate sites can be a good source of property leads.
There’s no doubt that real estate brokerages control the vast majority of listings of property for sale. Agent listings on national sites can have certain kinds of issues - among them outdated listings that don't get removed, they are still an important place to look.
There are some pretty well-know places to search:
www.Realtor.com. I don’t tend to use realtor.com to search for listings because I get frustrated with the amount of outdated information I find. It seems to me that about 7 or 8 out of every 10 listings on realtor.com are no longer for sale, but were never taken offline. I do use realtor.com to help find agents, to browse properties in areas in which I am interested to get a sense of value, and learn the communities and so forth. It has some pretty good search tools, so for that it’s useful. And, my comments withstanding, realtor.com is still among the top places to find property for sale.
Here's an FYI (for your information) - be watchful when you are browsing the online classifieds of regional papers. Often when you think you are browsing their reader-placed ads you end up just looking at realtor.com listings. Often you have to dig deeper in the newspaper's website than just the "property for sale" link to find the actual reader-placed classifieds.
The real gem, as far as real estate agent listings go, is being able to access the various multiple listings services. In some cases like Houston’s www.HAR.com, or Ohio's Lake Eerie region's www.firelandsmls.com the service is available to the public without any complication. Some others like Tidewater Virginia's www.hrmls.com provide a certain amount for free, but require either an agent's connection or the paying of a modest subscription fee.
Many links to local MLS services go right through agents' websites, and these can be accessed just as easily as those you can access directly. Searching for the term "MLS" in the area of your interest will generally bring up links, whether they are direct, or on an agency website.
Another FYI - if an agent forces you through a contact page to get your criteria – in other words, you really can’t access the MLS through their site without giving them your contact data. I’d move on. Your objective at this juncture is to research and locate properties, not to be forced into a contact with an agent.
That said, when you find a good agent to work with, they can send you automatically emailed listings that meet your criteria. This is a really useful service and probably the best reason to invest time and energy locating an investor-friendly agent. Probably the best tool I have at my disposal is the nearly daily flood of leads automatically generated by various MLS services and sent through these agents auto-emailings.
Homes guides are great to pick up when you are in an area. I don’t know if you are like me (my wife just laughs at this), but whenever I travel to a new location one of the first things I do is pick up all the homes guides at the grocery store or street corner. Thankfully, most have online versions. Here are three to get you started:
www.Homes.com
www.Homesandland.com
www.harmonhomes.com
Next time I'll be discussing private investor sites and providing a great collection of links to investors who have great deals - often at wholesale pricing - for other investors.
Until Next Time, live your real estate dreams!
William Flood
The Coast to Coast Real Estate Investor
There’s no doubt that real estate brokerages control the vast majority of listings of property for sale. Agent listings on national sites can have certain kinds of issues - among them outdated listings that don't get removed, they are still an important place to look.
There are some pretty well-know places to search:
www.Realtor.com. I don’t tend to use realtor.com to search for listings because I get frustrated with the amount of outdated information I find. It seems to me that about 7 or 8 out of every 10 listings on realtor.com are no longer for sale, but were never taken offline. I do use realtor.com to help find agents, to browse properties in areas in which I am interested to get a sense of value, and learn the communities and so forth. It has some pretty good search tools, so for that it’s useful. And, my comments withstanding, realtor.com is still among the top places to find property for sale.
Here's an FYI (for your information) - be watchful when you are browsing the online classifieds of regional papers. Often when you think you are browsing their reader-placed ads you end up just looking at realtor.com listings. Often you have to dig deeper in the newspaper's website than just the "property for sale" link to find the actual reader-placed classifieds.
The real gem, as far as real estate agent listings go, is being able to access the various multiple listings services. In some cases like Houston’s www.HAR.com, or Ohio's Lake Eerie region's www.firelandsmls.com the service is available to the public without any complication. Some others like Tidewater Virginia's www.hrmls.com provide a certain amount for free, but require either an agent's connection or the paying of a modest subscription fee.
Many links to local MLS services go right through agents' websites, and these can be accessed just as easily as those you can access directly. Searching for the term "MLS" in the area of your interest will generally bring up links, whether they are direct, or on an agency website.
Another FYI - if an agent forces you through a contact page to get your criteria – in other words, you really can’t access the MLS through their site without giving them your contact data. I’d move on. Your objective at this juncture is to research and locate properties, not to be forced into a contact with an agent.
That said, when you find a good agent to work with, they can send you automatically emailed listings that meet your criteria. This is a really useful service and probably the best reason to invest time and energy locating an investor-friendly agent. Probably the best tool I have at my disposal is the nearly daily flood of leads automatically generated by various MLS services and sent through these agents auto-emailings.
Homes guides are great to pick up when you are in an area. I don’t know if you are like me (my wife just laughs at this), but whenever I travel to a new location one of the first things I do is pick up all the homes guides at the grocery store or street corner. Thankfully, most have online versions. Here are three to get you started:
www.Homes.com
www.Homesandland.com
www.harmonhomes.com
Next time I'll be discussing private investor sites and providing a great collection of links to investors who have great deals - often at wholesale pricing - for other investors.
Until Next Time, live your real estate dreams!
William Flood
The Coast to Coast Real Estate Investor
Thursday, September 13, 2007
Locating Properties (Part 2) - Classified Sites
Hi Everyone. Welcome to another edition of the Coast to Coast Real Estate Investor. In this edition I'll be continuing my multi-part series on how and where to locate suitable investment properties out of state.
In this edition, I'll be exploring classified advertising sites and resources. Right on the heels of the For Sale By Owner (FSBO) sites are the big national classified advertising sites. My top pick is the well-known www.Craigslist.com. I’ve heard a lot of people complain that they can’t find deals on Craigslist or that only amateurs use it. That can’t be further from the truth. Any time you have a collection of sellers, you are going to have a certain percentage that are “don’t wanter” types that are really flexible. You just need to know what to look for.
The trick to Craigslist is learning how to search. Craigslist allows you to do keyword searches, so you need to look for terms that would pull up potential candidates. For example, searching for “owner relocating” or “out of state” often pulls up some interesting possibilities. It does take a certain amount of finessing to really work Craigslist searches, and I’m going to dedicate a future lesson on just how to do some very precise looking. For now, searching for common investor-oriented terms like “owner motivated” or “fixer upper” can produce fantastic results.
My second pick in classified sites is www.backpage.com. It’s very much like Craigslist, but less well known. It has the advantage that it pulls ads from local papers and free newsies. It’s also very searchable, which makes it a great tool. I also like www.classifiedads.com for the same reasons, although the data on there isn't as extensive as the other two.
Don’t forget local publications like newspapers and Pennysavers. Their classifieds are often online, and of course, you can pick up the publications when you are in an area or subscribe to them. Browsing the online classifieds of an out-of-state newspaper online is fine, although if it has search tools, it's a better situation. One thing to be aware of when you use out of state newspaper sites is that the real estate classified ads are often nothing more than listings pulled from www.realtor.com, and are not the same as the actual ads run by individual sellers. You often have to look a bit deeply to find the actual ads that are running in the printed version of the paper.
Next time I'll be delving into national real estate sites. They can be a wonderful resource.
Until next time - live your real estate dreams!
In this edition, I'll be exploring classified advertising sites and resources. Right on the heels of the For Sale By Owner (FSBO) sites are the big national classified advertising sites. My top pick is the well-known www.Craigslist.com. I’ve heard a lot of people complain that they can’t find deals on Craigslist or that only amateurs use it. That can’t be further from the truth. Any time you have a collection of sellers, you are going to have a certain percentage that are “don’t wanter” types that are really flexible. You just need to know what to look for.
The trick to Craigslist is learning how to search. Craigslist allows you to do keyword searches, so you need to look for terms that would pull up potential candidates. For example, searching for “owner relocating” or “out of state” often pulls up some interesting possibilities. It does take a certain amount of finessing to really work Craigslist searches, and I’m going to dedicate a future lesson on just how to do some very precise looking. For now, searching for common investor-oriented terms like “owner motivated” or “fixer upper” can produce fantastic results.
My second pick in classified sites is www.backpage.com. It’s very much like Craigslist, but less well known. It has the advantage that it pulls ads from local papers and free newsies. It’s also very searchable, which makes it a great tool. I also like www.classifiedads.com for the same reasons, although the data on there isn't as extensive as the other two.
Don’t forget local publications like newspapers and Pennysavers. Their classifieds are often online, and of course, you can pick up the publications when you are in an area or subscribe to them. Browsing the online classifieds of an out-of-state newspaper online is fine, although if it has search tools, it's a better situation. One thing to be aware of when you use out of state newspaper sites is that the real estate classified ads are often nothing more than listings pulled from www.realtor.com, and are not the same as the actual ads run by individual sellers. You often have to look a bit deeply to find the actual ads that are running in the printed version of the paper.
Next time I'll be delving into national real estate sites. They can be a wonderful resource.
Until next time - live your real estate dreams!
Thursday, August 30, 2007
How to Locate Properties (Part 1 - For Sale By Owner Sites)
Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor.
Today I am going to start a multi-part series on where to locate properties across the country. Let me begin by saying that as you start using any of the resources I’m providing - or any other - your ultimate job is to get to know the market in which you are investing. Don’t try to shortcut that by using a website! Your job is to look, and look, and look, and to research, and then research some more to get a clear understanding of prices, values, best communities in which to invest, and what’s happening in a given market.
Don’t jump into some deal prematurely without having a real good sense of where you are planning to buy. Don’t take anyone’s word that a property is worth a certain amount. Basically, don’t make the speculator’s mistake of buying anything just because you can.
For Sale By Owner Properties and For Sale By Owner Sites
I’m going to begin this series by discussing For Sale By Owner (FSBO) resources. I’m placing it at the top for a reason. In my opinion, working deals that don’t involve real estate agents gives you various advantages.
First, since a real estate commission is not involved, you don’t have that 6% or 7% complicating the deal. Often, when you see someone who is otherwise flexible and motivated when selling their property, it’s the closing costs, and in particular the real estate commission that they can’t afford to pay out of their bank account. So their price and/or terms will reflect the need to recap the real estate commission from the property’s equity. I’ve come across scores of deals in which the owner would virtually give away the house, or finance 100%, except they need an amount to cover closing and commissions. Keep in mind, that on a $150,000 house, that can represent $15,000, so we’re not talking about a small amount of change! When it’s for sale by owner, you bypass most of that challenge.
The second reason why I like for sale by owner situations is that you are dealing with the seller directly. If you are good with people – if you learn how to build rapport and dialogue with sellers it helps you put together deals. Agents are not typically going to disclose a seller’s situation, so when you can deal with an owner directly you have the benefit of diplomatically inquiring about the seller’s situation. A skilled investor will always dig into the situation of the seller – more so than the property itself. As the old saying goes, the deal is in the situation, not the property. When you find a motivated seller - perhaps someone who has relocated out of state, is in financial difficulty, divorcing, etc. - you are in a position to help them and put together a fantastic deal for yourself.
By way of example, let's say you've come across a seller who bought a property a year ago and was suddenly transferred to another state. They can't afford two house payments, have bled their bank account low, and are getting dangerously close to a foreclosure situation. The problem is, they no longer have the $12,000 to pay a real estate commission and closing costs. So, they try the FSBO route. What's really hurting them is the extra set of payments. Perhaps you could come in and offer a rent with option to buy or lease purchase arrangement (more on those in an upcoming edition on financing) or simply take over their payments (called a subject-to deal). Your solution would take the burden of the payments off their hands while getting you into a deal with little or no upfront money. It's truly a win-win situation!
One of my best deals - actually one of my first out of state purchases was a FSBO, in a situation very near to what I just described. I can't overemphasize how valuable the for sale by owner situation can be.
With all that in mind, here are some FSBO resources.
Two of the top FSBO sites are:
www.Buyowner.com
www.Forsalebyowner.com
There are others like www.FSBO.com and www.byowner.com. FSBO sites are pretty prolific, but the first two are really solid contenders with thousands of listings across the country. It’s also worth mentioning that there are FSBO guides you can pick up in cities when you travel.
In the next edition I will be covering the wealth of classified advertising that's available across the country both in print and online.
Until then,
Live Your Real Estate Dreams
Today I am going to start a multi-part series on where to locate properties across the country. Let me begin by saying that as you start using any of the resources I’m providing - or any other - your ultimate job is to get to know the market in which you are investing. Don’t try to shortcut that by using a website! Your job is to look, and look, and look, and to research, and then research some more to get a clear understanding of prices, values, best communities in which to invest, and what’s happening in a given market.
Don’t jump into some deal prematurely without having a real good sense of where you are planning to buy. Don’t take anyone’s word that a property is worth a certain amount. Basically, don’t make the speculator’s mistake of buying anything just because you can.
For Sale By Owner Properties and For Sale By Owner Sites
I’m going to begin this series by discussing For Sale By Owner (FSBO) resources. I’m placing it at the top for a reason. In my opinion, working deals that don’t involve real estate agents gives you various advantages.
First, since a real estate commission is not involved, you don’t have that 6% or 7% complicating the deal. Often, when you see someone who is otherwise flexible and motivated when selling their property, it’s the closing costs, and in particular the real estate commission that they can’t afford to pay out of their bank account. So their price and/or terms will reflect the need to recap the real estate commission from the property’s equity. I’ve come across scores of deals in which the owner would virtually give away the house, or finance 100%, except they need an amount to cover closing and commissions. Keep in mind, that on a $150,000 house, that can represent $15,000, so we’re not talking about a small amount of change! When it’s for sale by owner, you bypass most of that challenge.
The second reason why I like for sale by owner situations is that you are dealing with the seller directly. If you are good with people – if you learn how to build rapport and dialogue with sellers it helps you put together deals. Agents are not typically going to disclose a seller’s situation, so when you can deal with an owner directly you have the benefit of diplomatically inquiring about the seller’s situation. A skilled investor will always dig into the situation of the seller – more so than the property itself. As the old saying goes, the deal is in the situation, not the property. When you find a motivated seller - perhaps someone who has relocated out of state, is in financial difficulty, divorcing, etc. - you are in a position to help them and put together a fantastic deal for yourself.
By way of example, let's say you've come across a seller who bought a property a year ago and was suddenly transferred to another state. They can't afford two house payments, have bled their bank account low, and are getting dangerously close to a foreclosure situation. The problem is, they no longer have the $12,000 to pay a real estate commission and closing costs. So, they try the FSBO route. What's really hurting them is the extra set of payments. Perhaps you could come in and offer a rent with option to buy or lease purchase arrangement (more on those in an upcoming edition on financing) or simply take over their payments (called a subject-to deal). Your solution would take the burden of the payments off their hands while getting you into a deal with little or no upfront money. It's truly a win-win situation!
One of my best deals - actually one of my first out of state purchases was a FSBO, in a situation very near to what I just described. I can't overemphasize how valuable the for sale by owner situation can be.
With all that in mind, here are some FSBO resources.
Two of the top FSBO sites are:
www.Buyowner.com
www.Forsalebyowner.com
There are others like www.FSBO.com and www.byowner.com. FSBO sites are pretty prolific, but the first two are really solid contenders with thousands of listings across the country. It’s also worth mentioning that there are FSBO guides you can pick up in cities when you travel.
In the next edition I will be covering the wealth of classified advertising that's available across the country both in print and online.
Until then,
Live Your Real Estate Dreams
Sunday, July 29, 2007
Researching Markets in Which to Invest
Hello everyone, this is Bill Flood, and welcome to another edition of the Coast to Coast Real Estate Investor.
Last week I provided an 8-step formula for how to approach out of state investing. This week, I want to look in more depth at the first step – that of researching markets in which to invest.
Let me start by identifying what I think are three critical components that determine where an investor should be looking.
They are:
Last week I provided an 8-step formula for how to approach out of state investing. This week, I want to look in more depth at the first step – that of researching markets in which to invest.
Let me start by identifying what I think are three critical components that determine where an investor should be looking.
They are:
- Employment trends
- Housing factors
- Population shifts (particularly by baby boomers) -and-
- Overall affordability.
Employment Trends
Employment trends deal with whether an area is experiencing job growth, stagnation, or decline. Many areas I discuss are experiencing growth in employment, which brings people into an area for jobs, placing pressure on the existing stock of housing and pushes up rents and property values. Declines in employment have the opposite effect as is being seen in places like Detroit. Unless you are hedging for a turnaround in an area, your best bet is to find an area with good employment prospects, even if you are not seeking a job yourself.
Housing Factors
There are many factors related to housing. Among them are appreciation rates, valuations, the ratio between rent and mortgage payments, and the number of vacant units waiting to be filled.
Appreciation rate is probably the easiest to understand, probably because it was one of those things that was reported on so markedly during the housing boom. Appreciation represents how much a property is going up or down in value. On average, across the country, and over time, real estate seems to appreciate at about a 4% per year rates. But, when a market gets hot, that can go up into double digits, and that’s when things get promising.
Keep in mind that housing values can stagnate, and even go down – particularly if they ballooned too fast and defied any logic.
Valuation is another key component. In certain markets properties are so expensive that only the upper strata of the population can afford to buy. And, don’t make the mistake of thinking that an expensive area naturally means better appreciation. That is often not the case.
One of the factors related to valuation is the differential between a typical mortgage payment and the rent a property can command. For example, in pricey areas, it’s not uncommon to find average single family homes selling for well over $400,000. That means a mortgage in the ballpark range of probably $3,000 a month. But, rental rates on that same property might be in the range of $1900 a month, meaning a $1100 a month negative cash flow! In a less costly area, a house might run, $140,000, with a ballpark mortgage of $1,100. Rent in that area might be $1,000 a month, nearly covering the monthly payment.
Vacancy rates and the amount of housing inventory an area needs to absorb is another critical factor. Closely related to this is the time it takes a property to get sold or rented. Right now in Phoenix there is at least a six month glut in vacant property for sale. Combine that with the mass of properties that were overvalued on speculation and you find a bad combination – people renting properties for far less than their monthly carrying costs just to cover some of their expenses…because they know the property could take half a year or more to sell.
Let’s turn our attention to a variety of resources where you can find critical housing market data. My emphasis today is on resources that you can access for free.
Federal Government Resources
First and foremost is the US Census. You can access that at www.census.gov
Census data is not compiled yearly, and can be a couple of years out of date. But, it does paint an overall picture that’s reasonably current. Here are just a sample of the reports you can access with the Census:
- Housing Affordability
- Absorption Rate
- Income
- Demographics of an area
HUD’s Resource site at www.HUDuser.org
Here are just some of the reports you can access from HUD
- State of Cities Data System
- US Housing Market Conditions
- American Housing Survey
- Property Owners and Managers Survey
State and Local Government Resources
State Economic Development offices hold a wealth of information for states, cities, towns, and counties. You can access a complete list of state economic development offices at the Economic Development Administration’s Website www.eda.gov
Associations
The National Association of Realtors at www.realtor.org and the National Association of Home Builders www.nahb.org are two fantastic resources with a lot of research at your disposal.
Chambers of Commerce are the gateways to local areas, their merits, business climate and so forth. You can access chambers across the country at the World Chamber of Commerce website (www.commerce.com) or the US Chamber of Commerce (www.2chambers.com)
Local and State Real Estate Investment Associations (or REIAs)
Larry Goins, who is going to be our guest speaker next week www.larrygoins.com has a comprehensive list of REIA’s across the country on his website as does the National REIA at www.nationalreia.com.
Private Research Sites
Mostly, these tend to be fee-based, but Altos Research, which deals in Western states has a fantastic property valuation map that overlays value charts on Google maps.
Retirement Sites
Retirehomesmart.com and greatretirementspots.com are two tremendous resources if your strategy is to buy where boomers are retiring.
Relocation Sites
Sperlings bestplaces.net and findyourspot are both similar tools, being able to filter locations based on criteria you deem important. The Wall Street Journal’s www.Realestatejournal.com has a similar tool.
Other Websites of Value
Job sites like Monster.com and, in particular, the Riley Guide www.rileyguide.com often profile markets, with a bent towards job prospects, growth, cost, and quality of life.
Magazines
Where to Retire magazine is a must have if you place importance on population migration. Each issue is a storehouse of market profiles and ideas for places to invest. Live South, which focuses primarily on the South East, has a magazine and website by the same name has similar information to Where to Retire.
CNN, Forbes, Money Magazine, the Wall Street Journal and similar financial publications all put out real estate articles on a regular basis. Just recently, for example, Kiplinger profiled the ten top cities for empty nesters.
Books
Places Rated Almanac is a must if you want to select areas by your own criteria. It covers, among other factors, tax rates, job growth, and quality of life.
Where to Retire magazine puts out a series of books on buying strategies. You’ll find them advertised in the pages of the magazine.
That’s a lot on your plate – and remember, if you want to ask any questions or need more information, email me at whflood@yahoo.com and I will be happy to chat with you.
So, until next time, I’m Bill Flood; this is the Coast to Coast Real Estate Investor…live your real estate dreams!
Friday, June 8, 2007
The Game Plan For Buying Properties Out of State
Welcome to another edition of the Coast-to-Coast Real Estate Investor.
Last week I wrapped up the overview of the various states to invest in. If you haven’t read any of those, or heard the Podcast versions yet you can go back and access them. The blog entries are located here in the archives, and the Podcasts can be accessed at:
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc
Those “where to buy property” episodes will be real useful to you for laying the groundwork on where to invest.
Today, I am covering a basic game plan for buying property out of state. This game plan is structured around long-term holding, but those of you interested in flipping properties can still make use of much of it. Today, I’ll be presenting the overview, and in the following weeks, I’ll be examining each step much more thoroughly.
So, let’s begin!
Step 1. Researching Markets –
Before you ever invest in an area other than your own home market, you need to have a clear idea of where you are going to invest…and why. Your reasoning can be as simple as the desire to buy a vacation home, or as calculated as trying to invest in a highly appreciating market. But, you need to be clear on your goals.
Begin with one market in mind. In the beginning, don’t try to chase all over the country after deals. With an entire country’s worth of real estate out there, you can get stretched way too thin and end up unproductive and totally frustrated. Simply put, you can’t know everything about every community, and there’s a lot of market research you need to undertake before you buy. Thus, you need to focus your attention. Believe me, I know this first-hand. You can easily fall into the trap of spinning your wheels looking at too many places at once and get more wrapped up in looking than buying! Being busy looking at properties will not make you wealthier – only buying them will.
So, where do you go to research markets?
My Podcast & Blog, of course are good places to get market information. As I noted at the beginning, the overviews presented over the last several weeks are good places to begin. And, down the road, I’ll be taking very intense, detailed looks at various areas.
Commercial sources are another great place to do your research. There are great magazines such as Where to Retire and powerful websites such as www.bestplaces.net that can provide all kinds of market information.
Government resources – the U.S. Census is a tremendous resource when it comes to digging up details on job growth, demographics, and housing prices among other things. State economic development offices and boards of realtors can help you get more localized information.
Step 2. - Locating properties
Locating properties is actually one of the easiest parts of the process. However, as I mentioned, it’s also the biggest trap because there is an endless supply of properties across the country; so, I will re-emphasize the importance of focusing your search.
Websites are the natural place to begin searching. One of the things that made out-of-state investing so possible now is the access to property listings on the Internet from sellers and realtors.
Craigslist (www.craigslist.com) is among my preferred places to look. If you haven’t come across Craigslist yet, it’s like the worlds biggest classified advertising site. For Sale By Owner sites, like www.fsbo.com are another place to look. FSBO’s are good because you are dealing with sellers directly and deals aren’t complicated by real estate commissions.
Real estate sites like www.realtor.com, and those available from virtually every real estate office are another logical choice. Realtors, with their access to multiple listing services have access to the main source of property listings, and a good share of brokerages allow the public to access the local multiple listing service (MLS) listings from their websites.
One commonly overlooked source of property leads is other investors. You’ll find investors with properties they are trying to flip, rentals they want to sell, and fixers they are trying to wholesale - so they can be a good source of leads. A side benefit is that they are the most common source of owner financing, so if you don’t want to go the traditional mortgage route, they offer a potential advantage.
Step 3. Buying properties
Keep in mind that whether you are buying a vacation home or trying to flip a property in a hot market, you are an investor. As an investor, the numbers must make sense in any deal. Always keep in mind that you need to buy right. That means getting good prices, good terms, or both. As an investor you can’t afford to buy at retail – or worse, above retail. Speculators do that in hot markets, but that’s more akin to gambling than investing.
Because of the need to get good deals, For Sale By Owners hold particular appeal. As I noted a moment ago, FSBO's are good because you are dealing with sellers directly, and deals aren’t complicated by real estate commissions. As an investor, in general, you will find that working with owners far easier than working through real estate agents.
That’s not to say you shouldn’t work through real estate agents. Realtors are the single largest source of properties for sale, so you can’t overlook working with them.
There is the issue, however, of whether you should work with one realtor exclusively (typically they will be your buyer’s agent) or whether you should talk to all the various listing agents who have the particular houses for sale.
In general, you’ll find it easier to contact the listing agents directly, but that also tends to be the harder route to go in terms of successfully buying something. Working with one specific agent and getting them to send you listings that meet your criteria is much more productive and will serve you better in the long run. On the other hand, it can be difficult to find a good agent. A good agent is worth their weight in gold, and it can take speaking to 20 or 30 agents before you find a good one. Plus as an investor you tend to be on a longer timeline than most agents expect; if you don’t buy, sooner or later they will move on to other clients.
On a completely different issue, buying condos versus single-family homes should be an issue you consider. Personally, I prefer condos in amenitied communities with things like a pool, tennis, etc. Buying a condo means you have to factor in the monthly condo fee, but that fee also takes a lot of maintenance issues off your plate, which is good when you are out of state. Single-family homes are generally the better investment, though. Keep in mind, however, that with a single-family house, sooner or later you’ll have to put on a new roof, take care of the landscaping, perhaps exterminate bugs – those are dealt with for you in a condo or townhouse. Over a long period of time, the cost of repairs versus those condo fees can be equivalent to each other
Step 4. Financing
If you are flush with money, cash flow, and credit, the subject of financing is probably not too much of a concern for you. You’ll be able to go out and get a mortgage of some type, and your main concern is getting the best rate and terms you can find.
If you are a typical buyer, probably with a middle income job, a family, and so forth, you are probably weak in one of those areas, so the subject of financing is probably much more important to you. To emphasize this point, a typical middle income buyer may find it reasonably easy to get a second home loan, but then run into a brick wall buying a third property. So, understanding the subject of finance is vital.
Owner terms – commonly referred to owner financing or creative financing is something every investor should study. Sooner or later you will run into a roadblock trying to qualify for traditional financing. At that point, if you don’t find alternative means to finance properties you’ll be stuck in the water. If an owner will offer owner financing where you make payments to him or her instead of wanting a cash sale, issues of your income, credit, or debt load may be irrelevant. It’s simply you and the seller at that point as opposed to you being scrutinized by a big money bank.
That’s not to say you won’t use traditional financing. There’s a place for that, too.
Mortgage brokers, who independently represent a variety of lenders, are often a best source for traditional financing. Simply put, if the broker can’t get you a loan, they don’t earn their commission, so there’s a good incentive there.
Banks, of course are natural sources. If you utilize a large national bank like Chase or Citicorp check to see if their mortgage department is licensed in the state where you want to buy. This can be more expensive than other routes, but there is a convenience factor because you can work from your local branch.
Local banks – that is, banks in the immediate area where you want to buy can be great places to find loans at good rates. Depending on the particular bank, they are often the most assertive lenders in the area, and often have decent terms and criteria – representing a bargain compared to other sources.
Step 5 – Don’t Forget the Details
Never forget the details you have to take care of when you have an accepted contract – these include surveys, home inspections, pest inspections, and appraisals. I have one important piece of advice - don't go with the affiliated companies of large banking operations. They are simply too expensive compared with independent services in the area. Countrywide, for example, partners with appraisers, title companies, pest inspectors, home inspectors, and so on. The fees for these “convenient” services can easily be double what you’d pay for the same service by selecting your own vendor.
Step 6. Closing -
You’ll need a title company to close. In some states the buyer gets to select the title company, in others it’s the seller’s prerogative If it’s yours, get references, and don't go with one affiliated with large mortgage company….again, too expensive compared to the overall market. That bedfellow arrangement is often nothing more than disguised greed waiting to take your money.
Part of the title company’s work is providing title insurance. Again, don’t go with the affiliates if you are using a large national mortgage company unless you are willing to pay a whole lot extra.
Step 7. Getting tenants
This is among the most important steps in the process. If you don’t get good tenants…and get them quickly, your investment will turn into a monthly money pit.
I do not recommend trying doing it your self. It just doesn’t make sense for you to try to secure and manage a tenant from hundreds of miles away. Some people do it successfully, but I am going to suggest you consider professional help in this arena. I’ve never understood why a landlord (even one with a local property) would try to undertake their own management to save $70 or $80 a month. Think about it -- where else can you get 24x7, legal, advertising, marketing support, etc. for about just a few dollars a month? I have a friend who owns several franchises. He pays his managers in the $30,000 range, and they don’t handle nearly the responsibility my property managers do. In my mind, professional property management is a secret bargain you need to discover.
First be aware that there is a different between tenant placement and property management. Most real estate agents who handle rentals are doing tenant placement. That is, they will find and qualify a tenant for you. For that, they will typically charge you 1 month’s rent. The problem is, you are left to manage the tenant, handle ongoing repairs, collect the rent, deal with potential eviction and a host of other concerns after the tenant is obtained. That’s not what you want.
What you really want is a property manager who not only can secure a tenant, but can handle the property on an ongoing basis. In my opinion you want to get the best property manager you can find because they have the best systems, contacts with reliable tradespeople for repairs, etc. A bad property manager is next to useless and can end up costing you money by being slow to get tenants, and sloppy with handling them, so get the best you can find. A good or bad property manager costs about the same amount, and that’s around 7-10% of rents.
In resort areas you may have the mixed blessing of short-term rentals. That’s a subject a bit too complex to go into in this edition, and I’ll save that for later. What I will note is that short term property management will be much more expensive than I’ve noted, and can run as high as 30% of your rents. It’s just the nature of the beast, and you need to decide whether to rent short-term or not.
A real blessing is when you can find an onsite property manager, or one that’s so closely affiliated with a community, it’s essentially the same thing. They have somewhat of a monopoly on getting tenants for that community, so they are usually the best game in town. It’s a double benefit if they also manage the home owner’s association because they really have their thumb on the full pulse of issues like maintenance.
Step 8. Handling vacancies and negative cash flow
You need to be properly primed to handle an out of state rental. Like any investment, thinking it will be rented 100% of the time is unrealistic. Consequently, you need to be prepared for the inevitable vacancies and likelihood of negative cash flow, unless it’s in more of a working class rental area. If you are prepared for that going in, you’ll do OK. If you don’t allow for that, you’ll get stung.
Keep in mind that the better the property is for appreciation, the worse it tend to be for cash flow. A resort property may not cash-flow at all, but might appreciate 10% per year. A blue-collar rental house may have decent cash flow, but little appreciation potential.
Given a typically priced and financed deal, a simplistic way to think of the financial realities of solid white-collar home is that in year 1 you’ll have a negative cash flow. In year 2 you’ll approach break even. In year 3 you’ll have a slight, but insignificant positive, and from there on you should see a small but increasing positive cash flow. That again is simplistic, but at least sets the stage for appropriate thinking. A little reserve cash will go a long way to your being able to hold on to that property.
So, it’s eight steps. That will give you a sense of what processes it takes to successfully invest out of state. As we go over the next few weeks, I’ll be taking intimate looks at each of those stages, providing much more depth, and supplying lots of resources.
You won’t want to miss a single edition!
Have a great day, and live your real estate dreams!
Last week I wrapped up the overview of the various states to invest in. If you haven’t read any of those, or heard the Podcast versions yet you can go back and access them. The blog entries are located here in the archives, and the Podcasts can be accessed at:
http://www.talkshoe.com/talkshoe/web/talkCast.jsp?masterId=20058&cmd=tc
Those “where to buy property” episodes will be real useful to you for laying the groundwork on where to invest.
Today, I am covering a basic game plan for buying property out of state. This game plan is structured around long-term holding, but those of you interested in flipping properties can still make use of much of it. Today, I’ll be presenting the overview, and in the following weeks, I’ll be examining each step much more thoroughly.
So, let’s begin!
Step 1. Researching Markets –
Before you ever invest in an area other than your own home market, you need to have a clear idea of where you are going to invest…and why. Your reasoning can be as simple as the desire to buy a vacation home, or as calculated as trying to invest in a highly appreciating market. But, you need to be clear on your goals.
Begin with one market in mind. In the beginning, don’t try to chase all over the country after deals. With an entire country’s worth of real estate out there, you can get stretched way too thin and end up unproductive and totally frustrated. Simply put, you can’t know everything about every community, and there’s a lot of market research you need to undertake before you buy. Thus, you need to focus your attention. Believe me, I know this first-hand. You can easily fall into the trap of spinning your wheels looking at too many places at once and get more wrapped up in looking than buying! Being busy looking at properties will not make you wealthier – only buying them will.
So, where do you go to research markets?
My Podcast & Blog, of course are good places to get market information. As I noted at the beginning, the overviews presented over the last several weeks are good places to begin. And, down the road, I’ll be taking very intense, detailed looks at various areas.
Commercial sources are another great place to do your research. There are great magazines such as Where to Retire and powerful websites such as www.bestplaces.net that can provide all kinds of market information.
Government resources – the U.S. Census is a tremendous resource when it comes to digging up details on job growth, demographics, and housing prices among other things. State economic development offices and boards of realtors can help you get more localized information.
Step 2. - Locating properties
Locating properties is actually one of the easiest parts of the process. However, as I mentioned, it’s also the biggest trap because there is an endless supply of properties across the country; so, I will re-emphasize the importance of focusing your search.
Websites are the natural place to begin searching. One of the things that made out-of-state investing so possible now is the access to property listings on the Internet from sellers and realtors.
Craigslist (www.craigslist.com) is among my preferred places to look. If you haven’t come across Craigslist yet, it’s like the worlds biggest classified advertising site. For Sale By Owner sites, like www.fsbo.com are another place to look. FSBO’s are good because you are dealing with sellers directly and deals aren’t complicated by real estate commissions.
Real estate sites like www.realtor.com, and those available from virtually every real estate office are another logical choice. Realtors, with their access to multiple listing services have access to the main source of property listings, and a good share of brokerages allow the public to access the local multiple listing service (MLS) listings from their websites.
One commonly overlooked source of property leads is other investors. You’ll find investors with properties they are trying to flip, rentals they want to sell, and fixers they are trying to wholesale - so they can be a good source of leads. A side benefit is that they are the most common source of owner financing, so if you don’t want to go the traditional mortgage route, they offer a potential advantage.
Step 3. Buying properties
Keep in mind that whether you are buying a vacation home or trying to flip a property in a hot market, you are an investor. As an investor, the numbers must make sense in any deal. Always keep in mind that you need to buy right. That means getting good prices, good terms, or both. As an investor you can’t afford to buy at retail – or worse, above retail. Speculators do that in hot markets, but that’s more akin to gambling than investing.
Because of the need to get good deals, For Sale By Owners hold particular appeal. As I noted a moment ago, FSBO's are good because you are dealing with sellers directly, and deals aren’t complicated by real estate commissions. As an investor, in general, you will find that working with owners far easier than working through real estate agents.
That’s not to say you shouldn’t work through real estate agents. Realtors are the single largest source of properties for sale, so you can’t overlook working with them.
There is the issue, however, of whether you should work with one realtor exclusively (typically they will be your buyer’s agent) or whether you should talk to all the various listing agents who have the particular houses for sale.
In general, you’ll find it easier to contact the listing agents directly, but that also tends to be the harder route to go in terms of successfully buying something. Working with one specific agent and getting them to send you listings that meet your criteria is much more productive and will serve you better in the long run. On the other hand, it can be difficult to find a good agent. A good agent is worth their weight in gold, and it can take speaking to 20 or 30 agents before you find a good one. Plus as an investor you tend to be on a longer timeline than most agents expect; if you don’t buy, sooner or later they will move on to other clients.
On a completely different issue, buying condos versus single-family homes should be an issue you consider. Personally, I prefer condos in amenitied communities with things like a pool, tennis, etc. Buying a condo means you have to factor in the monthly condo fee, but that fee also takes a lot of maintenance issues off your plate, which is good when you are out of state. Single-family homes are generally the better investment, though. Keep in mind, however, that with a single-family house, sooner or later you’ll have to put on a new roof, take care of the landscaping, perhaps exterminate bugs – those are dealt with for you in a condo or townhouse. Over a long period of time, the cost of repairs versus those condo fees can be equivalent to each other
Step 4. Financing
If you are flush with money, cash flow, and credit, the subject of financing is probably not too much of a concern for you. You’ll be able to go out and get a mortgage of some type, and your main concern is getting the best rate and terms you can find.
If you are a typical buyer, probably with a middle income job, a family, and so forth, you are probably weak in one of those areas, so the subject of financing is probably much more important to you. To emphasize this point, a typical middle income buyer may find it reasonably easy to get a second home loan, but then run into a brick wall buying a third property. So, understanding the subject of finance is vital.
Owner terms – commonly referred to owner financing or creative financing is something every investor should study. Sooner or later you will run into a roadblock trying to qualify for traditional financing. At that point, if you don’t find alternative means to finance properties you’ll be stuck in the water. If an owner will offer owner financing where you make payments to him or her instead of wanting a cash sale, issues of your income, credit, or debt load may be irrelevant. It’s simply you and the seller at that point as opposed to you being scrutinized by a big money bank.
That’s not to say you won’t use traditional financing. There’s a place for that, too.
Mortgage brokers, who independently represent a variety of lenders, are often a best source for traditional financing. Simply put, if the broker can’t get you a loan, they don’t earn their commission, so there’s a good incentive there.
Banks, of course are natural sources. If you utilize a large national bank like Chase or Citicorp check to see if their mortgage department is licensed in the state where you want to buy. This can be more expensive than other routes, but there is a convenience factor because you can work from your local branch.
Local banks – that is, banks in the immediate area where you want to buy can be great places to find loans at good rates. Depending on the particular bank, they are often the most assertive lenders in the area, and often have decent terms and criteria – representing a bargain compared to other sources.
Step 5 – Don’t Forget the Details
Never forget the details you have to take care of when you have an accepted contract – these include surveys, home inspections, pest inspections, and appraisals. I have one important piece of advice - don't go with the affiliated companies of large banking operations. They are simply too expensive compared with independent services in the area. Countrywide, for example, partners with appraisers, title companies, pest inspectors, home inspectors, and so on. The fees for these “convenient” services can easily be double what you’d pay for the same service by selecting your own vendor.
Step 6. Closing -
You’ll need a title company to close. In some states the buyer gets to select the title company, in others it’s the seller’s prerogative If it’s yours, get references, and don't go with one affiliated with large mortgage company….again, too expensive compared to the overall market. That bedfellow arrangement is often nothing more than disguised greed waiting to take your money.
Part of the title company’s work is providing title insurance. Again, don’t go with the affiliates if you are using a large national mortgage company unless you are willing to pay a whole lot extra.
Step 7. Getting tenants
This is among the most important steps in the process. If you don’t get good tenants…and get them quickly, your investment will turn into a monthly money pit.
I do not recommend trying doing it your self. It just doesn’t make sense for you to try to secure and manage a tenant from hundreds of miles away. Some people do it successfully, but I am going to suggest you consider professional help in this arena. I’ve never understood why a landlord (even one with a local property) would try to undertake their own management to save $70 or $80 a month. Think about it -- where else can you get 24x7, legal, advertising, marketing support, etc. for about just a few dollars a month? I have a friend who owns several franchises. He pays his managers in the $30,000 range, and they don’t handle nearly the responsibility my property managers do. In my mind, professional property management is a secret bargain you need to discover.
First be aware that there is a different between tenant placement and property management. Most real estate agents who handle rentals are doing tenant placement. That is, they will find and qualify a tenant for you. For that, they will typically charge you 1 month’s rent. The problem is, you are left to manage the tenant, handle ongoing repairs, collect the rent, deal with potential eviction and a host of other concerns after the tenant is obtained. That’s not what you want.
What you really want is a property manager who not only can secure a tenant, but can handle the property on an ongoing basis. In my opinion you want to get the best property manager you can find because they have the best systems, contacts with reliable tradespeople for repairs, etc. A bad property manager is next to useless and can end up costing you money by being slow to get tenants, and sloppy with handling them, so get the best you can find. A good or bad property manager costs about the same amount, and that’s around 7-10% of rents.
In resort areas you may have the mixed blessing of short-term rentals. That’s a subject a bit too complex to go into in this edition, and I’ll save that for later. What I will note is that short term property management will be much more expensive than I’ve noted, and can run as high as 30% of your rents. It’s just the nature of the beast, and you need to decide whether to rent short-term or not.
A real blessing is when you can find an onsite property manager, or one that’s so closely affiliated with a community, it’s essentially the same thing. They have somewhat of a monopoly on getting tenants for that community, so they are usually the best game in town. It’s a double benefit if they also manage the home owner’s association because they really have their thumb on the full pulse of issues like maintenance.
Step 8. Handling vacancies and negative cash flow
You need to be properly primed to handle an out of state rental. Like any investment, thinking it will be rented 100% of the time is unrealistic. Consequently, you need to be prepared for the inevitable vacancies and likelihood of negative cash flow, unless it’s in more of a working class rental area. If you are prepared for that going in, you’ll do OK. If you don’t allow for that, you’ll get stung.
Keep in mind that the better the property is for appreciation, the worse it tend to be for cash flow. A resort property may not cash-flow at all, but might appreciate 10% per year. A blue-collar rental house may have decent cash flow, but little appreciation potential.
Given a typically priced and financed deal, a simplistic way to think of the financial realities of solid white-collar home is that in year 1 you’ll have a negative cash flow. In year 2 you’ll approach break even. In year 3 you’ll have a slight, but insignificant positive, and from there on you should see a small but increasing positive cash flow. That again is simplistic, but at least sets the stage for appropriate thinking. A little reserve cash will go a long way to your being able to hold on to that property.
So, it’s eight steps. That will give you a sense of what processes it takes to successfully invest out of state. As we go over the next few weeks, I’ll be taking intimate looks at each of those stages, providing much more depth, and supplying lots of resources.
You won’t want to miss a single edition!
Have a great day, and live your real estate dreams!
Friday, June 1, 2007
Where to Invest (Part 5) – The Mid Atlantic and New England
Welcome to another edition of the Coast-to-Coast Real Estate Investor.
Last week we discussed the Midwest, and how although it’s not a raging market, you can make sensible investments there. To make last week’s material short, look at properties in the Midwest as kind of a blue-chip investment that plug along at steady rates and produce solid cash flow.
This week we’re going to look at the Mid-Atlantic and New England areas – another set of regions for which that “blue-chip” nametag could apply.
Make no bones about it – that great megalopolis from Washington, DC and up through most all of New England is pricey. And, much of it – DC, New York, Boston, Hartford, Philadelphia, etc., has suffered the effects of speculative buying, running prices up so high that the markets are priced out of the range of the median buyers in the area. Prices in the big cities are more related to the effects of the greater fool theory, which I’ve talked about in prior episodes, than any real sense of value. What’s more important, is those markets have stalled and in a lot of cases we’re seeing prices decline. In my book, it had to happen.
Despite the Mid-Atlantic region and New England areas being pricey, there are opportunities for investment if you know where to look. Plus, with the sizable populations in the area’s huge cities – who tend to be priced out of the housing market at this point – the natural result is the population moving further out in order to find affordable housing. That means the more reasonably-priced regions outside of the core metro areas are getting increased attention – and that kind of demand pressure will cause those prices to rise.
With that in mind, let’s start in Maryland.
The Eastern Shore of Maryland – which is the area of land east of the Chesapeake Bay, for the longest time was a sleeper. There was just this mental barrier – despite the existence of the Chesapeake Bay Bridge - to crossing the Bay. That ended about 5 years ago, and populations spread to the other side. Some of it is concentrated close to the bridge for commuting to Annapolis, Baltimore, and Washington, DC, but the real prospects stem from the interest by retirees and baby-boomers who are moving to the more rural areas.
It’s a pleasant quality of life on the shore – small towns dot the landscape, and only a couple of small cities exist there, and it’s pretty water-oriented. That kind of bucolic combination makes for a perfect retirement choice. Prices have risen substantially over the last 5 years, but there’s still a lot of reasonably-priced real estate on the shore, and many areas have yet to be discovered. I’ll add in most areas of Delaware – particularly the rural areas into this discussion.
Additionally, I can’t forget discussion of the ocean resorts like Ocean City, MD and Rehobeth, DE. While most of the resort property is sky-high at this point, there are pockets – for example around Ocean City’s bayside (not oceanside) that still offer some value for the typical investor.
On a final Maryland note, certain areas of Western Maryland, particularly Hagerstown are promising because they are commutable to the outer reaches of DC growth, and have much better pricing than the DC suburbs…and the benefit of rural quality of life.
Next is Pennsylvania
In Pennsylvania I will point to the Amish Country in and around Lancaster. People fleeing the congestion of Philadelphia often pick the Amish Country as their favored destination. Make no bones about it – the Lancaster region has grown substantially because of that migration, and prices have moved accordingly. It used to be that one could find houses all day long in the low $100’s; the entry point now is closer to $200,000, but that doesn’t mean you can’t find property well under that. In particular, row houses in Lancaster and many of the other smaller cities and towns can still be had for even under $100,000 and make good rental units. Fixer-upper country property is still available at modest prices as well…and all of it in my book is destined for constant appreciation.
Harrisburg and York, Pennsylvania are two other good choices. York is undervalued by many standards, and is quickly gaining speed as a commuting point for people working in northern Baltimore. It’s the perfect combination – reasonable values and a do-able commute.
I’m also a fan of Harrisburg. It’s the capital city of Pennsylvania, which always bodes well for employment – eventually translating into buyers and renters. Prices are still modest by national standards, and people are quickly choosing Harrisburg as an alternative to living in the congestion of places like Philadelphia. Row houses in rental neighborhoods can run as low as the 30’s (sometimes lower), and singles can be had in solid rental areas right around $70,000.
New England States
I’m going to lump all the New England States – New York, Connecticut, Vermont, New Hampshire, Massachusetts, Rhode Island, and Maine into somewhat the same ballgame. I think the perception is that all of New England is priced beyond reason, and to a certain extent, that is not a bad interpretation.
But, as expensive as New England is, if you dig, you can find nuggets of gold. Principally, you need to look well away from the obvious choices like Boston or Hartford and into the rural areas. There are exceptions to that, but the rural areas and small towns – and in particular inland - away from commuting rage to the big cities are where the prices are within investor criteria. These are areas that will benefit from quick appreciation as populations in those states migrate and retirees look for better quality of life.
In New York, you’ll find scattered nuggets around the Finger Lakes region. Some of the cities along Lake Ontario show promise price-wise. Buffalo comes to mind as having some of the better-priced property in the country…and good rental rates as compared to prices. But, winters there are definitely an issue that must be factored in - and in my book could all but eliminate consideration of locations along Lake Ontario.
Rhode Island is tough if you are price-oriented as I am. The state is simply so small that much of it is commutable to Providence and Boston - and feels the effects. It’s a very popular state as well, with a stretch of coastline, and a favorite of the rich and famous. All of that seems to keep prices quite high.
In Massachusetts, believe it or not, you can still find some gems along the southern coast south of Boston. They’re rare, and of course disappear quickly, but if you value that New England maritime feel, this is one place you can look.
Inland, in smaller cities and towns like Springfield, and even the university city of Amherst (college towns are generally a good option), you’ll find good investment opportunities.
Connecticut has a plethora of small cities from which to choose. Torrington on the west side of the state, Putnam on the East, and even Manchester right outside of Hartford are all examples of reasonably priced Connecticut towns. As with all of New England, the rural areas are getting increased attention as people seek to escape the rat races of the big cities.
Vermont – You’ll need to go pretty rural, but investor-priced properties can be located in certain of the smaller towns and cities. Rutland and Barre are two locations to consider, but for the most part, unless you are willing to take on negative cash flow for a higher priced property, or go deeply rural and wait for appreciation to catch up, VT is rugged, rural, and pricey.
New Hampshire –Laconia, near Lake Winnipesaukee in New Hampshire’s Lakes Region is promising because of its proximity to the water. Beyond that, you have to get pretty far into the country to find modest investments
Maine - Maine is like the other New England states – you’ll find deals in the smaller towns and cities, particularly inland. However, Maine has a couple of exceptions that are noteworthy. Portland, the capital city, which is also waterfront, still has some pickings. Plus, there are quite a number of small towns dotting the coast, where if you look – and especially if you are willing to get into the $200,000 range - you can find a good property. And, there is a smattering of smaller cities and towns located along tributaries and rivers that bring the water-orientation into play. In places like Belfast, Bangor, Bucksport you’ll often find occasional nuggets, although you have to spend time to locate them.
As I wrap up with Maine, I’ll mention a side benefit to buying in the Mid-Atlantic and New England, and that is the availability of historic property, particularly the fixer-uppers that you can often find. Yes, rehabbing a historic property takes its own set of skills and values, but there are distinct advantages to buying historic buildings. Much of this I’m going to save for a later episode, but there are significant tax credits available (credits, not deductions) for owning and rehabbing historic property. Plus, the rarity of a historic property creates an unusual level of desire/demand along with associated pricing.
So, that will give you a sense of what’s available and the kinds of tactics you need for investing in the Mid-Atlantic and North East. There are plenty of unique finds, if you know where and how to look. Plus, the stability and population situation in those areas can make for solid long-term value.
Next week, I’ll be leaving the discussions of locations behind and turn to an overall game-plan of what you need to do to invest out-of-state successfully. It’s the first of the how-to lessons, and one you won’t want to overlook.
Have a great day, and live your real estate dreams!
Last week we discussed the Midwest, and how although it’s not a raging market, you can make sensible investments there. To make last week’s material short, look at properties in the Midwest as kind of a blue-chip investment that plug along at steady rates and produce solid cash flow.
This week we’re going to look at the Mid-Atlantic and New England areas – another set of regions for which that “blue-chip” nametag could apply.
Make no bones about it – that great megalopolis from Washington, DC and up through most all of New England is pricey. And, much of it – DC, New York, Boston, Hartford, Philadelphia, etc., has suffered the effects of speculative buying, running prices up so high that the markets are priced out of the range of the median buyers in the area. Prices in the big cities are more related to the effects of the greater fool theory, which I’ve talked about in prior episodes, than any real sense of value. What’s more important, is those markets have stalled and in a lot of cases we’re seeing prices decline. In my book, it had to happen.
Despite the Mid-Atlantic region and New England areas being pricey, there are opportunities for investment if you know where to look. Plus, with the sizable populations in the area’s huge cities – who tend to be priced out of the housing market at this point – the natural result is the population moving further out in order to find affordable housing. That means the more reasonably-priced regions outside of the core metro areas are getting increased attention – and that kind of demand pressure will cause those prices to rise.
With that in mind, let’s start in Maryland.
The Eastern Shore of Maryland – which is the area of land east of the Chesapeake Bay, for the longest time was a sleeper. There was just this mental barrier – despite the existence of the Chesapeake Bay Bridge - to crossing the Bay. That ended about 5 years ago, and populations spread to the other side. Some of it is concentrated close to the bridge for commuting to Annapolis, Baltimore, and Washington, DC, but the real prospects stem from the interest by retirees and baby-boomers who are moving to the more rural areas.
It’s a pleasant quality of life on the shore – small towns dot the landscape, and only a couple of small cities exist there, and it’s pretty water-oriented. That kind of bucolic combination makes for a perfect retirement choice. Prices have risen substantially over the last 5 years, but there’s still a lot of reasonably-priced real estate on the shore, and many areas have yet to be discovered. I’ll add in most areas of Delaware – particularly the rural areas into this discussion.
Additionally, I can’t forget discussion of the ocean resorts like Ocean City, MD and Rehobeth, DE. While most of the resort property is sky-high at this point, there are pockets – for example around Ocean City’s bayside (not oceanside) that still offer some value for the typical investor.
On a final Maryland note, certain areas of Western Maryland, particularly Hagerstown are promising because they are commutable to the outer reaches of DC growth, and have much better pricing than the DC suburbs…and the benefit of rural quality of life.
Next is Pennsylvania
In Pennsylvania I will point to the Amish Country in and around Lancaster. People fleeing the congestion of Philadelphia often pick the Amish Country as their favored destination. Make no bones about it – the Lancaster region has grown substantially because of that migration, and prices have moved accordingly. It used to be that one could find houses all day long in the low $100’s; the entry point now is closer to $200,000, but that doesn’t mean you can’t find property well under that. In particular, row houses in Lancaster and many of the other smaller cities and towns can still be had for even under $100,000 and make good rental units. Fixer-upper country property is still available at modest prices as well…and all of it in my book is destined for constant appreciation.
Harrisburg and York, Pennsylvania are two other good choices. York is undervalued by many standards, and is quickly gaining speed as a commuting point for people working in northern Baltimore. It’s the perfect combination – reasonable values and a do-able commute.
I’m also a fan of Harrisburg. It’s the capital city of Pennsylvania, which always bodes well for employment – eventually translating into buyers and renters. Prices are still modest by national standards, and people are quickly choosing Harrisburg as an alternative to living in the congestion of places like Philadelphia. Row houses in rental neighborhoods can run as low as the 30’s (sometimes lower), and singles can be had in solid rental areas right around $70,000.
New England States
I’m going to lump all the New England States – New York, Connecticut, Vermont, New Hampshire, Massachusetts, Rhode Island, and Maine into somewhat the same ballgame. I think the perception is that all of New England is priced beyond reason, and to a certain extent, that is not a bad interpretation.
But, as expensive as New England is, if you dig, you can find nuggets of gold. Principally, you need to look well away from the obvious choices like Boston or Hartford and into the rural areas. There are exceptions to that, but the rural areas and small towns – and in particular inland - away from commuting rage to the big cities are where the prices are within investor criteria. These are areas that will benefit from quick appreciation as populations in those states migrate and retirees look for better quality of life.
In New York, you’ll find scattered nuggets around the Finger Lakes region. Some of the cities along Lake Ontario show promise price-wise. Buffalo comes to mind as having some of the better-priced property in the country…and good rental rates as compared to prices. But, winters there are definitely an issue that must be factored in - and in my book could all but eliminate consideration of locations along Lake Ontario.
Rhode Island is tough if you are price-oriented as I am. The state is simply so small that much of it is commutable to Providence and Boston - and feels the effects. It’s a very popular state as well, with a stretch of coastline, and a favorite of the rich and famous. All of that seems to keep prices quite high.
In Massachusetts, believe it or not, you can still find some gems along the southern coast south of Boston. They’re rare, and of course disappear quickly, but if you value that New England maritime feel, this is one place you can look.
Inland, in smaller cities and towns like Springfield, and even the university city of Amherst (college towns are generally a good option), you’ll find good investment opportunities.
Connecticut has a plethora of small cities from which to choose. Torrington on the west side of the state, Putnam on the East, and even Manchester right outside of Hartford are all examples of reasonably priced Connecticut towns. As with all of New England, the rural areas are getting increased attention as people seek to escape the rat races of the big cities.
Vermont – You’ll need to go pretty rural, but investor-priced properties can be located in certain of the smaller towns and cities. Rutland and Barre are two locations to consider, but for the most part, unless you are willing to take on negative cash flow for a higher priced property, or go deeply rural and wait for appreciation to catch up, VT is rugged, rural, and pricey.
New Hampshire –Laconia, near Lake Winnipesaukee in New Hampshire’s Lakes Region is promising because of its proximity to the water. Beyond that, you have to get pretty far into the country to find modest investments
Maine - Maine is like the other New England states – you’ll find deals in the smaller towns and cities, particularly inland. However, Maine has a couple of exceptions that are noteworthy. Portland, the capital city, which is also waterfront, still has some pickings. Plus, there are quite a number of small towns dotting the coast, where if you look – and especially if you are willing to get into the $200,000 range - you can find a good property. And, there is a smattering of smaller cities and towns located along tributaries and rivers that bring the water-orientation into play. In places like Belfast, Bangor, Bucksport you’ll often find occasional nuggets, although you have to spend time to locate them.
As I wrap up with Maine, I’ll mention a side benefit to buying in the Mid-Atlantic and New England, and that is the availability of historic property, particularly the fixer-uppers that you can often find. Yes, rehabbing a historic property takes its own set of skills and values, but there are distinct advantages to buying historic buildings. Much of this I’m going to save for a later episode, but there are significant tax credits available (credits, not deductions) for owning and rehabbing historic property. Plus, the rarity of a historic property creates an unusual level of desire/demand along with associated pricing.
So, that will give you a sense of what’s available and the kinds of tactics you need for investing in the Mid-Atlantic and North East. There are plenty of unique finds, if you know where and how to look. Plus, the stability and population situation in those areas can make for solid long-term value.
Next week, I’ll be leaving the discussions of locations behind and turn to an overall game-plan of what you need to do to invest out-of-state successfully. It’s the first of the how-to lessons, and one you won’t want to overlook.
Have a great day, and live your real estate dreams!
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