Since many of us have lost a home, lost their job and see nothing but bad news all around, how can Warren Buffett announce today that now is the time to buy residential real estate? Well, considering he is one of the smartest and wealthiest investors in the World, let's take a look and see what he sees. First, the large builders (Pulte, Lennar, DR Horton) have all posted small gains this quarter; the pending home sales were up in January; mortgage purchase applications increased in January and best of all, mortgage interest rates are at record lows. In other words, Buffet sees long term value in residential real estate because of low prices, low interest rates, shortage of inventory and long term equity growth. He even suggests to finance the home purchase to really take advantage of these economic factors.
What if you are a cash buyer or investor? An even better opportunity presents itself here. First, tenants. There are a lot of Americans out of work or who have lost their home, but still need a place to live and will now become renters. Also, with your cash sitting in the bank it is not actually working for you but for the financial institution where it sits. They are lending it out to other institutions, people, businesses and earning a small income from it everyday. In return, they pay you a small monthly dividend or interest return. Buying residential real estate using that cash now allows you to become the bank. It ensures that you earn that daily/monthly income, while paying a small percentage or fee back to someone else, like a landscaper, plumber, etc. Yes there are risks, but a long term hold right now looks like a solid investment.
So based on this analysis, I would say that Warren is correct, again! So everyone waiting to buy a home or those with money sitting on the sidelines, earning no interest, call your local realtor and see what is available in your area. You might find a gem that could earn you good short term income, long term equity growth or both.
Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Wednesday, February 29, 2012
Sunday, August 1, 2010
Short Sale will not get approved
So, I just posted earlier about our loan modification failure, let's just keep the positive vibe going and explain the recent rash of short-sale failures too.
First, Indym*c Bank (One W*st Bank), B of A, Ch*se and Wells F*rgo have been good to work with, so long as you NEVER refinanced your home and/or took cash out. This really only accounts for about 12% of the US population, but hey who cares, everyone is doing it right?
We have applied for, started and received approvals for 3 short sales so far. We have applied for, started and been denied on 3 short sales as well. Not bad, 50% approval, but let's dig deeper.
1. Purchase money loans in CA have a "one action rule" which means they get they home or they come after you, they cannot do both. Good for about 12% of the popluation, the other 88% percent of us are screwed.
2. For the rest of us who have "cash-out" loans, it means that once the first lender takes the home, the second lender or "cash-out" lender has to come after you personally since the first lender has the collateral (home). So, if you want to short-sell in CA then you must understand that the second lender will need a large incentive to let the home go in short-sale.
3. Not all lenders are participating and better yet, the Government has not forced any lenders to participate and truely HELP people, so there is no guarantee you will even get a loan mod, a short sale or deed in lieu of foreclosure, in the end. So, with all of the good news, what is a home owner to do? Especially one who needs to ditch a $600k boat anchor that is now worth $250k?
First, get an agent familiar with short sales. Second, do not worry about the first lender, they are in the drivers seat and will get cash or a property. It is time to schmooze the ugly girl in the back seat who is commonly referred to as the "second lien holder". They will typically ask for 20% of their lien balance in cash, at the close of escrow. USAA once asked us for 90% of the loan balance and when we said "HELL NO" they ended up foreclosing on the home owner, so be careful. If you have a private lender second, good luck they are tough! The only alternative is to have the first lender contribute cash and/or the agents each contribute cash to the second lender. However, from experience we know that first lenders only contribute $3k and an Agent will typically tell his clients that the home is not available and show them something else. That will not help bring us out of this recession, will it!
So, if you are a home owne who wants to save your credit, short-selling is your best bet. Otherwise, walk away and be prepared to have a huge hit to your credit, receive a large bill from your lender and possibly a bill from Uncle Sam as well. Always check with your CPA first for exceptions, otherwise good luck to you and your Agents it is tough out there for the middle class!
First, Indym*c Bank (One W*st Bank), B of A, Ch*se and Wells F*rgo have been good to work with, so long as you NEVER refinanced your home and/or took cash out. This really only accounts for about 12% of the US population, but hey who cares, everyone is doing it right?
We have applied for, started and received approvals for 3 short sales so far. We have applied for, started and been denied on 3 short sales as well. Not bad, 50% approval, but let's dig deeper.
1. Purchase money loans in CA have a "one action rule" which means they get they home or they come after you, they cannot do both. Good for about 12% of the popluation, the other 88% percent of us are screwed.
2. For the rest of us who have "cash-out" loans, it means that once the first lender takes the home, the second lender or "cash-out" lender has to come after you personally since the first lender has the collateral (home). So, if you want to short-sell in CA then you must understand that the second lender will need a large incentive to let the home go in short-sale.
3. Not all lenders are participating and better yet, the Government has not forced any lenders to participate and truely HELP people, so there is no guarantee you will even get a loan mod, a short sale or deed in lieu of foreclosure, in the end. So, with all of the good news, what is a home owner to do? Especially one who needs to ditch a $600k boat anchor that is now worth $250k?
First, get an agent familiar with short sales. Second, do not worry about the first lender, they are in the drivers seat and will get cash or a property. It is time to schmooze the ugly girl in the back seat who is commonly referred to as the "second lien holder". They will typically ask for 20% of their lien balance in cash, at the close of escrow. USAA once asked us for 90% of the loan balance and when we said "HELL NO" they ended up foreclosing on the home owner, so be careful. If you have a private lender second, good luck they are tough! The only alternative is to have the first lender contribute cash and/or the agents each contribute cash to the second lender. However, from experience we know that first lenders only contribute $3k and an Agent will typically tell his clients that the home is not available and show them something else. That will not help bring us out of this recession, will it!
So, if you are a home owne who wants to save your credit, short-selling is your best bet. Otherwise, walk away and be prepared to have a huge hit to your credit, receive a large bill from your lender and possibly a bill from Uncle Sam as well. Always check with your CPA first for exceptions, otherwise good luck to you and your Agents it is tough out there for the middle class!
Thursday, February 7, 2008
How to really get Rich in Real Estate
I was not going to do this since there are 1 million idiots selling Real Estate get rich quick scams, but I might as well get some good information out there for Free. We are at a very critical point in the Real Estate world and now is a great time to buy. Here are the golden rules of investing and how to really become rich in the Real Estate investing game.
There are layers and layers of investing vehicles from notes, to second liens to tax liens to dirt to actual Real property, called Real Estate. For those who want to dabble, make a quick buck, do not make much money personally or do not have very good credit, stick to non-real estate investing. The market is on it's ear right now and without assets, good credit and a great job you will not qualify to buy an investment dog house, let alone a real house!
Are you ready: First and foremost, in order to be an investor you must make more money than your debt payments each month. And I am NOT talking about minimum credit card payments, or Interest Only mortgage payments, I am talking about full mortgage payments (taxes and insurance) autos, utilities, food, etc. Also, you need have at least 6 months of total monthly expenses in the bank to even consider investing. On top of those assets you will need to have 10% down payment, in liquid form (no 401k or IRA accounts) for all properties purchased. Last and of course not least, you will need to have good credit. If your credit score is not above a 680, then get into the stock market or notes, etc. The days of 100% financing are gone and you need income, assets and good credit to get into the game. If you do not fit into this category, I will save you time.......ba bye!
Research: OK so now that you have your income, assets and credit in order let's talk about markets. There are still good investment markets in the US making 5% returns on a yearly basis. I believe the US average cycle for RE over a 30 year period is 25% gains, so let's get our money in now. Oh by the way, did I mention we were nearning the bottom of a huge selling cycle, which means over the next 12-18 months those with money are going to go on a buying spree at $.50 on the dollar? This is where you become a millionaire in the Real Estate investing game. Now if I only sold a CD 12 pack for $99 or had my own commercial like Tom Vu. Damn!
1. Areas: Find a market with low unemployment, good job growth, university nearby, and of course a good rental market. Simple, but you would be surprised how many over look this.
2. States: Depending on your budget (10% down rule) there are some states that always provide good investments. CA, FL, NY, WA are always going to have rocking economies and lot's of employees flooding to those states. NC, MO, LA, KS, AL are newly ripe investment areas because of hurricane Katrina. Recent damage, low prices, new construction requirements and a lot of people looking for housing is a recipe for success. As my man Tim the Tool Man Taylor always said...."measure twice, cut once"! Nevermind that was my 8th grade shop teacher. I think Tim's motto was...cut twice oops forgot to measure! Bottom line, look, search, visit twice and then pull the trigger.
3. Pricing: This is simple, buy a home that rents for at least the full PITI payment. Never pay more than 75% of current market value and if you can get the seller to finance your loan, even better. Single unit properties are ok, 2 units are good and 3+ units are great. More income, more security and better equity growth possible. If you cannot find a home or homes that fit this criteria keep searching.
Financing: Once you are financially stable, have found a general area and have a home or homes in mind, it is time to get an agent and Loan man! I do not sell agents or Loan Officer names but maybe I should? Any how, get with your local Loan Officer or banker to get pre-qualified. If you do not have one, email me I am licensed in most states.
Next, visit the area you are buying in (recommended) and you will see plenty of RE signs. Start calling those agents to make appointments and you will find out which one's are lazy, too busy or just think you are a tire kicker and will not help. When you find one that actually calls back or meets you, and they match your personality, have them write an offer.
There are layers and layers of investing vehicles from notes, to second liens to tax liens to dirt to actual Real property, called Real Estate. For those who want to dabble, make a quick buck, do not make much money personally or do not have very good credit, stick to non-real estate investing. The market is on it's ear right now and without assets, good credit and a great job you will not qualify to buy an investment dog house, let alone a real house!
Are you ready: First and foremost, in order to be an investor you must make more money than your debt payments each month. And I am NOT talking about minimum credit card payments, or Interest Only mortgage payments, I am talking about full mortgage payments (taxes and insurance) autos, utilities, food, etc. Also, you need have at least 6 months of total monthly expenses in the bank to even consider investing. On top of those assets you will need to have 10% down payment, in liquid form (no 401k or IRA accounts) for all properties purchased. Last and of course not least, you will need to have good credit. If your credit score is not above a 680, then get into the stock market or notes, etc. The days of 100% financing are gone and you need income, assets and good credit to get into the game. If you do not fit into this category, I will save you time.......ba bye!
Research: OK so now that you have your income, assets and credit in order let's talk about markets. There are still good investment markets in the US making 5% returns on a yearly basis. I believe the US average cycle for RE over a 30 year period is 25% gains, so let's get our money in now. Oh by the way, did I mention we were nearning the bottom of a huge selling cycle, which means over the next 12-18 months those with money are going to go on a buying spree at $.50 on the dollar? This is where you become a millionaire in the Real Estate investing game. Now if I only sold a CD 12 pack for $99 or had my own commercial like Tom Vu. Damn!
1. Areas: Find a market with low unemployment, good job growth, university nearby, and of course a good rental market. Simple, but you would be surprised how many over look this.
2. States: Depending on your budget (10% down rule) there are some states that always provide good investments. CA, FL, NY, WA are always going to have rocking economies and lot's of employees flooding to those states. NC, MO, LA, KS, AL are newly ripe investment areas because of hurricane Katrina. Recent damage, low prices, new construction requirements and a lot of people looking for housing is a recipe for success. As my man Tim the Tool Man Taylor always said...."measure twice, cut once"! Nevermind that was my 8th grade shop teacher. I think Tim's motto was...cut twice oops forgot to measure! Bottom line, look, search, visit twice and then pull the trigger.
3. Pricing: This is simple, buy a home that rents for at least the full PITI payment. Never pay more than 75% of current market value and if you can get the seller to finance your loan, even better. Single unit properties are ok, 2 units are good and 3+ units are great. More income, more security and better equity growth possible. If you cannot find a home or homes that fit this criteria keep searching.
Financing: Once you are financially stable, have found a general area and have a home or homes in mind, it is time to get an agent and Loan man! I do not sell agents or Loan Officer names but maybe I should? Any how, get with your local Loan Officer or banker to get pre-qualified. If you do not have one, email me I am licensed in most states.
Next, visit the area you are buying in (recommended) and you will see plenty of RE signs. Start calling those agents to make appointments and you will find out which one's are lazy, too busy or just think you are a tire kicker and will not help. When you find one that actually calls back or meets you, and they match your personality, have them write an offer.
The link above is for our investment site. These are some of our projects. Email me for any questions or interest!
Good luck and make it a great day!
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