Blog > Blog > Archive by category 'Real Estate'

March 17, 2010 at 4:37 pm

So you’re on board with the idea that investing in real estate is profitable and think you have the right personality to be an investor? Great! Now comes the hard part: Paying for it. This is THE issue that makes or breaks your ability to be an investor. There are opportunities around every corner, but if you don’t have access to money, your investing days are over before they begin.

Unless you are going to owner-occupy a property,  you simply must be able to bring cash to the table. The days of 100% loan are long, long gone. Putting 25% is pretty much the norm for most loans nowadays. Not only that, but other than FHA 203K loans, finding a lender who is willing to finance repairs is nearly impossible. Most of the best deals on the market today involve distressed properties that need work.  So you’re e going to have to find the money to pay for fix-up if you want to be able to get into these deals. At least until the property seasons long enough to refinance.

Whether you are financing properties or not, the reality is that you are going to need at least $25,000 to do much of anything in this market. Even a $60,000 house or duplex is going to take $15,000 cash down to secure financing, and you’re going to be hard pressed to find something that doesn’t need at least $10,000 worth of work. If you can meet that threshold without overextending yourself, you can probably swing a deal.

So now that you know how much you need, assuming you don’t have a truckl0ad of cash sitting around, you’ll need to determine how you are going to get all that money together. Here are a few options in the current market: Read more

March 12, 2010 at 6:09 pm

For the last two weeks I have been in a pretty upbeat mood. I had finally got my rehab project at 3969 Humphrey under contract and a smooth closing looked to be all but a sure thing.

Now, the contract has fallen through and the property is back on the market (a steal at $127,750 if you are looking for a house ;-) ) . So what happened? The appraisal came in last night. It came in at $101,000! For my gut-rehabbed house! All I can say is that the appraiser in question doesn’t know the area. Every single comp pulled was from south of Utah. Streets like McDonald and Fairview. Anyone that knows Tower Grove South knows that the area south of Utah is almost a different neighborhood. More appropriate comps on streets like Utah, Humphrey and Wyoming were ignored in favor of the lower values streets to the south.

If that wasn’t bad enough, the appraiser adjusted the comp prices downward because I only have a parking pad instead of a garage. That is all well and good, except adjustments are a two-way street. I replaced all the electric, plumbing, HVAC, windows and flooring my rehab. Was that the case for the comps? No. But the appraiser did not make positive adjustments on my behalf. It was clear that the man did not know the area and is totally unfamiliar with the concept that rehabbed properties are worth more than properties with 50 year old systems. According to this appraisers logic, the $20,000+ put in to update the systems was a financial waste.

I am frustrated, but I am not worried. There are quite  a few other interested parties coming forward that can see the realities of the property. That can appreciate it’s REAL value. But take my lesson to heart. Don’t just assume the appraisal on your transaction will go smoothly. Common sense does not always rule. Assume that the appraiser doesn’t know the area and make sure you do a little homework and prep some comps of your own prior to the appraisal. Send these over to the appraiser to help point them in the right direction. Some of the more headstrong in the appraisal trade might take offense to this, but with ludicrous appraisals popping up from time to time, it is clear that some are in need this kind of direction.

March 9, 2010 at 7:06 pm

The grass is always greener, right? When you hear so many stories about people making a killing on real estate, it can be hard not to feel a little envious.  There is no doubt that real estate can be very profitable,  just don’t fool yourself into to thinking that it is easy money. It isn’t.  When it comes to real estate investing, it takes a lot of work to be successful, and not everybody is cut out for it.

The so-caller “real estate experts,” publishing books and producing television shows about real estate investing, tend to show you the rosy side of things. They are trying to sell their books or get you to watch their show, so why shouldn’t they? They probably wouldn’t  do too well if they scared you off with doomsday scenarios. But if you are considering taking the plunge from watching others invest in real estate for entertainment, and actually doing it yourself, you need to wake up to a harsh reality: Investing in real estate is not easy. Read more

March 4, 2010 at 9:35 pm

Real estate investing can be a lucrative and rewarding enterprise. It can also be a frustrating and profitless exercise. You could write a 1,000 instructional book on all the dos and don’ts of investing, but perhaps the first and most important question to as is simply “Why?” “Why should I invest in real estate and not put my money in savings or stocks?”

The most important benefits of real estate investing are related to the generous return on investment and the ability to control your own destiny. Real estate offers a great way to make significant profits quickly for the self-starters out there. Here is a detailed breakdown of some of these benefits: Read more

February 28, 2010 at 12:33 am

Buying foreclosure properties can be a frustrating, cutthroat enterprise. The best properties usually have investors circling like vultures. You’re never going to be able to win all your bids, but there are things you can do to increase your chances of being the winning bidder. And get the best price in the process.

The following guide will help arm you with information that can help you along your road to becoming a power buyer:

  • Financial Viability – Keeping funds available at all times; ready to pounce on that next great deal.
  • Earnest Money – How much should you put down, and other negotiating tactics involving earnest money.
  • Limiting Contingencies -  Sometimes inspections are unavoidable, but keeping contracts as clean as possible can really help when making an offer.
  • Offer Pricing – Offer price is unquestionably the biggest single difference between a dead deal and an accepted offer.  Avoid overpaying, while not letting the good ones slip through the cracks.
  • Persistence – Whether it is not letting a lost contract get you down or keeping on real estate agents and banks when an offer is in play, sometimes the squeaky wheel really does get the grease.
  • Dates & Timetables – Keeping closings short and sweet can really increase the desirability of an offer.

February 26, 2010 at 9:09 pm

Heard some rumbling about this a while ago, but it looks like it is official: The former owner of Title Pros used $250,000 of escrowed money for personal use.  Just makes you wonder how commonplace this is.

Link

February 5, 2010 at 12:18 pm

This might seem a bit off-topic for this blog, but if you are in real estate or any other business, you have likely run into this issue. Clients, agents, and tenants send me documents all the time that are for software I don’t have. Openoffice is a good (and free option) to handle that problem, but there is also a free file converter online that I have been using a lot lately: Zamzar.

The good thing about this method is that there is no need to download any software. This is a webware program that handles all the conversion through a website. The free version can convert just about any file you might have, into a format that you support. I have found this particularity helpful in working with Microsoft Publisher files, which are notoriously tough to work with. It also works with just about any other product from Microsoft, Adobe, Corel, etc.

To use the service, simply go to zamzar.com. Once there, simply select the files on your computer that you wish to convert, what format to convert them to, and what email address to send the files to. It might take a few minutes to process, but when the procedure is complete, a link to the new file will be sent directly to you.

So the next time some sends you a Wordperfect resume that you have no way of opening, consider Zamzar as an option. It just might come in handy.  And its the best price anyone could hope for: FREE.

January 21, 2010 at 1:33 pm

If you have ever purchased a market-rate or foreclosure property for a quick fix and flip, there is a good chance that you have run into problems with FHA financing. Until now, FHA would not insure any financing on a property that had already sold within the last 90 days.  And since so many buyers are using FHA to finance their homes these days, that is an issue. With a decent sized crew on a smaller property, this timetable required some owners to sit on vacant properties while they seasoned. But as of February 1, 2010 that will no longer be the case.

Due to the current glut of foreclosures on the market, FHA has released a waiver to their current seasoning guidelines for at least one calendar year. Restrictions will still apply to ensure that the program is not abused, but if you are doing legitimate work on a property these restrictions should not pose a problem.

For more on this rule change, check out the official waiver from HUD.

January 20, 2010 at 1:40 pm

It’s been far too long since I have relayed my thoughts on the state of the investment real estate market, so in the spirit of the season, here is a quick rundown of my current investment market impressions in South St. Louis, Missouri:

  • Single-Families – There is no doubt that the $8000 homebuyer credit had a positive impact on house sales in the fall. September and October were especially productive. With the deadline for the credit originally set for November 30th, buyers were in a frenzy to find and close on properties prior to that deadline. Of course, when the program was extended until April 30th, 2010, the sense of urgency wore off. Couple that with the typical slowdown during the winter holidays and the market for these properties has been particularity slow for the past month or so. The good news is that with the holidays now over and the new homebuyer credit deadline  approaching in a little over three months, the market should see a nice resurgence soon. After April 30th though, its anybodies guess what is going to happen. So if you are in the middle of am rehab or thinking of selling a house, I would hurry up.
  • Condos – Not much to say here other than to avoid them. There have been some pretty good deals out there as of late, but the big issue is that buyers can’t get condo financing right now. Unless you can make sense of renting a condo or seller-financing it, I would stay away from them until something changes financing-wise.
  • Multi-Families – Where last year seem to offer a steady mix of 2-family and 4-family foreclosures, the last few months have been very heavy on the duplexes. Since the fall, however, things have been very heavy on the duplexes. Some of the single bedroom properties don’t present the greatest deals, but there heavy been a  fair amount of 2+ bedroom properties that heavy been pretty solid. It seems that a great many of the 4-families out there have already been foreclosed and sold, so it is possible that this might be somewhat of a permanent trend.
  • Apartment Rentals – November and early December were great for renting mid-level apartments. We moved a lot of inventory during that time. The properties that seemed to be getting less activity were the cheap units ($450 for single) and expensive ones ($650 for single). There hasn’t been much of a resurgence following the holidays as seems to happen some years. Lots of window-shoppers out there requesting showings, but not many pulling the trigger. Average would probably be the best way to describe the current amount of rental activity.
  • Neighborhoods – When looking for investment properties, location and price are always big factors. But the one thing it is hard to control is where all the good inventory is coming from at any given time. Much of last year produced a glut of quality foreclosures and short sales in neighborhoods like Tower Grove South, Shaw and Tower Grove East. But since the fall, things seem to have shifted increasingly eastward, with the best deals coming up in Tower Grove East, Fox Park, McKinley Heights, and Benton Park. Areas further south such as Benton Park West, Gravois Park, Dutchtown and Bevo continue to have a solid flow of inventory coming through as well, obviously rentability and resale remain a concern.
  • Best Investment Bets – So what’s the moral to this story? Obviously you should be on the lookout for all types of property in any quality area, but if I had to point you in one direction it would be Tower Grove East. Despite the sluggish economy of the past few years, or maybe even because of it, this neighborhood is really changing fast. There has always been a nice housing base, but the vast amount of foreclosures on derelict and substandard properties recently in the neighborhood has created a huge influx of development in the vicinity. Pricing hasn’t really caught up yet so there remain some pretty good deals. Look out for properties of all types there. Also pay attention to the increasing number of singles and duplexes in Benton Park and McKinley Heights. Benton Park West and Gravois Park within one block north or south of Cherokee is also a place to watch.

October 2, 2009 at 10:18 pm

The following tables display all the multi-family properties sold in the City of St. Louis south of Delmar, from September 1st to September 30th, 2009. The properties are broken down by number of units.

Read more

July 30, 2009 at 10:04 am

I always get a kick out of the fact that everybody and their brother is talking about short sales these days. I don’t doubt that you can find some great deals out there via the short-sale route, but these deals generally turn out to be a waste of time. Consider these issues:

  • Most sellers and/or their agents don’t know what they are doing – People seem to have this odd impression that even though they owe $200,000 on the loan, they can just put the property out on the market for $120,000 and short-sell it without the bank blinking an eye. No though for protocol, valuation, just a lazy desire to have someone else shoulder the impact of their foolish purchases
  • The process is time consuming – A two to three month turnaround is certainly not unheard of to close a short sale. With ever changing lender practices and market environments, what might seem like a good deal today, might not seem so great three months from now when it comes time to close. I have seen buyers get tied up waiting on a short sale, only to pass up other great (and easier) deals while they wait.
  • Wasted effort – Considering how time consuming the process can be, its amazing how many owners and listing agents put these properties on the market when they are 15 days from foreclosure. You end up putting an offer on the table, jump through every hoop imaginable, and the property ends up getting foreclosed on before you can get anything done.
  • There are plenty of great foreclosure buys – I stay plenty busy, and find tons of great deals from the seemingly endless supply of foreclosures that are constantly coming on the market. That isn’t changing anytime soon either. No matter what kind of investment property you are looking for, there are always plenty of properties that will fit your criteria coming on at any given time. Why jump through so many hoops to possibly make a deal when something just as good is right in front of your nose?

In short, for most investors, the short sale is not worth messing with.  In most situations at least. That is not to say that you shouldn’t consider giving them a look, but don’t let all those so-called gurus make you think it’s so easy. Just like anything else, “there ain’t no such thing as a free lunch.” There is a lot of hard-work that goes into making these deals work and if you are looking for a quick buck you’re better off looking elsewhere.

April 9, 2009 at 5:28 pm

If you are involved in the real estate industry in any shape or form in the St. Louis area, there is a good chance you have heard of DHP Investments, and Doug Hartmann. If you’re a real estate investor there is also a good chance you were swindled by him or might have have purchased one his many foreclosed properties. Read more

April 8, 2009 at 4:50 pm

I’m certainly no stranger to visiting shady buildings. I have been going into vacant houses all over the area for years. Mostly by myself. I understand the risk and accept it. But that doesn’t mean that property owners and their real estate agents don’t have some level of responsiblity in making sure the property is safe. Read more

April 1, 2009 at 11:14 am

I was hoping to have a little more notice, but my interview with St. Louis NPR affiliate KWMU on foreclosures is airing today. Read more

March 4, 2009 at 7:02 pm

We’ve all been there before: you’ve got an electronic document you need read, but don’t have the software to open the file. Whatever do you do? Read more

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