Wealth Wisdom System

Just read this. Thought of you.

By David Boyd

This series of articles on the basics of real estate investing discusses what an investor needs to know in order to take advantage of the current real estate market and build a profitable real estate investing business. To some, real estate investing may seem somewhat complicated, but it’s actually easier than one might think. This doesn’t mean you can just read a book or go to a seminar or two and gain all the knowledge you need to safely invest, but it does mean that with some effort, you can get the training you need to start investing. Tigrent™ Learning provides numerous courses (online and live) covering the basics of real estate investing. If you couple those courses with a personal real estate coach and a Mentor, you can gain the knowledge you need to start investing in record time.

Nothing will give a real estate investor more confidence than having a super buyer’s list. It helps to take away the number one fear that investors have—the fear of not being able to sell a property that they buy. This is especially worrisome for many investors in the current buyer’s market where it is more difficult to sell a property; however, with a good buyer’s list the property can easily sell.

There are two main components to a buyer’s list: 1. a list of other investors and rehabbers who may be interested in buying properties and 2. a list of buyers who are looking for a home to purchase as their primary residency.

Building a Wholesale Buyer’s List

If you are planning to wholesale, you should spend time building a list of active buyers, usually other investors, who are looking for properties to buy. This is an ongoing process and an investor should always be searching for potential buyers. An ideal list for a wholesaler would have buyers for every type of property that one might find—contractors/rehabbers, landlords (for low-end, high-end, and average properties), multi-unit buyers, other wholesalers, cash buyers, new investors, and commercial buyers. An investor’s list usually starts fairly small, but grows over time into a list with hundreds of ready and willing buyers for numerous types of properties.

Here are a few suggestions to help you build a super buyer’s list:

• Search the newspaper for “Cash for Houses” or “We Buy Houses” ads. Many investors worry when they find numerous “I buy” type ads in their local newspaper. They think, “Boy there is a lot of competition for real estate deals in this area.” But if you are going to wholesale deals to others, the “I Buy” guys become your customers, not your competition. They are looking for property to fix up and sell or rent, and you may be able to supply them with that property, if you have negotiated a good deal.

Develop an information sheet that you can fill out each time you contact an “I Buy” guy. When you call, get to know them as best you can. At a minimum, get the following information:

• Name and contact information (office phone, business cell phone, and e-mail address).
• Find out what type of properties they are looking for.
• Find out what areas of town they prefer to invest in and if there are any areas they don’t want to consider. Hint: If you are just getting started and are not that familiar with an area, this information can help you know in which areas you should look for property and the areas you should avoid.
• Find out what price range they are interested in.
• Find out how fast they can close on a property. If you have a property under contract that has a closing deadline in two weeks, you need to know who on your list can close in a relatively short period of time.
• Find out how much profit they want in order to be interested in the deal. You will find that some investors will be satisfied with deals that produce $10,000, while others may not even look at a deal unless they have a potential profit of $25,000 or more.

As you generate your buyer’s list, categorize and group potential investors
based on the above data. That way you can save time and match the right properties with the right investors.

• Always be on the lookout for “I Buy Houses” bandit signs. Again, new investors may view the investors who use bandit signs as competition, but as a wholesaler, these people can become some of your best customers. Whenever you see a bandit sign, immediately write down the phone number. If you think, “I’ll get that number later,” you won’t remember where you saw the sign or the sign may be gone by the time you get back to that location.
• Search the Internet for “I Buy Houses” ads. Go to some of the popular advertising websites, such as craigslist.com and backpage.com, and look for “I Buy” type ads in your area. You can also try a search by typing in “I Buy Houses” along with your city and state. You will get more information than you really want, but start calling and add the names of interested investors or investment companies to your buyer’s list.
• Call on “For Sale” ads. Research your local newspaper for homes that are advertised for sale. Look for key words that might indicate that the home has been recently rehabbed. Words such as, newly remodeled, completely updated, or new interior can be indicators of rehabbed properties. Call on the ads and find out if they are investors. If they are, get their information and add them to your buyer’s list.
• Run your own ads in local classifieds. Experiment with the regular newspaper and the weekly free papers, such as the Penny Saver or Thrifty Nickel. Try running an ad that says, “Handyman Specials – Low Prices – Terms Available – XXX- 123-4567.” This should get your phone ringing. You are not advertising a particular property (unless you have a property under contract) and when people (usually investors) call, get their information and let them know you will be getting additional properties soon and will provide them with specific information. Get them on your buyer’s list.
• Run your own ads on several Internet classified advertising sites.
• Network at your local real estate investment club meetings. Most areas in the country have real estate investment clubs that meet on a regular basis. Plan to attend the monthly meetings for as many clubs as you can find. Gather cards from everyone you meet and follow up later in the week with a phone call to discuss what type of investing they do and add them to your list.
• Call on all the “For Rent” signs you see and ads listed in your local newspapers. Property owners who have properties they rent out may be looking for additional properties to buy, fix, and rent. If you have a property under contract at a high-enough discount that provides a positive cash flow, it should be easy to assign that contract to an existing rental property investor.

There are other techniques that can be used to build a wholesale buyer’s list. Be creative and your list will continue to grow.

So how many active buyers do you want on your list—50, 100, 200? You want as many as you can get! Don’t ever stop building your list. Investors with a super buyer’s list never have to worry about selling properties or assigning contracts. And if you have a super buyer’s list, you will find that other investors will come to you and ask for help in selling their properties. That can generate an additional income stream for you. A super buyer’s list is one of your most important assets.

David Boyd is a real estate investor and owner of Wasatch Front Homes, LLC in Farmington, Utah, working in short sales and loan modifications. He is also a licensed securities agent with Regent Capital Group, specializing in 1031 Exchanges and Tenant-in-Common investments.

For those of you following my progress with Monica Main’s Apartment Building Cash Flow System, I thought you would like to read this article about apartment rents.

Apartment rents rose during the first quarter, ending five straight quarters of declines and signaling the worst may be over for the hard-hit sector.

Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis Inc., a New York research firm, began its tally in 1980.

Reis tracks vacancies and rents in the top 79 U.S. markets, and rents rose in 60 of them, led by Miami, Seattle and New York—all cities that have notched big rental declines in the past year.

Rents increased 1.6% in the first quarter in Miami and 0.9% in New York. The gains came during what is usually a seasonally weak period for apartments and suggested that landlords may have some momentum heading into the peak spring and summer leasing season.

“Deterioration seems not to have just been arrested but reversed,” said Victor Calanog, director of research for Reis. “Several markets have bottomed and may be on track to recovery,” he said.

Nationally, effective rents, which include concessions such as one month of free rent, rose 0.3% during the quarter compared with a 0.7% decline in the fourth quarter of last year and a 1.1% drop in the first quarter of 2009. Vacancies are tied to unemployment, because many would-be renters move in with family members or double up during a downturn.

“We clearly hit an inflection point in all of our markets in January and February,” said Jeffrey Friedman, chief executive of Associated Estates Realty Corp., which owns and operates 12,000 units in the eastern U.S.

Renters are also staying put longer: the average renter now stays for 19 months, up from an average of 14 months, said Mr. Friedman, and despite low mortgage rates and greater home affordability, fewer renters are leaving to buy homes.

“This is the first time in many, many years that it feels like even people who could afford to buy are making the investment decision not to,” Mr. Friedman said.

Difficulty in obtaining financing for new apartment construction, meanwhile, has limited the supply of new units that will be added in the coming years. Those fundamentals have landlords and investors excited about the potential for rents to pop once the economy gathers steam.

Read the whole thing

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For those of you following my progress with Monica Main’s Apartment Building Cash Flow System, I thought you would like to read this article about multifamily sales by Mark Heschmeyer.

Large dollar property sales seem to be emitting faint sparks of hope for the commercial real estate outlook so far in 2010, particularly in the multifamily and hospitality sectors.

To be certain, the number of property sales with price tags of $5 million or more still declined 16% in January from the number of sales in January 2009, according to CoStar Group Inc. And that was a steeper decrease than seen in November and December.

However, that decrease in dollar volume can be attributed to fewer deals and smaller properties being sold. The average size of the properties sold this past January was 5% smaller than a year ago, and the number of deals was down 15%. That helped raise, the average price per square foot being paid for institutional-quality properties from $141 per square foot to $149 per square foot January to January, the third month in a row that the average price paid was more than it was in the year-earlier period.

What’s more, multifamily sales in the $5 million and up category increased 50% over the year earlier. This was the second month out of the last three that multifamily sales had increased month over month. Apartment sales were up in November and flat in December.

Hospitality property sales also took a huge upward turn in January – up more than 250% over the year-earlier period. Although, it was the first monthly increase since the recession started, the trend over the last four months has clearly been improving for hotel properties. They were down 58% in October 2009 compared to October 2008, but down only 1% in the December-to-December period.

While no one is jumping to the conclusion that the results clearly indicate commercial real estate has turned a corner, they do appear to lend more credence to the belief that a painfully slow rebound may be in progress.

“We’ll see more transactions involving institutional quality property because buyers are beginning to understand that prices for top-quality properties may be at or near a bottom,” said Bob Bach, chief economist at Grubb & Ellis. “I think we’ll see a gradual increase in sales this year of perhaps 20% to 30% or possibly considerably more.”

“We’ll also see [more activity in] Class B and C troubled assets in secondary and tertiary markets because lenders realize there’s no reason to hang on for better prices because these properties will be the last to recover,” Bach said. “Prices are expected to drift moderately lower, more into the strike zone where buyers and sellers will start to make deals. But the pricing correction is [still] probably [only] two-thirds to three-quarters over with.”

In addition to attractive pricing and lenders more willing to sell, confidence from the resumption of job growth is also expected to stimulate the willingness among investors to seek outsized returns by taking on greater risk.

As CoStar’s Property and Portfolio Research (PPR) noted in its 2010 Predictions white paper, “Once we start getting a couple of months of positive job numbers, particularly if there is an accelerating trend, we’re going to see a lot of investors interested in cashing in on the opportunities that are out there, whether this means acquiring half-empty buildings or taking on assets with big lease-roll exposures.”

According to PPR, the best-performing opportunity funds from a vintage standpoint have been those that are executed in the last year of a recession or the first year of the recovery. Looking back to the last downturn, 2001 and 2002 vintage funds were the best-performing opportunity funds over the previous eight years.

Multifamily Investment Sales

“There has undoubtedly been an uptick in transaction velocity in multifamily deals, and I believe it is due to a variety of factors,” said Darron Kattan, partner and senior multifamily broker for Franklin Street Real Estate Services in Tampa, FL. “Multifamily is always the top choice of investment dollars and therefore there are a lot of buyers looking for deals. Nothing new in this cycle versus previous where multifamily is the first to recover due in large part to the availability of buyers. Multifamily was actually the first to hit the distressed radar screen, with the shortest term leases (outside of hotels), and therefore became the first to get hit hard by the downturn and land on asset managers’ desks at lenders and servicing companies, and therefore are the first working through the system.”

In addition, Kattan noted that AIMCO and Equity Residential were large net sellers in 2009 due to balance sheet and stock pricing issues. That, he said, opened the door for attractive deals to hit the market.

Tim Wang, vice president, senior investment strategist for ING Clarion in New York noted that Freddie Mac, Fannie Mae, and HUD have been dominating the multifamily financing.

“This is the only property sector that you can still lever up to 75% loan to value and have positive leverage to juice up investment returns,” Wang said. “The Fed plans to end its $1.25 trillion mortgage debt purchase program by the end of next month, which could potentially lead to an increase in GSE mortgage rates. So, there is a rush in the marketplace to take advantage of the attractive financing terms and do multifamily deals before this deadline.”

Hospitality Investment Sales

“Hotel demand is highly correlated with economic growth,” Wang said. “Historically, it is one of the first property sectors to recover after recession. The sector is definitely improving, albeit from probably the steepest downturn in the U.S. lodging industry history. We are seeing generally stabilized occupancy while the average daily room rate is still declining but at a slower rate. The major difference in this downturn is that there was excess hotel supply delivered to the market in 2008-2009. Consequently, the revenue per available room recovery this time around could be slower than in the past.”

Gordon L Wicker, chief operations officer for AXIA Real Estate Appraisers in Tucson, AZ, said, “with respect to the hospitality market statewide, average daily room rates and average daily occupancies remain well off 2007 numbers, so most sales activity in the larger regional/national market appears to be an increase in activity from REITs both as a long-term investment, and also due to a lack of attractive investment alternatives.”

Timothy D. Chamberlain, principal at Koda Ventures LLC, and senior director at Lee Kennedy Co. Inc. in Quincy, MA, also noted that hospitality, while still distressed, is becoming appropriately priced.

“Hospitality is discounted enough to start to move and apartments represent stabilized cash flow, which is what the market wants today,” Chamberlain said. “All other classes are getting kicked down the road and are not yet priced appropriately for a reasonable risk adjusted return.”

Office, Industrial and Retail Investment Sales

“There will be an uptick in volume in 2010, but not much,” Chamberlain said. “2011-’12 will be an active years for the industrial, office and retail food groups.”

Of the three primary commercial real estate property sectors, 2010 investment sales numbers seem to indicate that office properties have improved the most over 2009. For starters, the pace at which sales have been declining has slowed dramatically. October 2009 sales were 50% fewer than they were in October 2008. That dropped to 24% fewer for December 2009 over December 2008. And in January of this year, office property sales of $5 million and up were off just 6% from what they were a year earlier. Notably, the average price per square foot is down dramatically from what it was a year ago: $158 compared to $202.

Retail and industrial property sales were still way down from year earlier numbers. Retail sales in January totaled 38% less the year-earlier period and industrial sales declined 68% month over month.

“Retail will generally continue to struggle until investors can get a feel for when occupancy rates and net operating incomes will stop deteriorating,” said Mac McCall, senior director of Franklin Street Real Estate Services in Atlanta, GA. “With many retailers continuing to see declining sales, especially mom and pops, vacancy rates will continue to tick up without the added boost of increased employment in the overall economy.”

“Additionally,” McCall continued, “if you factor in the potential of bank-owned retail properties hitting the market in the coming years, buyers of this product will be able to get away with charging lower rents because their acquisition basis is much lower than their neighboring properties which were either built or acquired during the peak of the cycle and therefore have to charge higher rents to justify their mortgage payments. Both of these key factors make it a tough sell to a potential investor to invest in an asset with so much uncertainty regarding future cash flows.”

Manish Rajguru, who oversees the evaluation of CMBS and other CRE debt instruments at Red Pine Advisors LLC in New York, said that, “the industrial [property sector] should increase, especially those related to trade (exports in particular). The office and retail property sectors should continue to lag given uncertainty of growth in office using employment and consumer respectively (and General Growth Properties’ fallout as some malls will have to be repositioned/closed).”
Buyer Demographics

The buyer profile of institutional quality properties has shifted in the last four months from what it was a year earlier. Developer/owner and investment manager buyers continue to be the primary buyers of properties and, in fact, have increased their outlay year over year. Developer/owner purchases were up to about $7.3 billion in the last four months compared to $6.8 billion in the same period a year earlier; and investment manager buys were up to $5.5 billion from $3.7 billion.

REITs and corporate buyer have decreased their buying activity in the last four months from a year ago. REIT activity was down slightly from $5.4 billion to $5 billion; and corporate buying activity was down from $3.5 billion to $2.6 billion.

Notably, it appears that banks and financial institutions have stepped up their foreclosure activity. Bank/finance firms accounted for $1.9 billion in purchases in the last four months up from $480 million in the same period a year earlier.

Source

I know some of you are just starting your real estate investing career. I want you to think big and see what’s possible when you stick with it.

Pacific Property Co. is offering for sale the Madison, a 90-unit upscale apartment complex in Rancho Palos Verdes, CA.

The Palo Alto, CA, investor had acquired the property in 2005 in a venture with what was then GMAC Institutional Advisors for $26.4 million. At the time, the property was actually two complexes, Ocean View Apartments, with 57 units at 6507 Ocean Crest Drive, and Ocean Crest Apartments, with 33 units at 6510 Ocean Crest Drive. The two were built in the early 1970s.

Since buying them, Pacific Property has made substantial renovations and combined the two properties, which are close to downtown Los Angeles, Torrance and Long Beach. More than half of the property’s units, which average more than 1,200 square feet, have views of the Pacific Ocean. Some have views of Catalina Island.

Marcus & Millichap Real Estate Investment Services’ Los Angeles office is marketing the property with an asking price of $24.5 million.

Haven’t gotten started yet?

Step 1. Get Monica Main’s Apartment Building Cash Flow System

Step 2. Start building business credit

Just got this little piece of advice from Jason Gilbert. It’s pretty wise advice for all you real estate wholesalers out there.

Investors who find deals and flip them (wholesaling) often make this common mistake: They find a great deal, then scramble to find a buyer and often run out of time, and lose the deal.

A few, smart an very successful investors do what’s called “Reverse Wholesaling”: They first find the buyers,
and then find the deals they want, and flip the deals to them for a quick profit.

Makes sense doesn’t it?

For those of you who are following along with my progress with Monica Main’s Apartment Building Cashflow System, I thought you might like to see this email I received from an apartment broker’s monthly newsletter.

Over the last six months, the average rent for an apartment in the U.S. has decreased by 4 percent or about $40 to an average of $961 per month. Indianapolis showed the largest rental rate increase at 3%, while Denver had the highest decrease at 9%.

Multifamily properties could be the best performing sector for 2010, as 70 percent of commercial real estate investors surveyed chose multifamily to outperform the other property sectors by as much as 30 percent this year.

Many investors believe that the peak of opportunity to buy distressed multifamily property is just ahead. Take a look at the history. Five-year, aggressively underwritten CMBS loans done at the height of the market—from 2005 to 2007—should mature starting in 2010.

This year, real-estate investment trusts in the U.S. are expected to begin construction on almost $1 billion in new multifamily projects, a significant increase over the $100 million of multifamily starts in 2009. Investors are betting that the limited new supply in recent years, combined with an improving economy, will lead to ideal market conditions nationwide starting in 2011 or 2012. The 20-to-34 age group, prime renting age, is also expected to increase by five million in the next decade. In Atlanta, we heard from a recent Atlanta Apartment Association update panel that multifamily starts for 2010 in the Atlanta metro area will be at their lowest in recent years, and that as a result rents are expected to increase and vacancies decline in 2011 and 2012.

Ready to get started?

I just read this article from Wendy Patton; I thought of you.

As an investor you must determine your bottom line to do a deal. What is the profit you would expect, minimally, to do a deal on a lease with option to buy or Subject to investing technique? For each type of investing technique you might have a different profit amount required. For instance, I will accept less for a rehab than a lease option, because it can be completed and out of the deal within a few months, whereas a lease option I will be in the deal for 12-18 months or more. Is your profit range for a deal $10,000, $50,000 or $300,000? Once you determine your bottom line then you can determine what you will and will not do for a deal. For instance, if your bottom line is $20,000, and a deal comes along that will only provide you with $18,000, then you need to pass that deal up, or negotiate more to get you your bottom line, otherwise, it is not be a win/win with the seller and yourself. You also might be able to wholesale it to someone else who has a bottom line that is less than your bottom line, but you will need to learn to walk away from deals that don’t work for you.

Source