Buying Right Has Never Been More Important

We all know that the sub-prime mess is still on going. The problems getting new buyers qualified to cash you out of your properties are causing hassles for many investors. This is the 800 pound gorilla in the room that is making it more important than ever to buy properties correctly. It does not matter what your exit strategy is, you can loose a lot of money if you pay too much for a property.

When I am looking at the property I ensure that I am comparing the properties to ones that are very much like the subject property. I never compare a rambler or a two story house to a split level. Why you may ask? The answer is because in my market a split level is seen as dated and a throwback to the 70’s. This retro style is great for clothes but not so good for houses.

I also will go out of my way to compare properties that are in the same neighborhood rather than miles away in a different area. Banks are getting more stringent with their appraisers. They are also black listing some appraisers because of the generosity of appraisals. Before the mortgage crisis, you had some liberty in choosing an aggressive appraiser when you were shopping for a loan. Now the banks are only allowing certain appraisers to value the properties they lend on.

Overall this is very good for you as long as you take this stuff into consideration when you buy your investments. Do your due diligence so that you can avoid those traps that can come back and bite you in the behind. There is nothing more painful than paying too much for a property and then not being able to sell it for the profit you expected.

My Round Table Mastermind and Mentoring clients have been working very hard at correcting this tendency when they first started. I have worked with them on ensuring that they are able to figure out the current value but also the after repaired value so they are ensured of a profit before signing on the dotted line. It has helped them put more money in their pocket instead of leaving it on the table.

Take a little more time to be sure of your values. It will help when presenting your offer to the seller. By proving to your seller the true value of the home you take the emotion out of the value. This will help you explain your position in a way that is undeniable. I have found that when I properly present the value to a seller I am authoritative and credible to the seller; allowing me an edge in the negotiation.

Have a Merry Christmas and a Happy New Year.

Will the credit crunch and sub prime bail out have a bigger affect on the Economy than predicted?

Have you been staying on top of the news lately? If so you know that the Bush Administration has outlined a plan to help some of those facing foreclosure. As I mentioned last week there are a bunch of activists out there saying that they did not go far enough.

Question I am posing to you is; what else is there to do? Should he stop all of the foreclosures? Should he bail out the financial institutions and Wall Street investors so they don’t lose any more money? Is this really what is best for the economy?

I will tell you that I can see the writing on the wall. This is going to begin to effect more than just the housing industry. People will be stretched thin making their payments and will not be spending their money on non-necessities. This will cause the economy as a whole to shrink of stagnate.

How will this affect us as Real Estate Investors? There will be more motivated sellers. This will allow us to purchase more properties. This is a dramatic difference over the last several years when it was more difficult to buy but you could pretty much sell anything. Now you will need to be much choosier about what and where you buy your properties. And you will have to work harder to sell them. Be more creative and offer more options.

Lately, I have tightened my buying criteria. I now will only buy closer to the town center areas. I concentrate on those areas that are still selling a little quicker. I still buy pretty houses that are of the size and value that sell more often. I will not purchase a house that is functionally obsolescent or laid out in an unorthodox way.

I always drive the houses that are for sale to ensure that after renovation I can compete with them head on and usually with an advantage. I ensure that my house is renovated well and that there are few if any issues with the buyer’s inspection report. I ensure that the house is clean at all times and that it is staged neutrally so that people can see themselves in the property with little trouble.

There are a few more ways that I have tweaked my sales strategy to sell quickly but I don’t have a lot of room to cover that in this week’s eNewsletter. I will go into more depth in the next several weeks on how to sell in a buyers market.

Dedicated to Multiplying Your Successes!

Paul

P.S. Two items of note. I am teaching a 4 hour workshop this Saturday December 15th in Bellevue, WA on “How to Find Motivated Sellers” This workshop will run from 9:00am until 1:00pm and will be taught live. There is a small cost for this event but well worth the money as we will be discussing 107 different tactics and places to find motivated sellers that are willing to sell creatively and at a discount. Reserve your seat here: http://www.rei-success.com/workshop.php

P.P.S. Second Item, next Wednesday December 19th I am holding a Free Webinar on how to determine true comps of a property. This is a training call with a friend of mine Mark Jackson who has been an appraiser for years. We will show you how to ensure that you are placing the proper value on the property when you buy it as well as pointing out some common misconceptions about renovation and adding value to your properties. RSVP here to reserve your place on the call: http://www.rei-success.com/teleseminars.php

Cash, What's Cash?

Here is a post from YouTube for some of your clients that may be experiencing foreclosure right now. I know that it sounds a little crass to talk about not spending money if you don't have it. Especially during the Christmas Season.

But the sad fact is that many people are just in over their heads. They have spent more than they have and relied on the future to take care of them. I know that there have been many that I have talked to that bought a house based upon their Real Estate Agent and Mortgage Brokers advice that they could not afford using conventional financing. They relied on advice from someone who made more money if they bought something more expensive.

So only buy what you can afford rather than the dream house that is just out of reach.

FEDS to the Rescue?

The Fed released their plan to help those in foreclosure. As I expected they only addressed those that could afford the house they are living in now without the rate adjustment but could not afford the house after the rate changed according to their contract.

This does not affect three other types of borrowers:
1 - Borrowers who could afford the adjustment
(In my opinion there is no help needed)
2 - Borrowers who are already behind on their payments
(those that need the most help - this is where creative investors come in)
3 - Those that can refinance into a fixed rate loan.
(Again no help needed there)

There are a whole bunch of consumer advocacy groups crying that it did not go far enough. “This does not help those who need it most”. Frankly I don't see how the government can help this last group; those homeowners that are already in foreclosure. The rates have adjusted but what else could they do? They are looking at extending the FHA program to allow for easier qualifications.

The problem is that typically in this situation even if the borrower can afford the payments the house may have devalued to the extent that they would be so upside down in Loan to Value that they may not be stabilized again for many years to come when the house values rise again. This is not the case everywhere but there are some markets where this is just what is happening.

I understand that this will affect the entire economy. The housing starts are down across the board. The home builder’s and mortgage stocks have taken a nose dive. It is starting to spread to the rest of the economy little by little. Maybe there is an economist or political scientist out there that will explain to all of us the ramifications.

Last night I taught a group of investors Creative Marketing for Creative Investors. There was a gentleman in the room who has been investing for 40+ years creatively. He is a well known Hard Money lender in the area and he said that for the 1st time ever he has to actually come out of pocket with 20% of the purchase price to buy houses more conventionally. He was saying that this is the toughest he has had it as an investor. He has ended up taking back houses that he lent on because of the investors not being able to sell the houses once they are fixed up.

Is this what you are finding? A friend of mine who is a mortgage broker says that she is busier than she has been in 18 months with new home purchases, first time home purchases and investment projects. She is happy as a clam. Who is right? Which reality is yours? I have been searching for commercial properties for the last several months. I am getting in lead after lead right here in my back yard. Some are deals some aren’t.

I guess the point I am trying to make is that you make your own reality! So how rosy is your outlook? What do you think? leave me a comment below.

Foreclosure rescue plan: No help for you - Dec. 3, 2007

Treasury near subprime aid deal - Yahoo! News

Sub-prime Aid

The government is working to save the middle portion of those subprime borrowers. Those that can afford the loan payments as they are now but could not handle the huge rate increases that will be starting soon.

This will be a welcome relief for some.

Treasury near subprime aid deal - Yahoo! News