Real Estate Investors – Red Alert

How’s the real estate marketing doing? Is the huge jump in home prices that is evident in some areas symptoms of a value bubble? Good questions, yes?

Two things to keep in mind when surveying the market:

1. All real estate is local,
2. Real estate is cyclical.

Here in Arizona some residential areas have seen as much as a 30% jump in value in the last 8 to 12 months. The word about increasing Arizona home values has spread across the country. We recently sold a home to an out of state buyer who never looked at the property. His agent is just buying homes, because the buyer is sure prices will continue to escalate.

In the case of another of our houses a buyer offered $2,000 above our asking price on the day we posted a for sale sign on the property. We were asking more than we expected to get!

At the same time we received a telephone call from a relative living in California. He was very excited because his brother-in-law was sure he would get rich by buying a couple of Arizona homes. Should her do the same, he asked?

Such events have all the earmarks of a price bubble… if only in Arizona. On the other hand…

On a recent trip to Buffalo, New York, the local newspaper ran a story explaining that home sales were up. In the same article it revealed that the median price of a home had dropped. In other words, people are hurrying to buy homes that are dropping value. There’s more…

Mortgage Banker’s Association data shows that adjustable-rate and interest-only mortgages accounted for nearly two-thirds of mortgage originations in the second half of last year.

Loans of that type help push up housing prices, because they carry lower initial monthly payments, enabling borrowers to purchase more expensive homes. Basic economics… if more people can buy homes there is more demand… More demand means higher prices.

The rise of interest-only loans, coupled with acceptable higher debt levels for borrowers and tightened bankruptcy laws will probably soon lead to an increase in foreclosures.

If you are buying a home with an interest only loan and the value of that home drops… it is very easy for the borrower to just walk away from the payments. After all, they’ve built no equity in the property.

Both the Clinton and Bush administrations have pushed a policy of low interest rates and easy mortgage loan qualifying. If every voter has a home they are happy and will vote for the party in power seems to be the limit of political thought.

The truth may be that the government is setting people up for failure and financial pain. Far to many people are buying homes they really can’t afford. When interest rates rise… as they surely will… all those adjustable rate loans will act like debt-traps. Interest rates will go up while wages remain stagnate. The result? More foreclosures and financial ruin for many.

There are international forces at work that will not continue to support our government’s wild spending habits by buying its low interest bonds. Interest rates must rise. sooner or later?

Bubble or normal cycle… it makes little difference. If you are an investor consider selling some of your properties to raise cash for the awesome opportunities ahead. You know, buy low – sell high.

TACT Program – Solving the Real Estate and Banking Crises is Simple

There have been numerous articles and books written on the theories or reasons behind the residential real estate bubble and its bursting in 2006, which led to what will likely be remembered as the Great Recession. I can add that I am not one of the parties that share the blame. I was living in Europe from 1994 – 2007 and did not even own real estate in the US during most of that time period! Chalk that up to luck, not prescience.

I would like to focus on what can be done to get out of this mess. The answer is surprisingly simple, although as so many things in life that are simple, it will not be so easy to implement due to the number of banks and organizations involved. They need to change or eliminate the policies, guidelines, and artificial barriers these organizations created to stop the free market from correcting the situation.

The easiest way to understand the solution, is to realize that a bank’s balance sheet is far stronger when it has a performing mortgage loan, rather than a bank owned (REO) property on its books. A REO property is in reality a liability to the bank, inhibiting its ability to borrow and lend. A performing mortgage loan is an asset that can be sold in the secondary market, or used to borrow against to make more loans. The situation is similar when a bank has a performing mortgage loan (even at a lower face value), rather than having a non-performing loan that exceeds the value of the real estate backing it.

In the simplest terms, the solution is for the banking industry to use some of the same strategies as real estate investors currently use since bank loans are not available. Investors whose livelihood depends on the returns they earn on their invested capital, do not wait until a buyer comes along with the ability to get financing. With few mortgage loans being made, there are very few such buyers. The investors package financing in with the property sale to have a competitive advantage. The only step the banking industry took in this direction over the last year was their proposal to allow former owners to stay in their homes as renters. The banking industry lacks property management skills, so they picked the worst strategy to try. The banking industry needs to focus on providing financing to sell the homes, not to get into the rental business.

I have been working on this solution for 18 months and so many naysayers told me it could not be done, that I initially believed them. Fortunately I heard about a gentleman across the country that had been working on the same concept. He had sufficient success acquiring bank owned properties from small local banks, that he started holding seminars on the topic. He coined the phrase “Bank Seller Financing” and pitches it as a great way to acquire properties. He appropriately cautioned that this was not a phrase that would get a positive reception within the banking industry, since “seller financing” was viewed as competition by mortgage lenders. I am indebted to Michael P. Watson and his seminar for rebuilding my determination to expand this simple solution to resolve a massive problem – the US housing market crisis.

Let me summarize the US residential real estate market issues, as if there was a US real estate market. In reality there are many sub-markets with varying degrees of these problems and opportunities. Detroit, Cleveland and Buffalo (where I was born & raised) are very different real estate markets than Las Vegas, Los Angeles, Phoenix (where now I live and invest), or most metro areas in Florida. The key issues are:

– property values have declined, in some markets precipitously,
– many homes are now below their mortgaged value, and far below their “market value” during the bubble,
– banks have too many properties they own due to foreclosure,
– banks are faced with many non-performing loans and the prospect of even more foreclosures,
– some counties (like Maricopa County where I invest) are sending out ridiculously low assessments for 2011 and scaring more homeowners into turning their keys over to their lenders, and
– with the current high unemployment rate the majority of people believe that real estate prices will continue to decline, despite evidence to the contrary.

As a case in point, I was shocked when investors at a recent meeting of the Arizona Real Estate Investors Association (AZREIA) were polled about whether they believed housing prices would fall further, are near bottom, or are rising. Approximately 75% felt they would decline, 14% said it was at or near bottom, and 1% (including me) felt they were rising. All of those investors have access to the same very detailed market data, so I was shocked how differently we each filter that data based on what the media and the gurus are saying.

Back to the issues, there is one key issue which is both the crux of the problem, and the crux of the solution. There is not enough money available to make mortgage loans to meet demand. Ask your friendly bank executive if money is available for mortgages and they will give you the party line – “yes, we are lending every day and have plenty of funds available”. Publicly available data on lending, current underwriting requirements, and government issued guidelines give a totally different answer. The truth is banks do not have sufficient reserves to make enough loans.

Since banks are not lending, hard money lenders and private mortgage lenders (like my company) cannot even meet 20% of the investor demand for loans, despite charging annual rates of 12-18%. If plenty of mortgage money is available, why do I get daily requests, far exceeding our capacity, for Private Mortgage Loans, Transactional Funding, Seller Financing, Contracts for Deed, and our Lease-to-Own program? Trust me, it is neither because of my good looks, nor because I offer rates below government subsidized bank loans.

Many people believe that demand for real estate is low, and that is depressing the market. The opposite is true in many markets. In the Phoenix market, sales in 2009 and so far in 2010 were on par with the peak years of 2004-2006. Pending sales are now at levels that make those earlier years look like slow periods. Incidentally, during the peak years the Town of Buckeye, where I live, was the fastest growing housing market in the US. By 2008 the bubble burst and about 90% of the properties for sale were distressed sales. Like the rest of the Phoenix market, sales now exceed the peak years, and I have prospective buyers asking for our financing help daily since they can’t get bank financing.

The solution to the real estate and mortgage crises is simple, and it is not new and stronger regulation. To the contrary, the more the government meddles the worse things will likely get. The banking industry, and I include the mother hens in FHA, Fannie Mae, and Freddie Mac along with the banks, need to eliminate the self inflicted policies they imposed and barriers they constructed after the real estate market collapsed. These policies are analogous to locking the doors once all the horses escaped.

I recently submitted a number of purchase contracts on bank owned (REO) and short sale properties (with non-performing loans). So to those that say there is no demand – I am ready and willing to buy hundreds of properties that meet my cash flow requirements, if the financing is available. There are another 100 investors like me in the Phoenix area flocking to the auctions, bidding on REO listings and on short sales. If financing were available, prices would be rising even faster than the 13% year-over-year increase we saw in April. That was not a misprint; Phoenix area prices rose 13% since April 2009!

Here are a few of the barriers to mortgage financing:

– REO properties require high reserves, inhibiting lending,
– non-performing loans require accruals and reserves, further inhibiting lending,
– bank REO, short sale and mortgage modification departments are understaffed,
– lending departments have policies to inhibit financing the sale of their own bank’s REO’s and short sales (notice the Catch-22),
– most mortgage loans help the bank selling the REO more than the one issuing the new loan (not a great incentive for issuing new loans),
– few investors and homeowners have FICO credit scores exceeding 720 (the new underwriting norm),
– individual investors, even those at the top of the Forbes 400 list are restricted to 10 mortgage loans in their name, regardless of assets, net worth and income,
– entities whether corporations or LLCs, as most investment funds are structured, cannot get mortgage loans regardless of their assets, profitability or book value, since those loans cannot be sold on the secondary market,
– bank executives are not aware of the conflicting policies they have put in place,
– too many separate governmental organizations regulate and “try to fix” the mortgage and banking industries, and
– there is intense pressure from the US Treasury for banks to buy T-Bills to finance the deficit.

To me it is very obvious from this list – banks do not have the money to lend due to their weakened balance sheets and reserve requirements. When distressed homeowners face this same dilemma, they reach into the bag of tricks investors use, selling their homes with seller financing, on a lease-to-own contract, contract for deed, or even turning over the deed “subject to” the investor taking over the payments.

Banking industry, meet the enemy – look in the mirror. It is time to heal thyself by implementing the TACT (Toxic Asset Conversion and Transfer) Program. Learn from and work with real estate investors and buyers to sell off your REO and short sale properties. You will strengthen your balance sheets and income statements, property values will continue to rise, fewer people will hand over their keys, and the real estate market will return to normal. This can be done in months, not in decades. For more detailed description of the TACT Program review other articles in this series.

How To Save Money On Car Insurance For Young Drivers? Read To Know

The cost of car insurance policy is determined by many factors typically examined by insurance companies online such as driver’s age, the location where he mostly drives a car on, the make and model of car, driver’s driving experience, etc. Insurance companies take into considerations these factors to figure out if driver will be a high risk. Usually, young drivers are considered risky as they are less likely to have good driving experience and skills. This is why it is challenging to qualify for cheap car insurance for young drivers. But, the interesting thing is that today many online insurance companies specialize in offering various discounts which you can earn to reduce your insurance cost or simply get cheap car insurance for young drivers. Before applying for insurance policy, it is advisable to get some knowledge about the same.

If you install security or safety devices in your car, you are less likely to get injured or your vehicle is less likely to get easily stolen or damaged. Many online insurance companies offer discounts for the same. Moreover, if you want to save money, you should think of joining a recognized driving course. This will improve your driving experience as well as skills and also could get you one more discount. One more way to get best affordable auto insurance is to drive less. If you drive less, the possibilities of accidents or similar circumstances leading to insurance claims will get reduced. Some insurance providers also offer discounts to students who score good grades. Besides, your driving location also affects insurance cost. Even make and model of car will affect what you will pay for insurance policy. Some vehicles are expensive to be insured while other cars are not too expensive.

Thus there are many aspects which you should work on to save money. But, most importantly, you need to locate insurance company which offers the most affordable auto insurance rate and also multiple discounts. One of the easiest ways to locate best insurance company in your local area which is willing to provide affordable car insurance with many discounts is to take free professional assistance of a reputable online car insurance service. These services which are closely connected with a huge online network of insurance providers that offer cheapest car insurance quotes will help you to get easy and quick access to best insurer.

The risk factor associated with you will affect your insurance cost significantly. So, it could be advisable to see if you can reduce the risk taken by insurance company by following some expert guidelines and improve your eligibility for affordable auto insurance rate. Get assisted by experienced car finance specialist to know what these guidelines are and how to get cheap car insurance for young drivers.

Log on to to get more information on young driver affordable car insurance in Canada. It offers various discount on premiums to lower down your monthly payments and helps you to save money. The interest rates are also so minimal compare to market rates. Visit us soon.

Rockwall TX Homes & Real Estate

Rockwall, TX homes are situated in two general parts of town: the northern side and southern side. Homes for sale on the south end are closer to I.H. 30, Heath TX, and various retail shopping and dining locations situated at the intersections of I-30 / Ridge Road / and S.H. 205. Most noteworthy is The Harbor, a new retail, office and entertainment district situated on the lakeside which furnishes residents with public access to the lake, open spaces, a lake view promenade, fountains, and pedestrian walkways all surrounded by excellent entertainment and retail destinations. Anchored by the Hilton Harbor Hotel and the Cinemark 12 Harbor Theater, this town center draws scores of visitors and residents. Just some of the best known tenants include Gloria’s Restaurant & Bar, Dodie’s, The Blue Canyon Kitchen & Tavern, Agave, and Rocky Mountain Chocolate Factory.

The north end of Rockwall provides a more relaxed lifestyle to residents with access to the lake, the courthouse, Downtown Square, and Harry Myer’s Park. Residents enjoy family friendly neighborhoods, open spaces, parks, recreation, fishing, golf and other nearby activities.

Wal-Mart, Bank of America, and Chase Bank are located at the junction of Lakeshore Drive and State Highway 66 while a Tomb Thumb and other ancillary retail stores are under construction at S.H. 205 and Lakeshore Dr. Rockwall, TX homes for sale on the northern end tend to draw people who favor family friendly neighborhoods with less vehicle traffic while still having access to recreational areas, shopping and dining.

The following are some of the more substantial subdivisions located on the north side of Rockwall, TX. Homes for sale vary in price:

The Shores on Lake Ray Hubbard is a residential community consisting of numerous phases surrounding open green areas, parks, Lake Ray Hubbard, and a tremendous golf course. Situated adjacent to the northwest bend of Lakeshore Dr., this master planned community has a broad range of homes at varying price points. With initial development and construction taking place in the 1980’s, portions of the development still spur new construction of custom homes.

The Ridge at Lakeview Summit is a favorite Pulte Homes subdivision, offering a community pool, situated on the south side of Lakeshore Drive on the opposite side of Lakeshore from The Shores. This community is within a short walk of Hartman Elementary School.

On the southern side of Rockwall, look into these outstanding subdivisions:

Lakeside Village is a gated community of approximately 450 homes surrounding a nine-hole, par-three golf course, community pool, splendid lake views, tennis courts, and park areas with the downtown Dallas skyline visible in the backdrop. Ingress and egress from I.H.-30 is very convenient via Village Drive, a.k.a. Horizon Road.

Buffalo Creek Estates encompasses an excellent golf course developed by Jay Morrish and Tom Weiskopf. The community features jumbo lots and custom homes by some of the most respected home builders in the Dallas area. The Buffalo Creek Swim and Tennis Club is a popular destination, particularly in the summer. It sports a 25 meter pool, 5 lighted tennis courts, and clubhouse for its members. The clubhouse could be reserved with or without the pool for large events.

A Few Great Books to Get You Started in Real Estate Investing

I have been investing in real estate for over 10 years and when the topic comes up in conversation, people always ask the same question – “How did you get started”?

The answer is books – to be more specific, Rich Dad, Poor Dad. I was fresh out of college, working as a software consultant, when a more senior colleague/mentor recommended that I read Rich Dad, Poor Dad. He said to me, “If I were your age, THIS is what I would be doing”. A few weeks later, while stuck at the Buffalo airport, in a snow storm, I read the book cover to cover. From a financial standpoint, my thought process was forever changes.

Here are a few other books I recommend – to anyone looking to get started in RE investing:

– Investing in Real Estate, by Andrew J. McLean and Gary W. Eldred – This book provides a more in depth look at real estate investing – examples of deals, issues which may occur throughout the purchase/ownership process, etc. In my opinion, the authors do a very good job of walking you through various sample transactions. The focus here is on fundamentals – long term wealth accumulation via the Buy & Hold approach. This book will not teach you how to do short sales, lease options or some of the other, more involved scenarios; however, it will provide great insight into basic real estate investing practices.

– Landlording on Autopilot, by Mike Butler – for anyone looking to understand property management (even if you plan on hiring someone, it is important to know good strategies), this is an excellent book. Mike developed some great methods for streamlining the PM process – which is critical – particularly when you start to accumulate a multiple properties. It can be the hardest part of the business – but if you start out right, you can prevent a lot of headaches.

– Loopholes of the Rich, by Diane Kennedy – Another book within the Rich Dad series – Diane gives a great, easy to understand, perspective on the tax advantages and legal (company structures, etc.) that should be considered when investing in real estate. Just as important as learning how to get the money coming in is learning how to keep it! This book is a great starter for understanding those strategies.

– Grow Rich with the Property Cycle, by Kieran Trass – This book was a more difficult read (for me anyway) but the perspective is priceless. It describes the various stages within the property cycle and how to make money in each phase! It may sound as if what we are experiencing in the current economy is something which has never been seen before. While that may be true – with regard to the exact cause – it is certainly not the first time our markets have seen a similar recession/depression. The most important thing is to understand where you are in the property cycle and how to best take advantage. I read this book once every few years.