DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE – REAL ESTATE FEED BY DEAN GRAZIOSI

As a real estate investor, you will be sticking to the script, or business, plan that you developed.  You will have a very good idea of your budget and of the criteria that will compose a workable short sale for your inventory. 

If you are working with one or more short sale agents, you must be careful that they do not waste your time.  Many agents just subscribe to the theory that you throw everything against the wall and maybe something will stick.  These agents can cost you time and money.

Being able to clearly describe the characteristics of a property that might interest you is essential as well as a good exercise for you.  When you converse with an agent about a property, these are some of the guidelines you may set:

·                     You are only interested in properties with one or two liens.

·                     You are not interested in properties that are in the midst of a divorce.

·                     You are not interested in properties that have Fannie Mae or Freddie Mac backed loans

·                     If there is a homeowners association, you want to make sure the property you are considering does not have outstanding liabilities.

·                     If there is a homeowners association you will want the name and contact instructions for the bookkeeper or accountant

·                     If there is a homeowners association, you will want to see a copy of the by-laws or prospectus.

·                     Is the potential property in the geographic area or neighborhood that you want?

·                     What repairs will definitely be needed to make the house livable?  You will have a contractor inspect the house but you most likely are not interested in a property that requires more than 20% improvement costs.

·                     What are the asking price and the amount of the mortgage?

If the agent can answer these questions to your satisfaction, you have a serious short sale agent working for you.  If you reject this property, make sure to explain why, so that the agent is not discouraged and knows what to concentrate on in the future.

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Today, one out of every 196 homes in the country is faced with defaults and foreclosure. There are very few people who would not be interested in the news related to real estate. It matters to know the state of affairs of the real estate market. Since there are many who are looking to buy homes, rent out space for themselves and the family. Then there are other class of people who want to sell there properties or rent their homes. For both, the buyers and the sellers, it is important to understand the market condition and act accordingly.

The sellers these days aren’t a happy lot. The rapid decline of job opportunities coupled with the job cuts going around hasn’t helped the buyer population. The number of buyers has reduced both for the new homes or resale homes, due to the fear of financial commitments and how the future holds.

There has been a slight improvement in buying trends for the past few months, however. Add to this the fact that many properties have been put under the foreclosure bracket of the banks, which has pulled down the prices of the resale properties, since the banks would sell these properties in an auction. Though the resale numbers have picked up considerably, the value is not coming in.

The buyer still remains cautious owing to the spate of foreclosures – some of the highest numbers in the history. The unemployment rates, which touched 11 percent, is a further set back to many who were thinking about buying a home. Now with a depleting financial situation they would definitely be thinking of a job more than a home. It would also mean that many are moving out of their ownership homes and taking up rented places where the commitment is lower.

There is some help to the buyers in terms of the very attractive mortgage interest rates and tax incentives by the federal government for the first time homeowners. However, significant growth will only happen when the job market improves, leading to stability and more faith from the population at large.

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The real estate market has really been thrown by a mutually conflicting picture. On the one hand are many people struggling to pay their dues for the mortgages they have. Some of them have already been told by their lenders that the lenders are going to foreclose. In fact, the foreclosure rates have touched new heights and are tipped to soar further. On the other hand are people who are looking at this as a huge opportunity to get the dream home they have been waiting so long for.

Further, the deadline for availing the tax credit of $ 8000 for first time homebuyer has been pushed back to June. There is more good news; there is tax credit, of around $6500, for existing homeowners who want to buy a new home. However, it has some pre conditions, like the period of stay in the current house and the annual income of the household. This should further boost the sales, which seem to be picking up due to the federal support and existing market situation.

Most of the dreams of the homeowner are fulfilled with the help of a mortgage loan. Since many cannot afford to own the homes with their own money, loans are the order of the day. Whatever the situation of the market, loan interest rates, terms and repayment schedules play a key role in purchasing a home. The only other important aspects would be the price of the house and amount of loan that can be financed by the lender. With the interest rate for a 30-year fixed term loan going down the 5 percent barrier (it is at 4.98 percent this week), good properties are available with wider choices and negotiable rates. It surely is a heady combination for those who have saved enough.

If you have enough savings and are sure about your future cash flow, drive a hard bargain and chances are that you will get the best deal in terms of property, price and interest rates. Some might wait a little longer to see what the second round of foreclosures, which were held back, brings to the table. With the announcement of the tax credit for step up consumers, there are ample opportunities to get the tax benefit. Although it’s a difficult call for some, it’s becoming relatively easy for other prospective buyers to find the home of their dreams.

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There is a massive ‘shadow inventory’ of around 7 million units, which is primarily made up of distressed and foreclosed properties, in the pipelines that the banks haven’t put up in the market yet. Once this shipload of inventory hits the shelves of sellers, it is going to further pull the rates down. This is one of the reasons why top researchers like Senior Managing Director of Research for Wall Street, Amherst Securities, Dr Laurie Goodman, believe that the market is going to go down further in the coming months, due to impact of the low cost inventory building up.

Dr Laurie Goodman also indicated that the prices could see a fall of around 8-10 percent in the forth-coming months. This may not completely push down the prices since the consumer demands are also increasing, which might just counter balance the price depression. Adding to the inventory of homes are the delinquent accounts, which have not been able to sustain the repayments due to a job market that has not really improved. Thus, with income in trickles, many have not been able to meet their commitments. These homeowners have been forced by circumstance to approach banks with foreclosure requests to qualify for government programs. The foreclosure rates in the country have increased over the second quarter by 5 percent.

There are multi fold factors, which have increased the foreclosure rates and will most likely keep them high for some time to come. Most lenders have not yet pressed foreclosures due to the loan modification programs extended to the homeowners. When this period ends, and the modifications don’t bring in the necessary economic relief, many more will be forced to close.

Adding to the difficulty is the yearly rate adjustments in flexible home loan rates, which will kick in now and may produce increased commitments resulting in greater financial difficulties for owners. Compounding to the fiscal problems is the mounting unemployment of 9.8 percent, which is slated to increase further. Therefore, most believe there will another tide of foreclosures soon.

The picture looks bleak and gloomy for many, but for others who have saved enough and are in financially secure positions, the situation is ripe for a home. The interest rates are the lowest and going down week by week, the prices are low and the choices are many, including resale homes. If you are financially stable, you should drive a hard bargain not only on the price of the house, but also on the interest rate of your home loan. This might be your best opportunity, but do your financials right and get them double-checked before you take the plunge.

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Smart real estate investors retain a real estate attorney.  Investors have one week to review the purchase and sale offer and one week to review loan terms and conditions.  Why gamble?  The right attorney can serve as consultant, tax adviser and listener.  You could do a lot worse.  Yes the attorney will cost some mo0ney, but the peace of mind is well worth the investment.   

Real estate investments are sizable.  Your investment is a serious, business transaction.  Attorneys who specialize in real estate law are worth their salt and can protect your interests, make sure you get what you expect while helping to negotiate with all interested parties.

Here are a few of the services your real estate attorney will provide:

·                     Review and explain the purchase offer and contract.

·                     Resolve all contingencies including issues with the structural inspection.

·                     Check that there are no covenants, easements, liens or other conditions that could affect the title.

·                     Prepare and register all legal documents.

·                     Review, explain and clarify the terms of the mortgage.

·                     Modify mortgage terms

·                     Calculate all adjustments to be made at closing including tax adjustments and utility and water credits.

·                     Review all documents prior to and at closing.

·                     Attend closing.

·                     Arrange title insurance protection.

·                     Make sure everything proceeds in an orderly manner and that you receive what you expect.

When selling, there is more to do than collect the money.  You need representation to accomplish the following:

·                     Review the purchase offer and contract.

·                     Help clarify all negotiations.

·                     Prepare the deed for transfer

·                     Procure power of attorney if you will not attend closing

·                     Attend closing

·                     Review all closing documents and statements

·                     Arrange for transfer of deposits

·                     Arrange insurance certificates

·                     Calculate credits

·                     Confirm and arrange mortgage payout.

Many of today’s homeowners would not be in the position they now find themselves had they elected to retain legal representation.  Can you imagine spending hundreds of thousands of dollars and entering into a financial commitment for 15 or thirty years without expert advice?  It doesn’t make sense, does it?

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At the International Commercial Property Exposition in Munich Germany, some pretty surprising and very disappointing numbers were released.  Foreign investment in U.S. real estate fell a whopping 77% in year-over-year comparisons.  The $14 billion outside investment in U.S. real estate fell behind the $15 billion invested in Japan and ahead of the $11 billion invested in the United Kingdom.

Perhaps the most startling transaction was the sale of the Worldwide Plaza at 825 Eight Avenue in Manhattan.  When the building was fully occupied in 2007, investor Harry Macklowe purchased the property for $1.7 billion.  After Macklowe defaulted on $7 billion in debt, Deutsche Bank took over the Plaza and eventually sold it to a joint venture spearheaded by George Comfort & Sons.  The selling price was $605 million.

The building is only 60% occupied with an initial net yield of about 6.3%.  If the new owners improve the building’s occupancy rate, the net yields should increase to 12%.

Also in New York, SL Green has agreed in principle to sell 49.5% of its interest in 485 Lexington Avenue to a joint venture between Gilmore USA and Optibase Ltd., an Israeli-based technology company.  The joint venture is paying $21 million and assuming the $450 million of existing debt.  Once the property is closed, the joint venture expects to acquire another 49.4% interest from SL Green.

While the downturn in the first half of they year was dramatic, July and August have seen investment from Germany and Asia begin to come back to the market.  New York and San Francisco have become popular targets for on and closed-end German and Asian funds. 

In Washington D.C., the largest transaction of the year has taken place.  Public REIT Vornado sold 1999 K Street to German investor Deka, an open-end fund.  The sale price was $208 million or $830 per square foot.  At the same time, Credit Suisse purchased 1099 New York Avenue from Tishman Speyer for $90.5 million.  Big investor’s are wheeling and dealing in big markets and betting on their ability to fill unoccupied space.

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The investor who takes a long view of real estate investing is a professional investor.  There is no substitute for buying low and selling high but real estate investors know the quick turnover is difficult to accomplish and that every real estate transaction has built-in expenses that cut into that quick profit.  Like all forms of investment, your real estate plan will include a description of your risk tolerance and appetite.  Making money in real estate involves hard work and discipline.  There is no way around those components.

To help analyze each transaction and assure conformity to your overall investment plan, real estate investors build a reliable team of professionals.  Your real estate consulting team should include:

·    An agent
·    An appraiser
·    A home inspector
·    A closing attorney
·    A lender for purchases
·    A lender for sales
·    A maintenance expert
·    A general contractor

The general contractor should have a general knowledge in plumbing, electrical, heating and air-conditioning, roofing, painting and flooring systems.  The maintenance expert should be familiar with cleaning costs, lawn services and windows cleaning services.

This team of experts can help in many ways.  However, their biggest contributions will help protect the real estate investor from the greatest sin, which is overpaying for real estate.

The reason to build a team of professionals is to heed their advice.  Investors must understand the numbers behind the numbers, but they must also respect the input of their chosen professionals.  When the numbers do not add up, it is time to move on to the next opportunity.

The evaluation of these numbers is the moment of truth in every real estate transaction.  When the transaction does not fit, the professional investor walks away.  Follow your plan and the profits will be there.

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Here I was, a woman, having gone through foreclosure, and yet still having the firm belief that I could purchase another home (no one in my family believed in me).  Everyone told me to “forget it.” There was just no way I was going to be able to purchase another home. I would get comments like: “Don’t worry! You’re a woman, when you get married your husband can help you purchase another home.”

I didn’t want that! I didn’t want to live with the failure of never being able to buy my own home. It had nothing to do with whether I was a woman or not!  So, one day, as I was lamenting my situation I saw a comment on twitter about how it was possible to purchase a home again, even after going through a foreclosure.

The twitter comment redirected me to a Wiki, that went on to give me the basic steps which needed to be followed to be able to purchase a home again:

The Wiki went on to say that the first thing that needed to be done was to re-establish credit. I read all the way through it, and then continued to do research elsewhere, and that’s when I found Dean Graziosi , who confirmed a lot of what I was reading on blogs, wikis and on twitter.  From the weeks of research I did, I learned the following.

The First Year after Foreclosure is the Toughest. When the foreclosure has been discharged you can start reestablishing credit, but the first year after a foreclosure is the most difficult.  Your credit score will sit somewhere around 550 or lower, and with this score you could qualify for a home loan but you will qualify for the highest rate. If you wait a year then your score can increase to 600 and drop your mortgage rate by a point or two, and by the second year, if you play your card right you can have a good credit standing and get a normal mortgage loan.

So, I decided to wait a little over a year before I started home shopping again, but during that time I also worked on improving my credit score. I opened a new credit card account, and started paying everything on time. I started saving for that down payment, which also helped my credit score.

Then once I was ready, I first checked my credit report to make sure that everything was correct and accurate. I didn’t want to have to pay for other people’s mistakes!

Another great thing I learned from Dean Graziosi was how to plan out my house payments, and figure out what my mortgage payment was going to be even before “shopping for the home.” I learned about different types of mortgages, and what type I wanted, or needed, what type of home I could afford and what to look for in a home, what features were important and which weren’t.

Today, my family and friends have realized that a woman can do more for herself without having to depend on her spouse, and that it is in a woman’s best interest to be financially independent.

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It is easy to assume you will make money on an investment property such as an apartment complex, store/mall building, or business complex and in most cases you will. What makes the difference between making a few dollars and making maximum profits is to know what the costs are going in. Your first step is to learn how to understand a cash flow statement.
A complete cash flow statement will include, not only the upfront costs of operating an investment property i.e.: cost vs. rental unit’s value but also underlying expenses such as utilities, taxes, insurance.
You should also find out the turnover in your proposed rental. If your renters are already in place, if there are vacant spaces, typical lengths of stay are all a part of knowing how reliable your investment will be. These figures are less solid than the above expenses and you should always take into account that the possibility you will have less income than the building is capable of but your fixed expenses will remain constant and save accordingly for times when rentals are under-performing.
Once you have taken all of these figures into consideration and feel a property is a good investment you are still not ready to take the plunge. Figures look good on paper but the property itself needs to look good in person. Make sure everything is in operating order unless you know ahead of time you are going to be putting money into repairs. If you are open to fixing up a property the price should definitely reflect the costs you will be putting into a building before it is up to your standards.
Now you are ready to make that jump into the rental world. When you close on your property and hold the keys, you are a landlord in an exciting new world of real estate investments knowing you’ve made all the right moves to insure security and profit.

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Just about anywhere you go online looking for real estate information will have a handy calculator meant to show you how much you can afford to spend on a new home. While some of these can be very detailed and accurate, many rely solely on your income.

Many of these figure your housing budget at 40% of your annual income, the figure used by most lending institutions.  However, you should always figure out for yourself how much you can afford, as it may be more or less than this number depending on a number of other factors in your life. By following a few pointers when adding all this up, you may get a much clearer understanding of your financial situation and hopefully avoid any future issues with your mortgage payment.

The first step is to determine the total amount of your income after taxes, then take out your expenditures. This should include all your monthly household bills including pet expenses, child care, fuel, etc. as well as whatever portion you either set aside or think you may need for unforeseen expenses. If you are currently renting, your monthly rental payment can be added back into your income as you won’t have this expense once you buy the new house. If you currently own a home you’re planning on selling, keep that payment in the equation until it is definitely sold so you will not be in danger of losing either the existing house or a new one.

Whatever is left out of this calculation is your “surplus income.” Surplus should never be used to its limits, especially if you do not have a sizeable emergency savings account, because you never know when your costs may go up or your pay may go down. Ideally, a house payment will be no more than half of this “surplus”, though it’s not always possible to keep it to that low of a percentage. If needed, cut out unnecessary bills such as entertainment, restaurant dining, or anything else that may be discontinued if need be to allow you to purchase the home you want.

Knowing the exact market price you can afford for a home requires knowing the terms of a potential loan. Run a credit report, then discuss your options with a lender to try to get a general idea what percent interest you’ll be paying.  Determine whether points are available and whether you plan to purchase any. Finally, discuss what kind of closing costs will be charged to you or added onto your loan. Now you have all the information necessary to place a dollar amount on what you can afford based on the monthly payment you can afford.

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