Day 3: The Missing Link

The Investor in Today’s Market…
Sure it’s daunting out there today. Especially any theory that has a missing link, like this one, is tough to prove. What is the missing link in today's recovery? The real estate investor. The real estate investor is a vital part of any upcoming recovery in the housing and real estate market. Without them, us, I don’t think it will be possible to recover. It’s no shame to admit that you are waiting on the sidelines. It’s hard not to do so when everywhere you look there is someone who knows the market is going to fall another 10% because Jethrow from so-and-so’s office said so last weekend at the yard sale. But sit back and think about it. When is the best time to buy anything? When is the best time to try something new? When is the best time to get into the market? Right; when it’s down, on sale, not working, when there is the right opportunity in front of you it usually is not wearing a big “Hello my name is: The Right Opportunity” sticker. (In my experience anyone with a name tag on is trying to sell you something anyway-think about it.) But if you do see one it’s up to you if you think that is weird or not, but in my opinion it will be a little harder to spot than that, even if it is just as obvious. Most people wouldn’t take any opportunity seriously that rolled in with a name tag on, but sometimes it is just that close and visible to you. It just takes you a little bit of commitment to convince yourself to say Hi and get to know it. What is a real estate investor to do these days? What is the definition of a real estate investor anyway? Who are they? Where are they? What are they looking for? The answers are easy, every person that buys a property is an investor, whether it is for personal use or not. The traditional investors are not out there, at least not in force. Those who are are doing it behind the scenes quietly. But they all have one thing in common; they are looking for a “Deal”. The issue is what defines a deal? Is it a discount off of the listing price? If so who sets a fair listing price? What is the value? Is it a house that is below market value? Again what is Market Value these days? Is it a home that needs repairs? Is it a property with good rental cash flow? Cap Rate? Expense Coverage Ratios? Fully leased property? Wholesale? Refurbished? Good part of Town? Close to Campus? Close to Beach?... Yes to all of these, and no to all of these. The answer is it depends, no one really knows these days. All that can be for certain is that in 10 years anyone who does not take advantage of the possibilities and opportunities out there right now, will be the same ones who ten years ago said gold was too high at $350 an ounce, and that gas will never go over $2.00 a gallon, or below $4.00 a gallon last year, said you can’t go wrong investing in Enron, or had a friend buying JDS Uniphase at $83 a share and would double his money in a week, said Google would never catch on…you know the type. The type that says it is never the right time or that his brother-in-law’s boss who-knows Chuck Norris’ friend who works for Warren Buffett thinks it is a bad idea. That type. So what is the opportunity out there for today’s investor? The opportunity today is choice. Let’s face it good or bad the fact is there are thousands and thousands of properties out there that are empty, distressed, upside down, in foreclosure or soon to be in foreclosure. The banks and lenders are not sure what to d and what not to do. I think they are just waiting for more bailout money. (Apparently the big loan modification rescue plan is not working. The issue is just too big! Just yesterday there was an interview by Matt Lauer on the Today show of all places about how a financial newspaper columnist “quasi-genius” got wrapped up in it and is losing his house. The banks told him repeatedly they were too busy to work with him to fix the mess he was in with his loan I read that one large bank that had billions of dollars of tax bailout money, has modified 1 loan to date. That’s right 1! It wouldn’t matter if they did do it the time it would take to process it would negate half of them anyway. ) They are simply waiting, for what I am not sure, but at some point they will unload thousands of new properties on to the foreclosure market. Checking the local commissioner sale website an average of 40 homes a week are being auctioned off for all of the upcoming sales listed. That is great except 95% of those are being purchased by the plaintiff aka the bank that has the mortgage from them, which adds to their REO inventory, which is precisely the business they do not want to be in, the property management business. All the time these and the others they already have taken back are just sitting, usually empty, or not being cared for if they are occupied. No matter how nice the neighborhood and how well they are watched, an empty house is a deteriorating house, period. Now the banks own properties that if they were to be sold even at a discount cannot be financed by the typical homebuyer as repairs are needed, as they are not in good shape they will not pass the minimum FHA guidelines in most cases. If they do the buyers will usually pass them up for others that need less work and are probably priced the same because the distressed sales are bringing their value down. This does not include the abandoned properties that are not yet in foreclosure or are simply vacant or empty and not distressed. A new plan needs to be tried here, this is not working! Someone, The Investor, will have to step in and be a middle man and have the ability to get these properties at a wholesale type price, repair and refurbish them, then pass them to the end homeowner, or be able to use them as rental property to those that cannot or do not want to buy. The problem is they cannot get the money to do so! What about an incentive for these guys, to make feasible the purchase a responsible amount of investment property, by qualified educated buyers, and give them incentive and or subsidies to make it worth their risk and effort and allow them to have the opportunity to make a profit in the future. This does not mean the “Investor” needs to buy 5, 10 or 20 properties. I am simply stating if you own your own home already; why not look to buy a rental property in your neighborhood, or a duplex somewhere. Small time responsible investing is investing all the same. Do so responsibly, at your comfort level. This would quickly lower inventory, create affordable housing alternatives, and allow homes that otherwise could not be purchased by first time home owners, or low income home owners be available. Want specifics of my plan? Tune in tomorrow…….Day 4 for “The Plan”.

Day Two - What is Driving Today's Market?

What is driving today’s market?
The short answer is nothing really. It’s like an empty car in neutral rolling down a hill. Yes it will roll, and it will go until it either runs off the road or hits something big enough to stop it. Why? How? Gravity. No not a tractor beam (Borrowed Stimulus Money) sent from the mother ship (Gov’t) pulling it downhill, its gravity it has always been here.
Compare that visual to today’s burgeoning recovery (the car) which is starting to roll in many areas of the country the movement can be attributed to a few things.
1. The natural cycle (The gravity) for this time of year, the spring and summer naturally bring more activity, a good amount of stored up demand. (Which is in my opinion mostly due to the unfavorable, inaccurate, over generalized media coverage of the last year.)
2. Attractive first time home buyer incentives i.e. $8,000 tax credit, record levels of inventory, lower prices and increased affordability. The big if is the supposed increasing availability of mortgage financing available. (The road with a big 90 degree turn coming up)
While these are all nice, and depending on which party’s media machine you listen to, there are signs of optimism in the economy and overall direction of the housing market. There are signs of a bottoming out of the housing fall, an increased level of activity and consumer confidence in housing all over the place.
But for a true long term recovery there are a few items missing and a few time bombs (The Wall) lurking in the near future that could derail any recovery unless they are addressed; one of the most immediate being the $8,000 first time buyer tax incentive sunset of December 2009, not that this can continue indefinitely however. At some point virtually every person with the ability to purchase a home as a first time buyer is going to do so. Sure there will always be new people entering the market, but the level to drive a recovery will, has, level off and the effect will be less noticeable, they cannot drive the market for ever. Also the job market and banks starting to lend again are big deals, but those are obvious and yesterday’s news.
So what do I think is needed next? (Who can jump in our empty rolling car and steer us around that corner and away from that wall?) I think a new incentive should be introduced to spur the missing link in the housing recovery, the real estate investor. Not the jacked-up-on-HGTV flipping-manic-fly-by-night-know-it-all-jack-of-all-trades-price-war-bidding over exuberant type of the early to mid 00’s. But the professionals, and the rational small time investor looking to take advantage of an opportunity, and to make sound quality purchases of an asset that can never be worthless.* (As I have stated many times before, if you find a piece of property that is truly worth $0, tell me and I will buy it! Chernobyl excluded).
Tomorrow Day 3…The Investor the Missing Link

Todays Market - Tomorrows Market Part 1

I doubt there is anyone out there than can dispute that the home buying and selling process, whether new or existing, is a vital and important aspect of any economy. The velocity of money which accompanies each transaction is enormous. With so many different beneficiaries from builders, suppliers, real estate agents, insurance agents and companies, bankers, investors, lenders, inspectors, repairmen, roofers, local, state, federal tax coffers, attorneys,, ….the list can go on for a long time I think you get the point. Each property sale creates enormous income for many, people, who in turn take that money and spend it elsewhere, who take that and spend it, who take that….
I think it is time we take a step back and look at the reality of today’s market, to see what is really going on, and where it’s going tomorrow. What are the few key issues that are driving today’s market? Also what are the few missing pieces that are needed to bring the market back to a true recovery, or a true long term positive, sustainable healthy level?

That is what I am going to explore the next few days, and present my plan and my ideas. I would like your ideas too, so chime in as you please and I will use your input in the plan, good or bad. I will then present the final plan anyone that will listen, to see if anything happens....at worst we can look back and say we tried!

Tomorrow…What is driving today’s market?

New Real Estate Degree

Thinking of creating a degree of Certified Real Life Real Estate Professional a combination of business, finance, engineering, marketing, law, B.S., psychlogy, early childhood education, enviromental services, insurance, mental health, and construction. I think I will approach the local colleges and universities to begin offering an advanced degree in Real Life Real Estate. Afterall it is expected that we know all of this stuff somehow anyway, why not be professional have a degree that covers it all. I envision a 3 year crash course to give a masters level degree in all of these in one blanket degree in real estate.

Advertising

I am going to make it official, NO MORE TRADITIONAL OR PAPER ADVERTISING. Ran some numbers recently, and the return on investment for all of the paper advertising I could track was .08%. Pretty Good huh? Yes I know there are untrackable possibilities, branding, name recognition and such issues. But if the numbers were even close to average say 8-12% that would be one thing, but less than 1%! I went back to every property I had ever sold, or listed and not sold for some reason. Every buyer client I had, and traced back as many as possible as to where and what made them contact me about buying or selling their home. I could do that for 145 transactions out of all the transactions I have done, not including personal. Guess how many came from Print, TV, or Mailers....2. Out of the rest an overwhelming majority came from Sphere of Influence and referrals 97. Online was 39, and open houses, random or other person to person were the other 8. Yes I know that is 1 too many, but one was in two categories. They came drive by my house and I was there, they saw the add in a real estate book, but did not call me....right place right time. I am going to try to figure out what the remaining transactions came from but it would take a lot to make any difference in my new plan. NO MORE PRINT OR TRADITIONAL ADVERTISING! Online all the way.....except for my postcards and newsletters of course. We will see how it goes!