Hello members I wanted to pass along this article from the Federal Reserve Bank of New York.

"Flip This House": Investor Speculation and the Housing Bubble"

 The recent financial crisis-the worst in eighty years-had its origins in the enormous increase and subsequent collapse in housing prices during the 2000s. While the housing bubble has been the subject of intense public debate and research, no single answer has emerged to explain why prices rose so fast and fell so precipitously. In this post, we present new findings from our recent New York Fed study that uses unique data to suggest that real estate "investors"-borrowers who use financial leverage in the form of mortgage credit to purchase multiple residential properties-played a previously unrecognized, but very important, role. These investors likely helped push prices up during 2004-06; but when prices turned down in early 2006, they defaulted in large numbers and thereby contributed importantly to the intensity of the housing cycle's downward leg. Read complete story below. Paul

http://libertystreeteconomics.newyorkfed.org/2011/12/flip-this-house-investor-speculation-and-the-housing-bubble.html

You might be as surprised as I was when I started doing some research on Reverse Mortgage defaults. See, I was working with one of the attorneys I do some consulting with and he was upset that the mortgage holder of one of his clients that had a reverse mortgage would not do a short sale. I explained to him that they are backed by the Government so they were going to get all of their funds so a short sale was not in their best interest

But he said my client was in default on her loan as she has not paid taxes and insurance in years and was in “technical default”. Here was the reason not to do a short sale. If the bank agreed to the short sale, they would lose the funds they had already paid in taxes etc. But if they foreclosed, the government would cover those losses. So then I googled Reverse Mortgage defaults and there was no shortage of information available. This is the first one I saw, and here is the link so you can read all about it.

HUD Issues Reverse Mortgage Default Guidance

http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-001

According to the Government about 30,000 reverse mortgages (or about 5% of the total) are in technical default.

Florida leads the country in terms of the number of defaults, with nearly 8% of the U.S. total, according to the CredAbility Group, a nonprofit consumer-credit counseling service based in Atlanta

Reverse-mortgage defaults generally have more than doubled during the past two years, as cash-strapped homeowners have fallen behind in paying the insurance, taxes and other household-upkeep expenses required by their loan terms, said Sue Hunt, CredAbility’s director of reverse-mortgage counseling.

This is a major issue for Florida as our property values have plummeted and continue to drop monthly in most areas. As seniors get older, medical bills continue to rise and money may be in short supply. What will they do pay property taxes or buy their prescription or food? This has the potential to be a major issue for the families of parents that have reverse mortgages. Will family members pay back taxes and insurance and deferred maintenance on property that is under water (and may be a home no one wants)? And the final thought: are we willing to put grandma out on the street for not being able to pay her taxes?

Now that it’s April, all our members in the great frozen tundra (aka anywhere North!) are finally seeing grass in their front yards and thinking it’s time to get these properties ready for sale. But before you put that house on the market you better do a little homework.

 All winter long people have been getting daily news flashes on how the market is down, in some areas 20%, since the fourth quarter 2010. They have been told that they could get more for less and all the extras as well. What I am hearing here in Florida from home buyers and Realtors is the home better be perfect and looking good. And that’s the same thing I personally found this winter in dealing with buyers from the north as well from ‘across the pond’. Yes they wanted to see a price reduction but more importantly they wanted the house to look like a palace; everything shiny and new. Fresh paint in and out as well as upgraded landscaping.

One advantage we have in the South is we get people from everywhere for the winter and we learn what people are looking for and can adjust quickly. This winter people were looking for bargains and expected discounts but if they found the right house they purchased. Some cash and some financing but they bought and that’s what’s important.

In our market there are so many homes you’ve got to do something to stand out from the rest. The one thing I’ve noticed is people want you to make it easy for them. I’ve always said it’s smart to have an appraisal and a home inspection done and available as well as all your disclosures. This not only makes it easy for the prospective buyer, but for you as well.

Having an appraisal and inspection on hand shows the buyers you’re serious about selling and you have done a lot of work for them. They can see the appraisal and see exactly why you’re priced as you are. This way you have a negotiating tool in their hands that helps to counter what their Realtor or friends say about the price. A home inspection tells them the house is in tip top shape and any problems have been fixed. Having these two items available helps with the bank appraiser and their inspector. It’s hard for them to devalue and question your numbers when there is another report right in front of them. Now you’re represented even though you’re not there. Keeps people honest. Also if there are issues you can fall back on your reports and have ammunition to protect your price. And I always offer a premium package home warranty with each house.

In one case this winter I had the buyers tell me the reason they choose my house was the inspection reports were already done and they had a good understand of the house before they placed an offer. They were concerned about making an offer then paying for an inspection and not being able to getting all repairs done prior to closing. And they liked the upgraded ceiling fans. See folks, people want everything done for them and if you do it they will pay you for it.

Ok, I know what you’re thinking: Yeah, Paul, everyone says that every New Year and they go right on doing the same things they did last year. And I would say you’re right on with that and the key is …they keep doing the same thing year after year and expect a different result. According to Albert Einstein, that’s the definition of Insanity! Sound familiar? You might even say this is you?

I work with numerous Realtors and Investors and the one overriding theme I keep hearing is the economy is so bad and there’s no money and no one is buying anything. The only problem with that is it’s not true. Yes, finding financing is harder but homes are being bought with bank financing. Investors are buying homes with investor loans. And Realtors are selling homes! Just check those facts with the National Association of Realtors.

I know one investor in my REIA group who has bought 20 properties this year, fixed them up and sold every one with bank financing. Other investors have bought homes with bank financing with 30% down. I have bought 2 homes in the last 4 months with bank financing.

As for Realtors, I am working with one husband and wife team on their marketing program. They had sold a home to a couple from Philadelphia and within 3 weeks they sold another home to a friend of the first sale. So we put together a 3 step mailer to people in their area along with an 800 number to call for more information. They sent out info on the area and as I am writing this they have sold 6 more houses.

Now they are doing the same marketing plan to the surrounding areas and are getting great results. Other agents I know are marketing to the Midwest about all the great deals in Southwest Florida.

I am working on a multi-level marketing program with web sites and a multi-step marketing campaign to California telling people how great it is in Florida: great weather, no income tax, and some of the most beautiful beaches anywhere. I’m using the same program ‘selling’ the Atlanta area.

I also have 5 education seminars scheduled for myself this year. If you plan on succeeding you must keep learning. How many education events have you already scheduled? You should plan at least one on marketing.

The way I see it, everyone has 2 choices: do the same thing as last year then sit around and complain that all the dark forces are against them, or decide to change their mindset and business plans. 2011 depends more on you than any outside factors. I encourage you to look at the things that worked well for you in 2010 and do it again, and to always look for new opportunities to succeed.

Change the people you hang around with if they are negative and surround yourself with positive forward thinkers.

I am available for one on one coaching and help with your marketing. And I will be doing a couple of master mind programs again this year. Call me at 941-716-2597 for more information.

Good Luck and make 2011 your best year yet!! 

1181 South Sumter Blvd Suite 301                      

North Port, Florida 34287                                                          

941-716-2597                                                                            

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com

paul@pauljdacosta.com

This weekend I held another “Real Estate For The Next Decade” education day in Atlanta. We had a packed house of Realtors and investors. Guest speakers included experts in Real Estate Law, Taxation, and using self directed IRA’s in Real Estate. We also heard from a mortgage specialist from Bank Of America talking about the FHA Rehab loan. I spent time on exit strategies and my Three Tier System on property location, as well as on marketing.

All the attendees agreed that the information definitely pertained to their business, and said they really wanted to start using it. But the overriding complaint from the members was, “I’m so tired now and don’t have time to do things I need to do, how on earth can I do this stuff as well??” After hearing about 10 people say the same thing I knew too many of them were working in their business and not on it.

So I started asking the group some questions and we (speakers) were all were surprised at how many of these people were doing everything in their business. To give you an example: out of 32 Real Estate investors only 2 were using a property management company. The biggest concern for the rest was the cost of using a company, and of having someone other than themselves or their own people handle the repairs. I explained to the group that those costs were minimal if you just consider the costs involved in answering all those phone calls about exploding toilets or broken windows, then doing the repair job yourself. This is working in your business. I asked how many people needed money to buy more homes. They all raised their hands. Well, you can’t raise money if you’re fixing toilets. Raising money is working on your business.

Let’s handle the issues of cost.  All said the property managers’ fees were too high. Most property managers charge 8% of the rent so if you have a rent at $ 650 their fee is $ 52.00. This is nothing in the big picture of your business. They handle all the calls and the issues with tenants who don’t pay. You can negotiate that they also handle all evictions at their cost, and I do this. If you’re doing it, how much does it cost you in hard cash, not to mention your time and that’s worth a lot. And in most states you have to go in front of a judge. They look at property managers as just doing their job but an investor is seen as just a greedy slumlord trying to throw this poor person out just because they did not pay rent. Some get all self righteous and benevolent, and tell the tenant they can have 60 days to move out and there’s nothing you as the corrupt landlord can do about it. Yep, they do it and you know it’s true. So now did you save yourself any money?  Nope, just gave yourself more aggravation. And how can you take time to go to court if you have to answer the phone all the time?

Most of the investors thought you must use the property management fee schedule or else. I explained that’s not true and you can set your fees by the number of properties they handle for you. Also if you use a handy man you can have the property manager call that person first. In case of emergencies if your guy doesn’t answer then they can call their guy.

Some of the Realtors felt they could not work any harder and adding more would send them over the top. Their biggest hurdle was paperwork. They said they spent hours for each listing and sale. I then asked if they had someone in their office whom they could pay to handle that for them. Most said yes but did not want to pay the $ 295.00 fee. I asked them how much was their time worth per hour and what the value of a customer was. None could answer these questions. I also asked them if they had to pay the person up front or when the property sells? They all said when it sells. With this information we figured out an option where they might work a deal with the person for a professional discount, if they gave this person all their business. And if they don’t have to pay until the property closes it won’t affect the cash flow now. How many more listings or sales could they get if they were working on their business not in it?

And the last thing that was a complete surprise to me: most do their own taxes! I was stunned! One investor had 30 houses and does his own taxes because he said his accountant charges $ 1000.00 to do them and he thought that was outrageous. I was laughing because I thought he was too cheap! Imagine having 30 rentals with all those deductions and IRS tax laws and loopholes. He’s complaining about a $ 1000.00:  GOD help him if he gets audited!  Folks, there are many things you can skimp on. But for your business to be successful you have to do what you do best- work ON it, not IN it. There are many people who can handle paperwork, reception duties, repair duties, taxes. But only YOU know what it takes to make YOUR business go where you want it.

  1181 South Sumter Blvd Suite 301                       695 Mansell Road – Suite 120

                North Port, Florida 34287                                                           Roswell, GA  30076

                 941-716-2597                                                                             678-287-4800

 Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com

Last week at both of my REIA meetings members were asking how to figure the value of a piece of property when the comps are all over the place. And how to advertise in this market; just putting signs out is not working like it used to.

Since this is really two different questions let’s tackle them one at a time.

Let’s start with marketing your properties first. Some cities and counties have made it their life’s work to take down our signs as soon as we put them up. In my areas the ‘sign police’ have full time people trying to catch you in the act so they can ask you for a donation to the city bank account.

I’ve come up with something that works for me. I go to private property owners and ask if I can place my signs on their property. I offer to pay them with a $5.00 Starbucks gift certificate if they let me put my sign up. This way I avoid the sign police and I get traffic to my houses. I have other ideas but that will be for another post. Now the big issue: COMPS

Well this is the million dollar question. If I could be right on this one 100% of the time I would be on the Forbes 400 list. The biggest problem is that with all the foreclosed properties you can’t figure out what the real value is. Here’s how I handle it.

First, I look at all the foreclosed properties and figure out which ones need repairs and which ones are in good shape. I get this from the MLS or Realtor .com site. This helps me separate fact from fiction and I get a good idea as to what’s happing in my area. Next, I see how many of those homes are back on the market, under repair or being rented out. Then I get the Sold’s in that area that were not distressed. (Sometimes none were sold that were not distressed). I also try to get rental comps as well; this will help me determine price to some extent. I then get a full appraisal done because this will help get a better picture of value from a third party. All these little things help to put a value on your property, and give you credibility when someone from the lender’s office or tax office asks where you got your numbers. But remember, in the end the value of your property is only what someone is willing to pay for it.

Paul J Da Costa

Has been a Real estate Investor for many years. He is a licensed Realtor in Georgia with Keller Williams Realty Consultants.

Paul can be reached by E-Mail  at paul@pauljdacosta.com

(Secure and Fair Enforcement for Mortgage Licensing Act of 2008)

According to the HUD interpretation of the SAFE Act anyone who sells any single family house or 1-4 units and does not live in it as their primary residence, and who wants to offer the buyers the benefits of a seller carryback note is a potential criminal who needs to be watched, regulated, licensed and taxed. This despite the fact that “seller financing,” “seller carrybacks,” “seller-held notes” or any other synonym doesn’t appear anywhere in the Act — Source the paper source

These property sellers have to have government approval via licensing before they hold a note or even discuss terms of a note with a buyer who is not a member of their immediate family.  If they are not licensed they will be fined.  If they don’t pay they will go to jail. Source the paper source

Ok, now that I have your attention we can move forward.

We investors and realtors must pay attention to all the laws that are changing in our business daily and the SAFE Act is a great example of this. I have scoured the internet and have spent time with both of my lawyers to make sure I am following the rules.

You need to know that it’s not as bad as it looks. Some people are making it sound like the end of seller carrybacks or seller held notes.  But only the rules have changed and you need to adjust to them, period.

You can find copies of the SAFE Act on the ‘net so I’m not going to talk in detail about it here. Basically the Act is designed to protect consumers from getting loans they can never pay back or from not understanding what they are signing. So the feds have come up with this Act which requires testing and designates who can talk about mortgages and who can discuss terms of the loans. This is where seller carrybacks or seller financing comes into effect.

I want to look at this as an investor first and then as a realtor. As an investor who has used owner financing, I find it’s a good way to sell property and to improve your bottom line. There are a couple ways this could be done. The first is investors loaning money to other investors so they can buy property and the second is investors holding seller carry backs to the end user.

Investors loaning money to investors, according to both my attorneys, is not as a big of a problem as loaning to an end user. But they made the point of saying the investor lender must have on file all the requirements for a standard 30 year fixed mortgage. Yes, that means you need an up to date credit report, a complete mortgage application with documentation and proof of income, and proof the buyers can pay the loan back. And you need to be careful of interest and points charged as well. You must supply a good faith HUD and all required disclosures.  If you use these tools and consult an attorney, follow all the laws and use proper disclosure you should be ok.

Now if you are an investor selling to an end user you have a different set of requirements and you need to take heed. You are the one who has a “BIG TARGET ON YOUR BACK” if you continue to offer owner financing like in the past. At that time some investors just took their buyers’ deposit, gave them a loan with a high interest rate and waited for them to default on payments. Then they would take the house back and sell it again and again with the same deals. I think you’ll agree with me that those days are over, and good riddance.

The law states that you must be a licensed mortgage broker to offer and discuss terms of a mortgage. It doesn’t say you can’t offer owner financing, it says you must have a mortgage license and they (Buyer) must be able to pay for the loan.

So you need to hook up with a local mortgage broker who will handle all the requirements to meet the law. They will need to do a complete mortgage application, as already mentioned. Debt to income ratios need to be in line with standard FHA guidelines. Loan to value ratios should be the same as FHA.  In my opinion it’s going to be hard for the government to say you misrepresented your loan or cheated someone if you used all the same guidelines as FHA. And the loan should be a fixed 30 year with no points or pre-payment penalties. Very important that you own the property free and clear or pay it off when you offer the loan to the new buyer. None of this ‘wrap-around mortgage’ or ‘subject to’ stuff. If you do business that way, then you default and the end user ends up losing the home you’re going to jail quick, fast and in a hurry. Bottom line is that Congress and the banking industry think of us as parasites taking advantage of people and needing to be watched carefully. They’re more than ready to make an example of someone so use your brain.

As Realtors we have special issues to deal with relating to this law and we need to be careful we know all the facts. A good many realtors are unaware of the law or have not taken the time to look it up. Each state has different views and different interpretations. So first thing is to call your local board and get the most up to date information they have. Spend some time on BING and GOOGLE. As a realtor you cannot negotiate a mortgage without a mortgage license. This causes us a potential problem when we are helping our seller and buyer to negotiate a contract and the seller wants to offer financing. The issue here: is this their primary residence (and how long have they lived there -Check for IRS rules here) or are they an investor. Every state will be a little different here but you must know the Federal Law states that a Licensed Mortgage Broker can discuss terms.

My Real Estate attorney says that if he had a Real Estate license the first thing he would do is double the E and O insurance and triple the malpractice insurance.

We Realtors must make sure we do a good job for our clients and steer clear of any part of the seller financing option if there is one. I also think that each broker office needs a disclaimer form that states the law and how they need to proceed with owner financing. I would interview at least 3 mortgage brokers/lenders and find out if they will be offering loan services for owner financing. I would also look up private lenders and get their information so you can offer them to your sellers and buyers.

To summarize: New financing laws and regulations are being put in place frequently and rapidly. We must keep up with them, pay attention to those that affect our clients and our business and make sure we are doing the right thing and also protecting our selves and offices.

Over time the heavy hand of the government will loosen its grip and we will get a clearer understanding of what we can and cannot do. But in the mean time you need to be very careful how you operate your business.

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at

941-716-2597

                                 paul@pauljdacosta.com

Real Estate investor

Ok, now that I have your attention we can move forward.

??      

Real Estate is my full time occupation. I run my business like the big corporations do:  I have a full time Accountant and a Lawyer whom I consult with on a regular basis. I have a Productivity Coach though my Keller Williams office who helps me keep on track and make sure my goals are realistic and attainable.  I depend on experts in these fields to help me become an expert in my own field.

Working with Realtors and Investors from all over the world I find that we naturally move to only associate with members of our own profession and talk about issues that only relate to our industry.  While this may be comfortable, it won’t allow you to grow either yourself or your business to its maximum potential. This is the limitation of an in-house mastermind group. 

If a realtor even knows what a mastermind group is, most likely they belong to one sponsored by their office. My office has a group that is run by our productivity coach. She does a great job, but all the participants are realtors. There may only be 4 or 5 who attend and they are not committed to the group because it’s FREE and there are no other obligations.

This is why, for the serious career person, I highly recommend joining an outside group that has a mix of businesses. Generally you must commit for a year and the cost can run from a few hundred dollars to several thousand. This depends on the group, what its goals are and how many days the sessions run.

I belong to 3 mastermind groups. The group I run requires members to commit for 6 months at $ 300.00/month .Sessions are held once a month for 10 hours. Currently the participants range from a local doctor to a pest control service owner who catches raccoons for a living. It is limited to 6 people so each person has plenty of time to tell us about their business progress from the last time we met:  what’s working, what’s not, and did they do what they said they were going to do at the last meeting. Oh, by the way, this is a tough love group: members have to follow through with what they say they’ll do or be prepared to catch hell.

One of the other groups I belong to meets for 3 full days from 8 AM to 10 PM three times a year. We commit for 1year and pay the moderator SIX THOUSAND DOLLARS. I might add that the moderator is one of the country’s most sought after business coaches. We have 16 people in this group. Occupations vary from doctors and dentists to realtors to an auto repair shop owner to internet marketers. Some of these businesses are making millions a year (and 2 do over 50 million each!) so we are diverse. And, though all have different issues that need to be handled, all have the same goals: 1) have more free time 2) make more money 3) retire.

The big advantage of this group is all the experience of the other participants on all issues that may affect my business. As an example, one member has over 100 employees so he always has challenges and can give good feedback on how to hire and deal with employees. Another member deals with consultants and directly with the public and has the same issues as Realtors do:  people not making appointments, people not understanding the market place, competitors undercutting the price or flat out not being honest. See, Realtors are not the only ones facing these problems. Members get to learn from these people and how they are doing it in their business. Many times group members can move these ideas to their own businesses with only a few tweaks.

 I know that you’re thinking Real Estate is different from healthcare, or manufacturing, but I’m here to tell you it’s not. We all face the same problems: how do I get someone to pay for a house I have listed or how do I get the seller to take my buyers offer. In the end we are still selling something regardless of what it is. And I hear all the time “we can’t get financing for our houses”. Well guess what, we’re not alone. The owner of the 60 million dollar /year business lost his line of credit for no reason other than the banker telling him it’s the economy and there’s nothing they can do for him. And this with a twenty year track record of excellent payments. Sounds like our business.

When he told us how he was able to find some financing, we all worked to give him other ideas. We all help each other on marketing and our marketing pieces. We make commitments to each other and we hold each other accountable: if you don’t meet those commitments there are consequences. And there are other perks that can’t be assigned a monetary value.  You build great friendships. Your career network expands. In my case some of these people have recommend me to their circle of influence. I have had the privilege to speak to their groups and in some cases actually find investors. But the knowledge and help implementing systems and programs to help make my business better and more profitable is PRICELESS.  

If you would like more info on mastermind groups, getting into one or starting your own call me at 941-716-2597.

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

        Real Estate Education       paul@pauljdacosta.com

This is the Million Dollar Question. Recently at my Mastermind meeting this was the hot topic and some people got pretty riled up defending their view on the subject.

Some members felt that all that was needed was to check comps and rental rates or number of sales in the area and you were good to go. Others felt you needed to do complete demographic and area evaluations on every property. I think you need to be somewhere in between depending on where you’re investing.

So let’s look at these areas.

Your local market: You live in the area, work and play there, so you should have a good grasp of what’s going on. How many foreclosures and job losses? Are there government issues? What areas are hot and which ones you should stay clear of? If you don’t know then you need to get busy studying and find out.

Long distance investing: I know lots of investors who live in one area and only invest in other places. I understand that as I am not interested in investing in my home town till the tax, insurance and job situations gets handled, and the local government becomes pro business instead of anti everything.  So investing in other areas is my preferred option. Here is how I go about it.

One of the first things I do is use my 3 Tier Property Evaluation system for a quick assessment. If it doesn’t pass this test I don’t waste any more time on it. If it passes I move to the next level. I get all the available information on the area from the City Chamber, volunteer groups, non profits and the internet. I check the net for stories about crime, taxes and city politics looking for signs the community may be changing for the good or bad. I also search for information from the State on that area and the surrounding area. Most larger areas have some type of business journal and the information there is invaluable. Example: the Atlanta area has The Atlanta Business Chronicle which is an important resource that all investors in the state of Georgia should be reading. It keeps you up to date on which companies are moving in, which are leaving, how many jobs are being created or lost, and the amount of money being spent in the area. I also get back issues of the major newspapers, including local papers. Two areas I always look through are the business section and the help wanted ads for real jobs. Real jobs are professional positions, not just commission type jobs or work from home selling this MLM or stuffing envelopes. The federal Government has lots of very good information about most metropolitan areas in the country so use that resource as well.

Next I contact the president or director of the Chamber of Commerce to arrange a meeting. In some areas that is quite impossible: for example, in Atlanta area the Chamber won’t even talk to you. But one of their sales reps or community specialists almost always will. Be straightforward and tell them you’re thinking of investing in the area and trying to get a good feel for the community. Another person who always has good insight is the local banker. Make it a point to meet with one. A great place to stop for information is the local board of Realtors. They have facts and figures on the market that I want to look at and usually they will help.

After all that if I decide I want to move forward I set up interviews with 5 realtors. I always disclose that I am an investor and a licensed Realtor as well and will be purchasing property to rehab and sell or for long term hold. I give them the area I am interested in and ask them for all the information I will need to make an educated decision. I never tell them what I want, I let them bring what they think is important. I always meet in a public place like Starbucks; can’t go wrong with a cup of joe.

All this might sound like a lot, but I can do all of the above in 2 days and 6 or 7 hours on the net. Small price to pay when you’re investing 100’s of thousands of dollars.

Of the members of my mastermind group only one thought my due diligence was correct; all the others thought it was too in-depth and wasted too much time. But, consider this: the person who agreed with me owns commercial property and SFR all over the U.S.

In the final analysis, you’re responsible for doing your own due diligence. How in depth you go depends on the area and how much you know about it. You need to do enough to know that your investment is protected. Only you can decide how much that is.

 Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at

                            941-716-259                              

  www.pauljdacosta.com  

paul@pauljdacosta.com

“HOUSING MARKET STUMBLES”

I love it when I read these types of headlines. I always get a chuckle and say “So, what did you expect?” The $ 8,000 home buyer credit was not renewed. FHA, Freddie Mac and Fannie Mae have tightened lending requirements. The “BIG BANKS” are imposing their own ridiculous rules on top of the government rules. And you expect the housing market to thrive. To quote a cartoon character, “DOH!”

Here are some of the particulars in the story: The U.S. Census Bureau reports single family housing starts in June fell by 0.7% to a seasonally adjusted annual rate of 454,000. The U.S. started 1.47 million in 2006 before the bubble burst. The article goes on to claim that a variety of factors have led to a flagging confidence including a sluggish labor market, global turmoil and falling stock prices.

I find it amazing that these so called experts in Washington and New York are clueless as to why we are in trouble on all fronts. Let’s take the labor market. I’m no economist or Harvard scholar but I can sure figure out why the job market is in such turmoil. How about the constant barrage of criticism, rules and regulations that keep CEO and the local business owners guessing “what’s next”

Over the past 4 years the auto industry, banking, financial, and insurance industries have been terrorized by Washington and special interest groups. They have to explain everything from CEO pay to why they’re not being green enough for the environmental groups.

Don’t get me wrong, Wall Street and the banking sector went on a GREED spree like none in history. But with that said, all of the banking and financial sectors have been placed under government rule with all kinds of draconian regulations that have stifled creativity and confidence. Washington has taken their typical reactive and not proactive stance.

Now let’s take business, especially big business. They have tax incentives to take jobs overseas. Does it make sense to anyone for businesses to be laying off people here and exporting jobs elsewhere? Obviously it makes good business sense. The biggest complaint is that taxes overseas are better than and not as high as the U.S. This might be the case but I have seen some reports that show most major companies pay very little federal income tax and most get a major credit. So, is it really taxes, or could it be something else? Cheap labor in some third world country may make the quarterly P and L look good for stock holders but eventually that catches up to you when no one here has any money to buy your product.

Global economic turmoil and falling stock prices are all a factor of Governments around the world becoming so big and cumbersome they stifle growth. In some countries the retirement age is 55 and then people live off the government dole for the rest of their lives.Tax rates in some countries are in the 80% range to pay for all the government social programs and an ever increasing portion of the population doesn’t pay taxes at all (sound familiar?). And you wonder why Europe is on the verge of collapse. Is this a model we want to follow??

Back here in the US all we hear from our leaders is negativity. Words matter and you have to understand they say them more for political reasons. A scared population is a compliant one that will agree with your political ideas. And this has worked well: think 9-11, war in Iraq, TARP Stimulus 1 2 or 3 (I forgot, they keep adding them on), saving GM ‘for America’, and the list could go on. In all of these events our leaders increased the fear factor to new heights making people believe if they did not go along all hell was going to break loose and we would all be out on the streets. Americans and most of Europe are paralyzed with fear escalated by our elected leaders. The job market and the housing market won’t turn around till Main Street starts to feel good about its future.   

So what does this mean for Real Estate investors? You need to pick your markets very carefully. The criteria I use is my Three Tier marketing system which was published in my September 2009 newsletter. Here is the link:  http://http://archive.constantcontact.com/fs050/1101755221758/archive/1102703583402.html.

The best markets may not be where you are investing now. For example Florida, my home state, is very anti business. The Government seems to go out of its way to discourage business from moving here. They want tourism, service jobs and retirees. That is living in the past. We need high paying good quality jobs if Florida is to survive and thrive in the market place.

On the other hand, just to our north, Georgia is grabbing every job that brings in good pay, health care and is a asset to the community and the State. Companies from all over the world are signing lease contracts and purchase contracts and plan to hire tens of thousands of Georgians. Both states have housing problems and job losses but one is being proactive and the other is sitting on South Beach having a cold one and taking in the sights!!!Which state will improve faster?

All over the country this is being repeated, with some states fighting for every job while others are living in the past. There have been a number of articles in national publications that more and more companies and people are moving to Southern and Mid Western States. Don’t believe it’s because of the weather. Northern States and Western States are still living in the 50’s and 60’s mentally when government was supposed to know what was best for the people and the business community. They are all super high tax states and still not able to see what their problems are. They are all on the verge of bankruptcy   and they blame everyone but themselves. Think California, New York, New Jersey and any one of the New England states. So as an investor you must really do your homework before you invest in an area especially if you are not from that area. What was a good bet in the past might not be safe any longer.

Due diligence is more important they ever. Take the extra time on this part of your Real Estate business and big profits will come your way. Because the rest of the world is scared to death and can’t or won’t make decisions so profits are there for the taking. You just need to have courage to go where others are afraid to. 

                              Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

http://www.pauljdacosta.com

mailto:paul@pauljdacosta.com