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

There has been a lot of talk from Washington and Wall Street about the continuing housing slump and foreclosure problems. The lament is about how to get the foreclosure rates down and housing moving again. Some say the

$ 8,000.00 first time home buyers credit was a bust.  But consider this:  every house that was sold with the $ 8,000.00 credit was a success because someone just became a homeowner for the first time. Realtors, closing agents, home inspectors, lenders and a host of other people collected a pay check for that one sale.

Washington keeps saying that banks must make funds available to lend. Banks say they are doing just that, and point to all the houses that are reported as sold from the National Association of Realtors and other data collecting agencies. While it’s technically true that there are loans being made, there are not enough to make the impact needed in the market to really get it moving in the right direction. So here is what I feel what must happen if this market is to get moving for real.

1) Congress and the President, as well as the private sector, must stop talking about creating jobs and actually work together to create them. Just as important, they must keep jobs from going elsewhere. Don’t worry I’m not going to get political on you. I’ll leave that to people who have nothing else to amuse them.

American business has to start looking at the long term business plans not just the next quarter.

(Wall Street created this monster) The CEO’s can only care about the next quarter earnings and being a Wall Street favorite. So they sacrifice quality and service, looking for the cheapest labor they can find and cutting corners. This way they hit their numbers, Wall Street is happy, the CEO is considered a genius and the cycle starts all over again. But what really happens is every time people here are laid off, and the jobs are outsourced to a country with fewer regulations and lower wages, it limits the number of people who can afford their product here. It’s a vicious circle.

Now our leaders in Washington have to take as much blame for this as the CEO’s because they make it hard to do business in America. They have so many overlapping regulations and laws it’s impossible to keep track of them. Hiring regulations and tax laws change all the time and each government agency has its own set of requirements. It’s hard to plan your future if the rules changes daily. Fear of lawsuits is a big and costly issue. Employee and consumer safety must be prime considerations, but frivolous and outright stupid lawsuits must be stopped.

 I know the Government and Private sector can work together to solve this and many more issues. The economy will not get better if people don’t have jobs or feel their job is next to be eliminated.  Spending will not increase as these people will either not have the income, or will hold on to what they do have, just in case.

2) Banks and other agencies must give us a true picture on the actual number of homes that have been foreclosed on and that are behind on payments. The number of homes that are reported and the numbers of homes that are on the market are not even close. Conventional wisdom says that there is a big ‘shadow inventory’ out there that nobody wants to talk about. This is flat out wrong.  But until people have a clear picture of the problem how do we know how to fix it? And Government alone is not capable of changing this perception. Until this is revealed people will not feel comfortable making any decisions and will take a wait- and-see approach.

3) Finally the housing market is not going to improve if the banking and the financing industries continue to refuse to work with the small investor. A large number of the foreclosed homes are in complete disarray and are unable to be sold to an end user. So this only leaves the investor class to pick up these properties and make them usable. But banks and other agencies have put so many hurdles in the way of small investors it’s hard to get a deal done. Private cash is available but harder to raise because of the reasons stated above. FHA with the 90 day rules and 180 day rules makes it almost impossible to fix a house up and sell it to an end user quickly. These rules don’t help home buyers at all, but somebody in Washington feels that they have the right to dictate how much money an investor can make. And the banks add their own set of rules on top of the Government. Some of the big banks won’t even loan money on a house that the owner has owned for less than 90 days. And others dictate how much profit investors can make for up to 6 months. (These rules, however, don’t apply to the banks themselves)

It’s the small investor who will restart the housing market, not the big institutional investor who buys 500 homes at a time ( and who, by the way, still needs to sell to someone)  The small investor is the key to the whole recovery. Banks and the government need to work together to allow the small investor to buy homes and fix them up and sell them or keep them for their rental portfolio.

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