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

 

Tags: bank, business, BUYING, federal reserve, homes, HOUSE, investor, IRS, Licensed, market, money, real estate investor, Realtor, time

Here’s the follow up to last month’s newsletter topic about safety for you and your clients when touring a home. A total of 43 people responded with their stories when going to a home. Here are the results:

43 total respondents

5 said they have been help up at gun point (and not one of them was from Detroit!)

3 people at knife point

4 had the client expose themselves

15 said they were approached in a sexually explicit manner that made them very uncomfortable

16 said they were just made to feel very uncomfortable ranging from the client yelling at them or getting a little too close to the client just starting to act ‘weird’.

As you can see you need to make sure you put yourself in the safest possible position you can. And we have an obligation to protect our clients as well. Here are some precautions that I use when I go to see a house.

I drive the neighborhood first to get a feeling as to what is going on. This also gives me a chance to see the back of the subject property in most cases.

I never park in the drive way or in front of the house. I park across  the street with my car positioned so the driver side door is easiest for me to get to. And in a position that it cannot be boxed in.

I also notify 2 people as to where I am going, how long I think I will be and the name of the people I am meeting. I text them a couple of times. And if I forget they text me. We work as a team and when they are out looking at a property they notify me where they will be.

1. I carry a safety tool box in the car. I have an air horn, mace, door stops, and bungee cord as well as other tools I may need.

I always prop open the front door and a back door just in case I need to get out in a hurry, and especially if the house is vacant. I always announce that I am coming into the house. When I’m with people I always try to stay behind them, not them behind me. I want to see what they are doing at all times.

I carry mace in my pocket and a knife just in case I might need them. And in the rare occasion I feel I need it, I take the 9mm out for a ride. Yes if you’re in this business you should have a concealed carry permit.

Remember you’re on your own and need to consider and prepare for things that could go wrong.

Paul

Tags: air horn, back door, business, carry, client, driver, feeling, gun point, home, homes, HOUSE, IRS, knife, knife point, meeting, neighborhood, newsletter, newsletter topic, obligation, park, people, Property, respondents, safety, safety tool, street, Subject, subject property, time, tool box

I recently found myself talking to a number of people who came to this country and became successful.

I’ve also spent some time with people who were born in America and who tell me that they can’t make it because there are no opportunities here anymore.

I find that hard to believe because I truly know in my heart that America is the only country where opportunities abound. The question you need to ask yourself is how willing are you to work for them.

Recently I was in Baltimore, Maryland. The driver who took us to our motel and a few other places is here from Ethiopia. He was telling us that he came to America seven years ago because he wanted a better life for himself and his family. He mentioned he was from a village where there were no cars. Villagers walk everywhere; the closest phone was 27 miles away. He laughed when he told us he had never even heard a car engine in his village.

He said he was one of the lucky ones because he got a visa, via lottery, to come to this country. He came by himself, left his family behind, not knowing the language, not knowing anything about America other than what he’d been told. Now here’s the most important part: seven years later he now owns the fleet of vehicles that runs 24/7, driving people around Baltimore, Washington and New York. I don’t want you to think he’s living in a hovel and eating beans at every meal to do this. I’ve noticed his thousand dollar suits! He says the best thing that’s ever happened to him was coming to America. He’s still concerned with his language (which is nearly perfect); he takes classes nightly at the local college to learn to read and write English. I just have to ask: if this gentleman can come to this country with no language skills, no driving ability at all, and within seven years own a fleet of automobiles and employ seven full-time drivers, how on God’s green earth can someone born in this country with all its advantages have  the audacity to say they can’t make it in America?!  America is not the place for the future? Says who??

I believe too many Americans have convinced themselves that they are victims and that someone owes them something. Too many people believe they’ve been wronged (somehow). The Government has helped propagate this fallacy by putting more and more people on government programs and telling them “your lot in life is not your fault, you’re not responsible, somebody else did this to you and we’re here to help you get them back”.

It’s not only people on the government dole who think this way. Just recently I was speaking to a friend of mine who commented that the American dream is over; we will be no better than a third world country within one generation. When I asked him why he felt that, his answer was amazing. He said there are no opportunities left in America between the government taxes and greedy corporations. The average man or woman doesn’t stand a chance and your best bet in life is to hope that you can have a place to live, a few dollars in your pocket and food on the table and wait for the government to help you when you need it. I was absolutely amazed with this defeatist attitude. I asked him why he felt he was such a victim and that his life was so miserable, (while we sat out on his back porch looking at the pool, drinking a cold one and looking at brochures of places he was thinking about for his family vacation.) He said he didn’t see his business going on for much longer and didn’t see America going on for much longer because too many people are depending on the government and the government is taking too many liberties when it comes to taxes and government regulation.

My friend sees America moving into second world status, like Europe, where people have a job, a little house, and depend on the government for everything ‘from the womb to the tomb’. Well, one thing for sure is that America was not born on government mentality, and government is not what has made this the greatest country in the world. America is not a victim country; America is the country where anyone can have a good life, money and freedom.

If you just look at these two examples, you can see where the problem lies. On the one hand are people who know they need to work to be successful, and who look for any opportunity. And on the other are people who believe the myth that they are victims of the economy, the corporate giants, Wall Street or whomever, and that only the government can help them now. Our founding fathers would be disgusted to hear these people call themselves Americans. Until people start taking responsibility for their own actions, for their own lives and for their own circumstances in life, this country will continue to have uncontrolled budget deficits, 10%+ unemployment, jobs going overseas, government spending with no results, and more and more people feeling that they cannot make it. Wake up, America!

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

 

 

Tags:  America, advantage, America, audacity, automobiles, Baltimore, baltimore maryland, baltimore washington, business, coming to america, cost, country, economy, employment, Ethiopia, Europe, fleet, food, freedom, full time, generation, gentleman, Georgia, government, green earth, heart, home, HOUSE, language, Licensed, local college, lottery, Maryland, mentality, New York, opportunity, people, Real Estate, real estate investor, Realtor, regulation, Tax, taxes, time, vacation, wall street

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

 

Tags: accountant, America, Atlanta, attendees, bank, bank of america, big picture, broken windows, business, CASH, cost, customer, deal, Decade, discount, education, example, exit, exit strategies, fha, Georgia, GROUP, guest speakers, hearing, home, HOUSE, houses, information, investor, investors, IRA, IRAâ, IRS, job, judge, landlord, Law, Letâ, Licensed, Management, manager, market, marketing, money, mortgage, mortgage specialist, national speaker, next decade, people, person, phone calls, professional, Property, property location, property management company, property managers, raising money, rate, real, Real Estate, real estate investor, real estate investors, Realtor, realtors, rehab, rehab loan, rent, rental, repair, repair job, sale, self directed ira, slumlord, Tax, taxation, taxes, tier system, time, toilets, value

(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.

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Tags: advantage, application, attorney, bank, banking, bottom line, broker, business, buyer, charge, Congress, consumers, contract, credit, Debt, dedt to income, default, deposit, disclosure, documentation, Federal, feds, fha, government, government approval, home, HOUSE, hud, hud safe act, income, industry, insurance, interest, investor, investors, IRS, lawyers, lender, Licensed, loan safe act, loan to value, loans, malpractice, money, mortgage, mortgage safe act, mortgages, owner, paper source, Property, property sellers, real estate investor, Realtor, realtors, rent, safe act, seller, seller carryback note, seller financing, single family, Tax, time, value

 …BECAUSE THEY EQUATE ‘BUSY’ WITH ‘WORKING’!!! How many times have you heard someone say, “I’m just so busy I hardly ever get things done at all, much less on time”?   Most people think being busy is the same as working and it’s NOT.  It’s not even close! Studies show that we spend only 20% of our time on things that produce results (i.e. working), while 80% of our time is spent on things that produce little or no results.   Other studies show every time you get dragged into “Got-A-Minute Meetings” it takes between 15 to 30 minutes to get back to what you were working on. If this happens 6 times a day to you that’s 3 hours a day wasted. You’ve got to find ways to get that time back, and make it productive.   If this is your goal, I highly recommend you read the following books first as they will give you a good foundation. 1) Dan Kennedy NO BS Time Management For Entrepreneurs 2) Dan Kennedy NO BS Ruthless Management of People & Profits   I have to warn you though; these books get to the bottom line, and are definitely not warm and fuzzy.   I got these books because I realized I was spending more and more time on emails, phone calls and other people than I was on things important to me. I was getting over 175 calls per day and 600 or more E-Mails and I was quickly losing sight of the significant things like my family and business.   After reading these two books I worked out a series of steps to fix the situation.   First I kept track of every call that came in. I wrote the name, call time and I set up system to measure the call: 1- Business; 2- Personal; 3- BS. (If you have a person who takes forever to explain something, even if it’s a business call, you must place it in the BS category).   I figured out how much time of the call was spent in each area. If you do this for three months you will be amazed how much of your time gets wasted.   Here are my findings on my TOP FIVE offenders. ( I won’t use their names; I want to protect the guilty). Remember, you must be ruthless. It’s your time, your money and your life.   Time Bandits sorted by offence, May 2010 Subject #1: 62 calls average call 28 minutes. (1) 4 minutes (2) 2 minutes (3) 22 Minutes Subject #2: 48 calls average call 31 minutes. (1) 1 minute (3) 30 minute Subject #3: 38 calls average call 25 minutes. (2) 25 minutes Subject #4: 20 Calls average call 21 minutes (1) 8 minutes (2) 8 minutes (3) 5 minutes Subject#5: 17 Calls average call 16 minutes (1) 1 minute (3) 15 minutes   I found the best people on the phone are the people that charge you for their time (Attorneys, CPA’s etc). Hard to admit this but the lawyers were the best at it. They got to the point fast and were off the phone. So big kudos for the lawyers.   My family times were not counted and never will be. My babies know they can call and talk any time and for as long as they want. All others, forget it.   You now get the idea of how much of your time people waste. And how much of it is costing you money and lost productivity . Next I started to make changes. It took some people time to get on board but they are now following the ‘Da Costa time management program’.   First I changed my voice mail message asking them to leave their question and reason for the call so I can have an answer when I call them back. If they only leave a “call when you can” message I DO NOT RETURN THE CALL. Do this a few times and they get the hint. Also if they are in the top 15 time bandits I usually let the call go to voice mail first and I deal with it on my time.   When I do answer or return a call, I make it a point to say how much time I can take. Once I hit that time limit I end the call politely and go on to the next call or back to work on the next project.   I also set up certain times throughout the day to return calls. First I had 4 times at 30 minutes each, now I am down to 2 call times at 20 minutes each.   With E-Mail I’ve stopped filling out forms for free stuff, or forms that someone sends me, if I haven’t asked for them. If someone sends me an E-Mail that has something to do with my business or my personal life I always thank them but I make it quick. I also only answer e-mails that truly need to be answered. You can see this will take courage on your part to be ruthless with your time but the payoffs are well worth it.   Here are my results: Since I have controlled my calls (both dialed and received) I have been able to reduce my cell minutes from 5000 per month to 2500 saving $175.00 per month or $ 2100.00 a year. That alone has been worth the effort.   My productivity has doubled. I am getting more done in half the time. I also find time for myself now and time for the family. I love to read, and am now getting to read a book a week. If you’re having a hard time getting things done you need to read both the books I suggested and follow the plan. You will see the rewards quickly.   Final thought on this subject: I was in Ohio for the Dan Kennedy Wealth Days. He focused a lot on time and people management, and the bottom line is this: You have to work with difficult people some of the time. But you can limit your exposure to them since they are a drag on your business and your time. And if you have toxic people in your business and personal life you MUST AT ALL COSTS GET RID OF THEM. These people will ruin your business and suck the energy right out of you. And they will think they are doing you a favor spreading their negativity to you.   One of the members of my Real Estate group started keeping track of her time and how she was using it. She was shocked to find she was spending 2 hours a day just on Face Book and Twitter. (How much time do you spend on just these two time bandits?) She also found she was spending more than 3 hours answering E-Mails and voice mails throughout the day. So between the Face Book and other time bandits she wastes 5 hours of the work day on low productivity activities. You can bet she’ll be making some changes! How about you?   Tags: 30 minutes, A-Minute, amp, area, Bandits, BECAUSE, bottom line, business, business call, BUSYâ, call time, category, charge, courage, CPA, Dan Kennedy, deal, e mail, EQUATE, GOOD, good foundation, Happen, idea, IRS, life, losing sight, Management, May, Meetingsâ, minute, minute meetings, money, person, phone calls, productivity, profits, question, real, Real Estate, real estate group, Ruthless, show, significant things, situation, style, Subject, system, thatâ, three months, time, time management, track, Turn, two books, WORKINGâ

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

 

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“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

 

 

Tags: auto industry, bank, banking sector, banks, buyer, buyer credit, cartoon character, contract, fannie mae, fha, financial sectors, freddie mac, global turmoil, GOOD, government rule, government rules, harvard scholar, home, Housing, housing market, income, insurance, insurance industries, interest, investors, IRA, market, money, profits, rate, real, Real Estate, real estate investor, Realtor, retirement, ridiculous rules, special interest groups, STILL, stock prices, Tax, taxes, time, Turn, u s census, u s census bureau, wall street

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

 

 

 

 

 

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Most of what I hear from my REIA members and from other investors is that what they really want is to build equity. So when the market turns they can CASH IN… and retire. Although we all want to cash in and retire we still need to make a living now. If you’re buying all your properties for cash and at deep discounts, great. Are you flipping them or holding and placing tenants in them? Let’s say you're flipping them all and making 10k to 20k a deal. This is fantastic, and if you can do 10 to 20 a year you have a nice income but have not built up much equity. Don’t get the two confused. What is your plan when the market changes and all these great deals are gone? You're left with a decreasing income and no equity at all because you sold your properties for quick cash. Nice income but you’re not any closer to retiring than when you started. One thing you want from any business is to make a living but also grow your equity position. Now let's say you purchased all your properties for cash at a deep discount and then picked the best ones to put into your equity pool. You sold off the others for income just like before. But the equity pool deals are there generating cash flow, which is still income, but these properties are growing equity as well for your retirement.  Just do the numbers. Say you have a property that produces $600.00 positive cash flow per month. That’s $7200.00 per years plus tax write offs (See your accountant on that one). In a couple of years you have made the same money as your quick flip and maybe more. (Yeah I know tenants can be a pain, just deal with it. If it really bothers you, hire a manager like I do and let them handle the BS). Let's not forget the property has increased in value especially if you bought it right. And over time the profits from the cash flow plus the equity increase will contribute to your retirement at a much greater pace than the quick flip and repeat method. So what if you're having trouble finding cash at the right time to make these deals happen? Many investors are in the same boat. That’s why, for the right person, investing in groups is one way to go. I invest a lot this way it solves two problems: It cuts my risk and it allows me to get involved in more deals. A lot of investors are not sure if this type of investing is right for them and not sure how to go about it. Check out my site www.pauljdacosta.com I have a complete Real Estate Discovery and Evaluation package designed to help you with these issues. It’s a great way to get a full understanding of your business and also will show you what track you need to be following to reach your goals. Remember, if your goal is to retire with lots of money (and the lottery isn't part of the plan) you have to build equity somewhere. You can’t just earn a good living and expect to retire rich. What I would like you to do is spend some time on figuring out how you can build equity and make a good living. Send me an e-mail I will be glad to help you. Paul@pauljdacosta.com 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 Fax 941-423-7964 Available for select speaking engagements: send e-mail for request and available dates. Tags: accountant, CASH, Consultants, deal, equity, equity position, Evaluation, great deals, income, investor, investors, manager, market, market changes, money, person, pool, positive cash flow, profits, Property, Real Estate, real estate investor, Realtor, Realty, retirement, Tax, tax write offs, time, value