I got an email earlier this week from a guy who I’ve never met before. From what I can tell, he’s fairly new to the investor/wholesaler game judging by the emails he sends out and the questions he asks (ie- who has a hard money lender, etc). I’ve never met him before, and have no idea how much business he does. However, I do get a couple emails a week either asking questions, or, posting a possible deal he found.
This specific email says that he has an investor looking for a property on the East Valley. He wants a quiet, nicer neighborhood at about 70-75% LTV. When I replied explaining that I can find him a deal for his investor- he tells me he won’t work with a REALTOR® because he can’t tack on ‘his fee’ to then pass on to his investor. NOT TRUE.
I try to explain how assigning contracts work, and after 2 attempts of follow ups, I never hear back from him. It’s too bad, too- he could’ve just had this deal that just slipped away. So, for all the others out there- let me explain quickly how you can assign a purchase contract.
You get a home under contract, with ‘<your name> and/or assignees’ as the buyer. Most investors will do this so that they can assign the contract to a different buyer or entity before closing escrow. The way you do this is you simply ask your title agent to assign the purchase contract to whoever you want before closing. It’s that simple. The kicker is whoever is taking over the contract, must stay within the terms of the original contact as written. As long as they do, it’s smooth sailing. Many REALTORS® and banks have a problem with this, simply because they don’t understand it. They tend to cringe because most investors will use this tactic making it difficult to stay current on the paperwork. It also tips off the seller/bank that you don’t intend to close on the property yourself, which explains why most banks hate it as it as they see it on their short sales all the time (which, have a high failure rate of closing).
As an investor myself, I ALWAYS write a contract with my LLC, and/or assignees as the buyer. Even if I don’t intend on flipping the paper, you never know what will come up before closing. And yes, this is what’s deemed as ‘flipping paper’ in the seminar world.
So back to this ‘investor’- if he wanted to flip the contract to his buyer, and tack on a little fee for himself- he just charges his buyer an ‘assignment fee’. Most guys will try to snag around $5,000 for this ’service’ of finding the deal. How this is handled is entirely up to the middleman- but most will take care of that through the title company to ensure it’s done properly, and everyone’s happy. It’s perfectly legal, and done all the time with most experienced investors. I wish this guy luck, and hope he comes back after getting more educated from his ‘mentor’.
UHHH! I can’t believe I missed this one! This past 2 weeks I’ve been super busy with other aspects of my life and business- but not looking for deals too actively. I’m in the middle of developing a new database for finding deals- and most of my time and attention has gone there (well, not to mention putting up Christmas Lights!) I just started lightly ‘grazing’ the MLS and I came across this beauty.
It was listed in MLS for just under $200k. 1700+ square feet, 4 bed, 2 bath cookie cutter home. In great condition (could use a little modernizing, but definitely livable). NOT in foreclosure, but the seller was over it and just wanted it sold now. The subdivision was very popular and well established, housing many upper-tier homes (not to mention man made lakes, waterfront properties, clubhouse with pools, tennis/raquetball courts, the works). Days on market in this subdivision are some of the lowest in Gilbert due to it’s popularity. Centrally located and less than 1 mile from the I-60- it doesn’t get much better than this!
It comps for $320k.
By the time I found this little gem, it had already sold. I can’t believe I missed that one. $120k in equity, in a great neighborhood. Unbelievable. So how motivated am I to get back on track and go find some others like it? VERY. And guess what- there’s PLENTY OF THEM OUT THERE! If you’re interested in sharing in the abundance of deals- contact me or sign up for my Deal Alerts and let’s make some money! Let’s just make sure to not miss any more like this one!
For those who don’t know, RL Brown is deemed as ‘the man’ in our housing market. He supplies in-depth research on the housing market to nearly every major home builder in the state, as well as predictions on things to come. He’s one of the most respected and knowlegable stats and figures men in the industry today. He put out reports on the current state of the Phoenix Housing Market, which you can subscribe to at www.rlbrownreports.com. Pricey, yes, they are. However, if you’re looking for the best analysis of facts and figures, it’s well worth the money.
In this issue he states…
October’s new home closings are showing signs of stabilization, with a “tally of 3,186 representing a very slight uptick from the previous seven months”
closings are down 23% from last year, and permits slumped 25% from 2006.
13% of our resale homes are to out of state buyers, with 50% of those going to California. Buyers from Illinois bought 35 homes while Canadians bought 21.
Only 20 resale transactions in the City of Maricopa out of the 1140 active listings- that’s a 57 month supply!
the new home market is expected to hit a supply-meets-demand type situation in the upcoming 5-7 months. At that point, the downward pressure on pricing might begin to slow down.
In an upcoming post, I’ll give my own statistics on Maricopa county. It’s no secret that our market has dropped. The key here is what do YOU do about it? Sit around and wait, or, take action NOW and capitalize on the outstanding deals out there? I, for one, know what I’m doing
Here’s an interesting article from CNN.com- Here’s an excerpt- The gross domestic product, the broad measure of the nation’s economic activity, grew at an annual rate of 4.9 percent in the three months ending Sept. 30. That’s up from the 3.9 percent growth rate in the government’s initial estimate for the period released a month earlier, as the revision matched the consensus forecast of economists surveyed by Briefing.com. Despite all the doom and gloom out there- seems as if things are actually going pretty well! I keep saying it, and I’m going to say it again- NOW’S THE TIME TO GET BACK INTO REAL ESTATE! Every major investor I know is capitalizing on this market, picking up foreclosures and rental property left and right! They’re not waiting for the media to report it and react to it, they’re picking up the best deals before everyone else figures it out. Here’s a great clip to reinforce my feelings on it… Feelin’ the Flow
I am constantly asked about using Hard Money in my deals, and am surprised by the amount of people who don’t know or understand the benefits. So, I’m going to write a 2 Part post as to what a Hard Money loan is, and the benefits to using one.
A Hard Money loan is typically made from a single Investor, or, group of Investors under one corporate umbrella or entity. The differences between a Hard Money loan and traditional loans are:
Higher Interest rates
Very few points, closing costs and fees, if any
Equity based loan- doesn’t use your credit score or debt to income ratios
Can close in a matter of a few days or as soon as a Title Report can be issued
Payments may be deferred until payoff
Meant for short term loans
The going interest rate for Hard Money in Arizona is 18% APR. Now, pick your jaw up and keep reading further- you’ll see the benefits soon, I promise. Yes, it’s insanely high compared to a traditional loan. However, most Hard Money Lenders charge a nominal processing fee. All the lenders I’ve used here in AZ charge $500-600 flat fee, that’s it. There’s no points, processing or other junk fees added in. We’ll look at this a little more in depth in Part 2.
A Hard Money loan is issued SOLELY on the amount of equity in the property, and intent of the loan. They don’t pull credit reports or report to credit bureaus. They don’t care about your Debt to Income ratios- shoot, I’ve never even had a HML ask me for income statements or my social security number! So I could have filed Bankruptcy last week, and still be able to obtain a Hard Money Loan on a deal. Most HMLs want to see 25-30% of equity in a property before agreeing to do the loan. They pull their own comps, might do their own drive-by appraisal, and then decide the maximum amount they will lend against the property. Most won’t do a loan in a foreclosure bailout situation- typically they only lend to Investors looking to flip, or, refinance their position out and hold as a rental. Also keep in mind a Hard Money Loan will always be a first lien holder. No HML will loan money for a 2nd position lien. Read the rest of this entry »
Now’s the time to Invest in Arizona Real Estate. I know, I know- the media hype and the masses are claiming it’s Black Friday all over again. A good friend told me once that ‘you always want to do what everyone else isn’t doing’. During the Gold Rush years I had Grandmothers (literally!) asking me how to flip houses, and where they could ‘pick up a foreclosure’. I knew it was time to get out of the game and let the amateurs get shaken out. Remember the same symptoms in 2000 when everyone had a ‘hot stock tip’ on a new dot-com? Yeah, kinda like that. And look what happened in both scenarios- inexperienced investors lost their butts, while the true investors sat on the sidelines waiting for the right moment. The ‘Fly-by-Night’ investors are now running back to the stock market, while the educated ones are swooping in and picking up the greatest deals. Many of which are foreclosures left over from the newbie investors who bought at the peak of the market, hoping it would last forever! If I learned anything from my Economics Professor, it was to buy low, sell high. It’s no different in Real Estate folks!
So how do I know this is the perfect time and place to invest? Well, for a number of reasons…
Cathy Luebke, of The Business Journal of Phoenix and the Department of Economic Security reports today that while Unemployment rose slightly last month, Arizona is still 1.7% below the national average. We also set a new record high for jobs in October.
The U.S. Census Bureau reports that Maricopa County is #1 Fastest Growing from 2000-2006.
AZ has a historical appreciation rate of 4-7% on average (not counting the boom years)- I am still tracking down this statistic for you guys, but will post it when I find it again.
Here’s the deal- foreclosures in Maricopa County are double the normal rate. The sellers are desperate to sell, and buyers are in the driver’s seat with decision making. It’s no secret that there’s a ton of inventory out there. However, prices are holding steady and are barely dropping, if at all. Even if they drop another 2% in the next year- that’s only $5,000 on a $250,000 house. Boo Hoo. If you’re a client of mine, there’s no way I’ll let you buy a property at or close to full market value. You’ll most definitely have plenty of equity to cover a 2% drop- shoot, I’ll even give you a 10% drop and you’re STILL sitting in equity!
Shailesh Ghimire of Arizona Mortgage Guru states:
“Don’t believe the doom and gloom. Loans are still available, and with the shake up in the industry, you’ll most likely be dealing with better mortgage loan officers. ” I agree, and the same goes for REALTORS®, Title Companies, Appraisers, etc etc.
Finance rates are holding fairly low, with Rental Rates rising. I honestly don’t know a better time to start picking up property than now. Everyone wants to wait for ‘the bottom’ of the market. Keep in mind that we never know when we’re at the bottom until it’s too late and changed to an upswing. Personally, I’d rather buy now then wait for everyone else to give me permission to dip my toe in the shallow end. I’ll post more statistics and facts in the near future.
I know it’s your guilty pleasure. It’s ok, we all watch them too. It seems like you can’t turn on 2nd Tier Cable Channels anymore without seeing someone flipping a house. Whenever I tell someone I’m an investor, their first response is ‘oh, kinda like that one tv show’. Yeah, kinda like that. HA! To this date, I’ve only seen 2 episodes that were filmed here in AZ- and those were during our boom. If you pay close enough attention to those shows, you’ll notice that the majority of them are filmed in either California during a rising market, or in the mid-west. Let’s talk about these 2 sceanarios…
Yes, in California when their market is rising, it was somewhat easy to find a deal for $500k, throw money at it, let’s say oh, $120,000, and sell the thing for $900k. Not a problem. Kinda like buying a home here in AZ during our boom and flipping it for $50k higher a week later. What cracks me up is that the beginner investors act soo surprised when their REALTOR® tells them how much their flip is now worth. - DIDN’T THEY KNOW THAT BEFORE THEY PUT MONEY INTO THE THING? Oh, how nice it must be to live in the promise land. I would guess that if you talk to any California investor during their down cycle, they would paint you a different picture. Funny how the networks don’t air episodes in those times, huh?
Let’s look at the mid-west. Ahhh- the beauty of picking up a home for $40k, throwing $20-30k into it, and selling it for $250,000+. Well, believe me, it’s never as easy as they make it look on tv. You’re cramming months worth of hard work into 42 minutes of air time- they’re bound to skip a few details. I’m not saying it can’t be done, there’s just a ton of details left out of the process.
One thing’s for sure- you can’t pick up a house for $40k, throw $20-30k into it and sell it for $250-300k+. At least, not in this market. The mid-west doesn’t have subdivisions like we do here, and subdivisions dictate your comps and values. I always wonder who is buying a $300k house right smack in the middle of $40k dumps? That just doesn’t happen here in AZ. If you pay attention to the shows now, they quickly end the show with their ‘Potential Profit’ if they sell the house for the projected amount. There’s no discussion of holding costs, closing costs, employee costs, etc. 2 years ago we knew how many days it took to sell, the final sales price, closing costs, Agent’s commissions and net profits. Now we’re swept away with ‘potential profits’ and ‘what-if’ scenarios as the closing credits are rolling across the screen. Funny how things change right under our noses. It’s still pretty glamorous when you don’t notice the little details, huh? Read the rest of this entry »
In a meager attempt to get the ball rolling on this blog, I decided to throw together a quick Top 10 list. Really, I could go on and on about why you should use a REALTOR®, and I had a tough time cutting this list down to just 10 reasons. The benefits far outweigh any reasoning against it. Now, I’ll admit, there are MANY ‘unqualified’ REALTORS® out there, who are not investors themselves, have never done a deal, and really have no clue what a great deal is. Obviously, as a buyer of Investment Property, you would search out the Professionals who specialize in Investments and make the best decision possible before hiring the guy who left a magnetic calendar on your front door. Let’s move forward…
10. Trusted Name Reputation
9. Required to Stay Current with Education
8. Knowledge of the local and national markets, and knows what a great deal is
7. Duty to protect their client’s best interest
6. Licensed by the State & Required by Law to Follow Specific Guidelines
5. Access to MLS where the great majority of property is listed
4. Gives accurate, unbiased Fair Market Values
3. Purchase Contracts & Inspection Periods!
2. Solid Network of Professionals in the Industry who refer deals!
1. FREE!
10. Trusted Name Reputation - As a REALTOR® your name and reputation IS your business. It’s a people business, and if you’re not trusted in the Industry, you’ll starve. Yes, it makes me sick to see the business card with the wife, kids, and retriever all cuddled up together, and I wonder how much business they get off of those car-wraps we see everyday on the freeway. But you have to give them credit that if they had a bad reputation, they surely wouldn’t be plastering it all over their car!
9. Required to Stay Current with Education- The State mandates that you have a specific number of credited hours of education every couple years to maintain your license. Beyond that, there’s not a day in my life that I can’t open my email, go to the office, or talk to my Team without hearing about a seminar, education event, luncheon, etc going on. It’s next to impossible to avoid it! Staying educated is just a day in the life. Read the rest of this entry »
Every month I compile Residential Housing Statistics for Maricopa County, AZ. The numbers are gathered from a variety of sources, listed below. I include a couple of indicators on the charts, which give me ’signals’ as to what the market is doing, or possibly going to do. These are similar to some of the indicators Day Traders and Stock Brokers use with their market charts. Each chart gives different information, or signs of what state the Real Estate market is in here in Arizona. While some of them are considered to be ‘Leading Indicators’ (Building Permits, Interest Rates), some are considered as ‘Current Indicators’ (Active Listings, MLS Solds, Absorption Rates), the remaining are considered to be ‘Trailing Indicators’ (Mortgage Defaults, Trustee’s Deeds, and coming soon- REOs). How To Read the Charts There are 3 lines on each chart. The raw data (Red line) is exactly that- the real numbers used in the chart. It correlates to the secondary Y-axis on the right hand side. This will tell you the chart’s exact numbers for a specific time period. The Momentum Reading Indicator (Blue line) considers each current month’s data, and the same month’s data in previous years to determine an amount of ‘momentum’ for that chart. It tells you the strength of momentum behind the current chart’s trend or direction of travel. The EMA Momentum Reading Indicator (Pink line) is the same as the blue line, except that it puts a heavier emphasis on the most recent month’s data, a little less emphasis on last year’s, and so on, and so on. So essentially, what happened this year and last year will effect the momentum more than what happened 5 years ago. Overall, the blue line can give you a little faster reading than the raw data, and the pink line can give you an even faster reading than the blue line. If you’re familiar with trading the stock market, these indicators will make much more sense to you. Each chart has a baseline from the left side Y-axis at ‘zero’. This is considered to be a ‘tipping point’ of sorts to show a possible change in the direction of the market. An indicator crossing the baseline in an upward direction may indicate a good trend on one chart (for instance, Solds), while crossing it in the same direction on a different chart may indicate an opposite response (for example, Interest Rates). Due to the nature of the indicators, they tend to ’sway’ a bit after a large surge in any direction, as compared to a market with slow/steady results. The key here is to pay attention to the direction of travel for each indicator, as well as at what point they cross the baseline. If you look at the time around 2002-2004, most of the charts will have seen a cross in the baseline in a specific direction. This would say that it’s a great time to buy property. Look again at the period of 2005-2007- the indicators on most charts would have crossed back over the baseline, indicating a time to sell your property. If you have 3+ charts telling you one signal, you might want to perk up and start listening. Keep in mind that the indicators are swayed pretty drastically right now as our market recovers from the boom/sell off we’ve had in the last 2 years. They still work, you just have to take into consideration what they’re reading, and adjust accordingly to your interpretation. Having such a strong movement for sales before our boom years, and then such a fall off shortly after will yield a really strong drop in momentum in the 2 indicators. As is common in trading the stock market, sometimes when an indicator is moving in a separate direction than the raw data (divergence), it could mean there’s a reversal in direction coming soon. If there’s a way to ‘predict’ the movement in the market, this is it.
NOTICE! I have added 4 new charts and stats to the reports! The first thing you’ll notice are new charts for both ‘Average Sold Price‘ and ‘Median Sold Price‘ for Maricopa County. Next you’ll notice the ‘Average Days on Market‘ stats for homes on MLS. Last, you’ll see an ‘Investor Activity‘ chart. This is an exclusive chart ONLY to REI Pipeline.com! This works much like the Absorption Rate, but solely for the foreclosure sales. It tracks how much ‘activity’ is going on between the Notice of Foreclosure Sales and the actual Trustee’s Deeds being issued from those sales issued. The ‘Investor Activity Chart’ can be interpreted in various ways. Some might look at it as a measure of how many investors are out there picking up deals BEFORE they go to the foreclosure sale auction at the courthouse steps. This would also indicate the home owner’s ability to save their home on their own (either by filing Bankruptcy, working it out with the bank and bringing their loans current, selling it either with a Realtor® or to a private investor, etc). Conversely, some might look at it as a measure of how much activity is going on at the foreclosure auction. I anticipate adding in an ‘REO’ variable to the stats here very soon- this will tell us how well the banks are responding to the market, and will most certainly be the slowest trailing indicator out of the bunch. More to come on that later… If you notice the movements in the Investor Activity Chart and it’s indicators, you’ll see some interesting data around the time of our boom/bust, which leads me to believe the effectiveness of this indicator. Only REI Pipeline.com brings you the most accurate and effective data for investing in our market! If you like what you see, please feel free to post a comment below!
Welcome to REI Pipeline! I’ve been around for a while, but made the decision to revamp the site to a blog style instead. If you stick around, I’m certain that you’ll find many interesting posts and articles to benefit your Real Estate Investment Portfolio. I’ve got a lot of commentary on the subjects of investing, flips, rehabs, rentals, pre-foreclosures and a wide world of everything in between. So sit back, enjoy the ride, and let’s make some money together! Please feel free to join in and post comments as you see fit. I look forward to interacting with you!
