Countrywide profit sinks, defaults rise

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LOS ANGELES - Countrywide Financial Corp. said Tuesday its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults among the most creditworthy borrowers.

The huge mortgage lender was forced to take impairment charges as it braced for the possibility of more people failing to make their mortgage payments.

Countrywide also said the market will become increasingly challenging as loan production subsides while lenders compete with one another more fiercely.

"This is a huge battleship and it's headed in the wrong direction," Chief Executive Angelo R. Mozilo said during a lengthy conference call with Wall Street analysts.

"Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist," he said.

The news sent shares of the Calabasas-based company sliding $3.56, or 10.45 percent, to close at $30.50 on Tuesday.

The rise in credit-related costs were primarily related to the company's investments in prime home equity loans, Mozilo said.

Unlike subprime loans, which target borrowers with spotty credit histories, prime loans are typically available only to those with solid credit profiles who are considered less risky.

The rise in delinquencies and projections of more defaults led Countrywide to write down the value of securities backed by prime home-equity loans by $388 million in the quarter, reducing earnings by 40 cents per share.

Where are The riskiest housing markets?

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A new report projects home-price declines for the next two years. The riskiest markets are in Florida, California, Nevada and Arizona. Here's how to ride out the hard times.

By Marilyn Lewis
As if the housing market isn't bleak enough. The Standard & Poors' Case-Shiller Home Price Index reported in late June that home prices dropped more in the first quarter of this year than at any other quarter in the last 17 years. Now, a report from PMI Mortgage Insurance says home values could decline across much of the country for at least two more years.

There's a 34.6% chance on average that home prices will drop in the nation's top 50 markets in the next couple of years, according to PMI Mortgage Insurance's new U.S. Market Risk Index, which heavily factors in recent price volatility.

How far and how fast prices actually fall remains to be seen. But the report underscores the fact that today's market is decidedly different from that of recent years, when homeowners could bank on rapid home-value appreciation. (See the report or hear a podcast here.)

Headed for decline

Not surprisingly, the riskiest markets identified by the index are located in areas that saw rapid price appreciation, a reduction in affordability followed by a rapid decrease in the rate of price appreciation. Of the 15 biggest cities with the greatest risk for price decline -- with more than a 50% chance of lower home values by mid-2009 -- five were in California and four were in Florida.

What to Do When Purchasing and Leasing Your First Investment Property

You've weighed all of the pros and cons, thought about it for months and read every reference material you could get your hands on. In short, you're ready to purchase an investment property and you're ready to do it now. However, how can you get started?

1. Know what type of property you'd like to purchase. Would you like to rent out a home to a nice family or buy an apartment building for several tenants. Decide what you would like to buy before you go looking. It will save you time in the long run.

2. Once you've located a property, try to get the most for the least amount. Spending the money to have an inspection done will allow you to have more chips at the bargaining table, especially if you can repair things yourself or have associates that can do it cheaply.

3. Put an offer on the property and secure financing. Obviously, this is an important step. Once you've agreed to the terms of the sale and secured the financing, you are set.

4. After the property is yours, you'll want to make it appealing for potential tenants. Make any necessary repairs, install new carpet and paint the walls. Tenants look closely at these details and it can be a make or break deal.

5. Price your property right. Think about what you'd like to charge for rent, taking mortgage costs, utilities and maintenance into consideration. Then take a look at what similar properties in your area are renting for. If you are considering putting rent at $1200 per month when others are renting their property for $1000, find out why their rent is cheaper and make adjustments accordingly. Don't price yourself out of the market or you'll risk having a vacant house.

6. Visit with a lawyer to draw up a leasing contract. You'll want to make sure all terms are spelled out before taking on tenants. What happens if something is broken or ruined during their lease? Who is responsible for the repairs? What happens if a crime occurs on your property? You'll want to spell out liability to protect yourself and your investment.

7. Figure out what you'll do if the home is vacant for an extended period of time. How will you cover your costs if you have no tenants.

All of these are important factors to consider before taking on your first property and tenant. Remember that you want to make this a positive and possibly money-making experience. If you don't have a plan in place before the unexpected occurs, you could face losing a lot of money in the process.

"The Power" of A Real Estate Formula

It was a simple real estate formula. The ads ran in our small-town newspaper for years before I realized exactly what was going on. They were always the same: A house for sale with 5% down and payments of 1% of the purchase price. Maybe a three bedroom home for $90,000, for example, with $4,500 down and $900 per month payments.

When a friend started doing the same thing he explained the process to me. It was a way to get a great return on capital, and it was the opposite of buying with no money down. There is no down payment at all when you buy, because you buy for cash.

The Simple Real Estate Formula

You probably know that when you buy for cash, you can often get a much better price. With no financing contingencies in the offer, and the promise of a faster closing, sellers are willing to sell for less. You can offer $95,000, for example, on a house that might be worth $108,000. If you can't get it for less than, say, $99,000, you walk away - there are always other opportunities.

Once you buy the house, you put few thousand into high-return repairs and improvements. These might include paint, carpet, and maybe asphalt for a dirt driveway. For our example, we'll say you spend $5,000. Let's suppose the house is worth $116,000 now. You're ready for the next important step in this real estate formula.

You put it up for sale, targeting buyers who can't get financing easily. You provide the financing. Because you are making it easy for the buyer, you can get more than the $116,000 value for the home - and do it without paying a realtor's commission. Let's say you sell it for 123,000. The buyer needs a down payment of just 5%, or $6,150, and makes monthly payments of $1230 per month. You charge higher interest than the going rates at the banks, of course.

This is a win-win situation. Your buyer is able to buy a home instead of renting, and you get a capital gain of perhaps $16,000 after expenses, plus good interest. Your total rate of return will often be over 20%!

In our town, the first to do this consistently were a father and son team of lawyers. They saved money by doing their own foreclosures when necessary. Once they foreclosed, they raised the price and sold the home all over again.

They made millions. Did you know that if you can get an average return of 18% on your money, you'll turn $75,000 into more than one million dollars in about fifteen years? That's the power of a good real estate formula.

Solutions for the Subprime Lending Crisis

There are solutions for the subprime lending crisis that entail making changes to the way lenders are handling this crisis. There are distinct groups of individuals that are causing this foreclosure epidemic. First, there is the homeowner who got a "teaser interest rate" that was affordable at the time but became unaffordable when the interest rate adjusted. In addition to the teaser interest rates, lenders started a policy of "no documentation of income" or no-doc loans that did not require borrowers to show proof of their income and are now referred to as "liar's loans". The problem was that homeowners couldn't afford the payment if there were any increases due to taxes, insurance, or an interest rate adjustment.

Next, there are individuals that purposely chose low-interest rate, interest only, and even negative amortization (neg-am) loans with the intent of flipping the property after one or two years and taking a huge capital gain. In the past few years, these "speculators" became trapped, either unable to sell or renting them with negative cash flows. The most viable option for these investors was to give the property back to the lender by foreclosure rather than bleeding monetarily every month.

Another typical foreclosure involved a homeowner cleverly refinancing his property but never making a payment and in effect selling his home to the lender, by taking out his equity on the refinance. There is a lingering question about whether these homeowners had "intent" to defraud the lenders, but that is better left to another discussion. And lastly, there are true personal hardships that resulted in foreclosure. Our estimates are that 95% of these homeowners want to keep their homes but are unable to reinstate the back payments.

Lending institutions can resolve many of these foreclosure issues by:

* Having counselors available to work with the homeowner for a solution. Possible solutions include loan modification (putting the late payments and costs on the end of their loan, accepting partial payments of the amount due until paid, reducing the interest rate adjustment(s), freezing the interest rate for the term of the loan, getting a deed in lieu of foreclosure in exchange for giving the homeowner a credit for a rental truck when they vacate, accepting partial mortgage payments for a limited time, assistance with applying for and getting government assistance including grants that could reduce the loan, and doing financial planning and credit counseling.
* If the borrower is an investor who can no longer afford the loan, the lender should get a deed in lieu of foreclosure, or a loan modification that is workable for both the lender and the investor which would be paid when the property was sold or refinanced.
* If a homeowner refinanced and never made a payment, the lender should request a deed in lieu of foreclosure and if the homeowner refuses, the lender should get a judgment after the foreclosure auction and collect this judgment. If fraud is suspected, the case should be pursued by local authorities for prosecution.
* True hardship cases should be handled on an individual basis with the interest of the borrower in mind. Loan modification and any other reasonable offers of help should be used to help resolve the problem. If a solution is impossible, a deed in lieu of foreclosure should be requested with a minimal compensation for moving expenses.

While certain banking regulations preclude some of these solutions Congress and the Federal Reserve must quickly realize the nature of this crisis and its resemblance to the former Savings and Loan crisis. Immediate action should be taken before it becomes expensive for every taxpayer. To their credit, a number of insightful lenders have already taken steps to have counseling staffs on hand and work with homeowners. Now is the time to take more aggressive action before hundreds of thousands of homeowners find themselves no longer owning a home or even homeless.

More Trouble in Subprime Mortgages

WASHINGTON, June 14 — Delinquencies and foreclosures among homeowners with weak credit moved higher in the first quarter, particularly in California, Florida and other formerly hot real estate markets, according to an industry report released on Thursday.

The report, published by the Mortgage Bankers Association, came as the Federal Reserve held a hearing on what regulators could do to address aggressive abusive lending practices. Also Thursday, the latest survey showed that mortgage rates this week reached their highest level in almost a year; the national average for a 30-year mortgage was 6.74 percent, up from 6.53 percent last week, according to Freddie Mac, the mortgage giant.

After housing boom, glut may lead to bust in Spain

MADRID: Javier Usua and Ruth Graneda never got out of the car when they visited Sanchinarro and Las Tablas, two of Madrid's biggest new suburban developments. The concrete-block buildings and empty streets were all they needed to see.

"We came to look at apartments but found ghost towns," said Usua, a 27-year-old taxi driver. "You'd need to drive miles for a loaf of bread or cigarettes, and my girlfriend found it creepy and unsafe so we turned around and left."

Pulte to ax nearly 1,900 jobs

After downsizing, builder to employ only 300 in Mich.

Pulte Homes Inc., in the latest major downsizing by a Michigan-based company, announced late Tuesday that it was cutting about 16 percent of its work force, or nearly 1,900 jobs.

The Bloomfield Hills-based company, one of the nation's largest and most successful homebuilders, has been hit hard by the nation's slumping housing market.

U.S. home prices fall for first time since 1991

WASHINGTON (MarketWatch) -- U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday.
A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarter

A Closer Look at Panama Real Estate Market

The Panama real estate market is something that is interesting to many investors as well as individuals that are looking to buy property abroad. Panama offers beautiful beach front properties as well as properties that are just as beautiful, but not on the water. Not only are many of the properties beautiful, but they can also be very affordable for investors and individuals alike. In addition to being affordable, most of these properties, when kept up, appreciate very quickly, allowing those that buy them to invest and then sell for a profit in relatively little time.

One of the things that draws many home and property buyers to the real estate market in Panama is not only the surroundings, but also the tax incentives. There are many tax breaks for those that buy in Panama, and for many the tax benefits are enough to have them consider Bocas real estate as well as real estate in other areas. When you buy property in the area and you plan on building a new dwelling you will benefit as there are no taxes on the dwelling for 20 years! What this allows for individuals to do is buy property that has not been built on quite cheaply. Then, the individual or investor can build a beautiful home or business office, and then sell, all without paying taxes! This will allow for the property to be sold for much more than it was purchased with the benefit of never paying taxes.

Bocas del toro is a beautiful place to buy real estate, though it's being bought up quite quickly. The property that has already been purchased is worth more than it was just six months ago, because supply and demand simply are not balanced. There is still property for sale in this beautiful province, and it includes residential as well as commercial property. This means that there is something for everyone, and this will always be a great place to buy as well as sell property. This province on the Caribbean will continue to be a great place to buy Panama real estate in the future, though the prices will probably continue to rise as more and more people want to buy and there is less and less in the way of available property. Panama real estate has never been more prime, and when you buy in an area such as Bocas you are almost guaranteeing a successful investment.

Apartment Buildings How To Make Them More Desirable by Kevin Cox

When renting out an apartment building there are certain things you can do to get more people to want to live in your apartment building. One thing you can do to make an apartment building more desirable to live in, is if you buy new appliances for each apartment. Some of these appliances you can buy are new refrigerators and new stoves. These appliances can bring out the beauty of each apartment and give it a more welcoming feeling.

Another thing you can do to make am apartment building more desirable to live in, is to put in a new bath tub. If the family or the person who is looking to rent out the apartment sees a brand new bath tub, it can show them that you really care about the building. Sometimes if a person or a family sees things in an apartment that looks kind of old in their mind they can think of the apartment of being cheap.

One last thing you can do to make an apartment building more desirable to live in, is to get wifi internet for the whole building. If the person or family who is looking to rent out the apartment knows they can get free high speed internet, it will make them more eager to live there. When adding new things it is important that you don't over spend so much that the rents don't cover the expenses. If you add some of these things to an apartment building, it is a good way to charge more in rent. Most of all when you add new things to the building, it will show you care and people are more likely to take good care of your place.

A good web site where you can see more information on topics like this is Real Estate Facts which is highly recommended. You can also Add This Article to your web site or blog.

U.S. Home Prices to Drop in 2007, First Since 1930s

U.S. home price declines this year are going to be steeper than earlier forecast because of the drop in subprime mortgage lending and the adoption of stricter lending standards, the National Association of Realtors said.

Minorities in U.S. heartland snared by subprime

ADDISON, Illinois (Reuters) - In a month or two, Jose Cortez will likely lose the home he wanted for his children. But he says that's not what bothers him most.

"I wanted to consolidate my debts, but everything the brokers said they would do was a lie," he said, waving a sheaf of documents in the basement apartment where he, his wife and four children live.

Many minorities in Chicago are facing the same predicament as the 57-year-old Mexican-born maintenance worker, according to several nonprofit organizations. Some unscrupulous and unregulated mortgage brokers arranged for low-income families to take out loans they could not afford, the groups said.

The nonprofit Woodstock Institute released a study this month that said Latino borrowers in Chicago were 3.2 times more likely than whites to pay more for loans; African Americans were 4.2 times more likely.

"The main feeding ground for predatory subprime mortgage brokers is in poor, minority communities," said Michael van Zalingen, director of housing ownership services at Neighborhood Housing Services of Chicago, a nonprofit community lender and financial counseling service.

Subprime, or high-risk, borrowers like Cortez are causing concern on Wall Street and in Washington as foreclosures rise amid falling house prices and higher interest rates.

THERE must be some kind of brain virus in our drinking water

Today: Let's have a Reality Check ...

Imagine that you are a loan officer at a bank. A customer comes in and says, "My hours got cut back, and my weekly paycheck just went from $395.40 a week to $190.20 per week. My boss also said, that he expects that his earnings to be less this quarter ... so there may be more trouble ahead. Anyways, what I wanted to ask is ... will you give me a loan for $10,000?"

As the loan officer, which do you say?
1. Sure Joe, are you sure that's enough ... can I give you more?
2. Sorry Joe, I can't give you the loan because the bank would be worried that you couldn't pay it back.

That takes us to the Pulte Homes story ...

This is Wednesday's news for Pulte Homes:

Pulte Homes Profit Falls as Demand for Homes Drops.

Pulte Homes Inc., the largest U.S. homebuilder by market value, said third-quarter earnings fell 52 % as a flood of unsold homes showed no signs of abating. Their net income declined to $190.2 million, or 74 cents a share, from $395.4 million, or $1.50 per share. In addition, Pulte forecasted that they expected their fourth-quarter earnings will come in below analysts' expectations.

So, what does the banker in you do with this news? Do you sell the stock, or think that "this is a stock I should buy right now?"

Here is what happened:

On Tuesday, Pulte Homes (Symbol: PHM) closed at $31.76.

The bad news came out on Wednesday. Investors bought and the stock went to $32.20.

Yesterday (Thursday) ... investors must have liked the fact that Pulte said, "the flood of unsold homes shows no sign of abating", because they bought more and drove the price to $32.66.

From Tuesday to Thursday, they registered a stock price gain of $2.83%. Pretty good for announcing that your net income fell 52%. With this kind of investor reaction, one wonders if there must be some kind of brain virus in our drinking water.

Home sales slow, 28 states see declines

WASHINGTON - The slowdown in the once-sizzling housing market is spreading, with 28 states and the District of Columbia reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California
Nationally, sales were down 7 percent in the April-June quarter this year compared with the same period in 2005, the National Association of Realtors said Tuesday in its latest state-by-state look at housing conditions around the country.

The Realtors survey showed that the biggest declines occurred in states that had been enjoying red-hot sales during the five-year housing boom.

The five biggest declines this spring compared to the April-June period of 2005 were Arizona, down 26.9 percent; Florida, down 26.7 percent; California, down 25.3 percent; Virginia, down 23.9 percent, and Nevada, down 23.5 percent.

The Realtors report depicted a tale of two housing markets, with former boom areas experiencing declines and other areas of moderate sales gains during the boom years experiencing strong growth.

In all, 20 states had sales gains in the spring, led by Alaska, which enjoyed a 48.6 percent jump in sales; followed by Arkansas, up 17.9 percent; Texas, up 11.3 percent; North Carolina, up 11 percent, and Vermont, up 9.1 percent compared to the spring of 2005.

"States with moderately priced areas that have experienced healthy job creation are seeing sales gains," said David Lereah, chief economist for the Realtors. "The economic backdrop remains favorable for the housing market, which is helping home sales level out."

In a separate survey of price changes in 151 metropolitan areas, the Realtors reported that 26 metro areas experienced outright price declines while 37 areas were still enjoying double-digit price increases.

The biggest price drops in percentage terms were in Danville, Ill., where home prices fell by 11.2 percent in the spring compared with the spring of 2005, and the Detroit area, where home prices were down 8 percent.

Home sales slow, 28 states see declines

WASHINGTON - The slowdown in the once-sizzling housing market is spreading, with 28 states and the District of Columbia reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California
Nationally, sales were down 7 percent in the April-June quarter this year compared with the same period in 2005, the National Association of Realtors said Tuesday in its latest state-by-state look at housing conditions around the country.

The Realtors survey showed that the biggest declines occurred in states that had been enjoying red-hot sales during the five-year housing boom.

The five biggest declines this spring compared to the April-June period of 2005 were Arizona, down 26.9 percent; Florida, down 26.7 percent; California, down 25.3 percent; Virginia, down 23.9 percent, and Nevada, down 23.5 percent.

The Realtors report depicted a tale of two housing markets, with former boom areas experiencing declines and other areas of moderate sales gains during the boom years experiencing strong growth.

In all, 20 states had sales gains in the spring, led by Alaska, which enjoyed a 48.6 percent jump in sales; followed by Arkansas, up 17.9 percent; Texas, up 11.3 percent; North Carolina, up 11 percent, and Vermont, up 9.1 percent compared to the spring of 2005.

"States with moderately priced areas that have experienced healthy job creation are seeing sales gains," said David Lereah, chief economist for the Realtors. "The economic backdrop remains favorable for the housing market, which is helping home sales level out."

In a separate survey of price changes in 151 metropolitan areas, the Realtors reported that 26 metro areas experienced outright price declines while 37 areas were still enjoying double-digit price increases.

The biggest price drops in percentage terms were in Danville, Ill., where home prices fell by 11.2 percent in the spring compared with the spring of 2005, and the Detroit area, where home prices were down 8 percent.

BUY Land, They've Stopped Making It!"

Land Investment

LAND has, just like most other precious commodities, an eternal value. It's a good investment option. Just like Gold, Platinum and Diamonds.

Investing in plots, lands, houses or buildings however is a absolutely necessary for people who want to live or work there.1031 Exchanges, Developments, or just Investment can make you 100% return on your money. But you must not forget that the value of the investment is in the expected return, and the risks involved, and not in its physical features. Return from real estate investments is obtained from rental/lease/possible capital appreciation. It can be enhanced by the benefits of taking a loan against the real estate asset.

Key Factors in Land Investment

1). The first and most important rule is to act according to your strengths. Take into account all the aspects relating to your income and budget. You should also to decide on where to and in whose name to invest.

2). The property can be jointly purchased in the name of two or more family members.

3). For joint purchase, investment by the co-owners should be in proportion with their owner ship in the property. For instance, if the property is proposed to be purchased in the name of husband and wife the ratio of 50 : 50, then the investment should also be in the ratio of 50 : 50.

4). Avoid making investment in properties in the name of minor children.

5). In the initial stages your land investment, you look for prime areas where there is less demand and where the premiums are low.

6). For purchasing the landed property, the location should be easily accessible for all basic facilities including hospital and transportation facilities.

7). One should keep in mind about the potential of the area and the property for future yields.

8). Do not invest in already mushrooming localities or in areas where the price of real estate in pretty high. Invest only in the areas that are developing.

9). Decide on your budget and evaluate your current liabilities and savings.

10). Buying plots, vast lands for commercial purposes would do much better profits as the value increases day by day.

11). Investing in Real Estate Investments Trusts (REITS), popular in USA would also bring good profits.

Risks Factors in Land Investments

The real estate market could be a risky proposition for investors not intending to hold the property for long. If you are intend to purchase the landed property, do not rush into calling sellers, real estate brokers or consultants without making upfront preparation. If you hire the services of a real estate brokers make clear your specifications and expatiations. Tell him about your budget too.

The following are risks factors in land investments.

i) Lack of Liquidity: Direct investments requires large commitments of funds and that makes diversification of an investors portfolio difficult. Investments in land or real estate is also difficult to convert to cost quickly. Ownership history, possession and occupation of the property etc., can lead to complexity in transactions.

ii) Maintenance burden: Property maintenance involves significant amount, time, effort and costs. Further, add to this the risk of unauthorised entries/trespassers and change in Governmental regulations. This includes controls over ownership land use and other planning controls and landlold and tenancy litigations.

iii) Government Charges: Government uses the real estate as a taxation over the transactions between the parties. The vendor has to bear stamp duties and registration charges, land taxes and general levies at various level of authorities. Transaction costs in land investments are higher than most other investment avenues.

iv) High risk: Real estate can be regarded as a dangerous investment in the medium and short run, but is often considered safe in the long run.

v). Monopolistic market: Real Estate is one of the most information inefficient market. Information necessary to make informed decisions is difficult to obtain, often imprecise, and some times misleading or contradictory.

vi). Segmentation: Prices often more depending on what kind of property you have: it depends on whether it is commercial, retail or residential/ housing in nature. And this depends on the buyer perception, irrespective of what you might feel.

If one has to consider so many things risk of economic growth, risk of patience, risk of liquidity, risk of geographical concentration - would it not be better to invest in Real Estate Investment Trusts. That can trade in these risks and makes money out of them.

Real estate investment is also a leading indicator of economic growth in all market economies. So keep trade in land investment.

Florida Residents Here's the Secret to Earning 1% Interest a Month for Four Months on Your Money

What's the highest interest rate you can earn now in a safe, government-sponsored program?

Did you say 4% per year? Wrong!

In Florida, for the next 4 months, every real property and tangible personal property taxpayer can earn an effective interest rate of 1% PER MONTH by paying taxes during the discount period!

Here's how simple it is: just pay your property taxes before March 1. Here's the way it works.

Taxes paid--i.e., received by the Tax Collector--during

November are subject to a 4% discount;

December are subject to a 3% discount;

January are subject to a 2% discount;

February are subject to a 1% discount.

Taxes paid after March 31 are delinquent and are subject to penalties and 1 1/2% delinquent interest per month.

In the same way that paying down your credit cards is the equivalent of earning interest at the same rate of interest that the credit card company is charging the customer on the outstanding balance, taking advantage of the 1% per month early payment discount on Florida property taxes is the same as earning interest at the rate of 12% per year on the amount of taxes you pay.

Don't say we didn't tell you!

About the author:
For a free consultation regarding your property, contact us at:
http://www.tannebaumweiss.com/property_tax.php

Where Are The Really Good Real Estate Investment Deals?

In writing my last article about the neighborhoods where I find the most profitable rehab real estate investment deals, something occurred to me.

In that article I described investing from what I've found is typical in doing this business. I wrote about where I TYPICALLY find the deals. Well, what IS typical in this business?

No two deals are the same, that's for sure! Every rehab itself is different with different problems to solve. So, in describing a typical deal, I'm referring to the spread involved. The spread is the different between what I can buy the house for, and what it's value will be when it's brought back up to standards.

The next big question is, "What will the rehab going to cost."

For instance, if a property in my market has a $25,000 spread between what I can buy it for and what I can sell it for (the as-repaired appraised value), it's a "maybe" in my book depending on how much rehab it needs. If it needs much, I would probably pass unless some external factor makes it a good buy, like the neighborhood. In other words, if it needs much rehab, I'd have to be convinced enough to put some of my own money into it.

I typically look for houses with a $30,000 spread or better. You have to decide for yourself, based on values in your area and what is the minimum you want to make, what spread you'll be happy with.

So, what is a rehab real estate investor's "homerun? "

Homeruns occur at the outer edge of what is typical. My homerun deals have occurred one of several ways.

- The spread is stellar. Let's say the spread is $45,000 and the rehab is a manageable $5-10,000.

- The spread is good, but the rehab is very light. Wham-bam, I'm looking for tenants within days of closing.

- The cost is exceptionally low for a given area. Sometimes the spread on paper will not be anything to get excited about, but the property has a huge lot, extra bedrooms, or is located an area that is in serious demand.

- There is NO rehab, and the spread is sufficient that I can buy it with none of my own money.

True story - I've only had one NO rehab deal. Wow. This house had been recently rehabbed, clean and didn't need a thing! This was a homerun just due to the ease at which I added this property to my inventory! The spread wasn't great, in fact, I had a local hard money lender make up a story about being out of money because he thought the spread was too narrow and didn't want to lend on it. He wrongly assumed there was a significant rehab. (Being straight up with me was too hard, I guess.) I consider this a homerun because I bought this property, changed the locks, put out a sign and had it rented within two weeks. Mind you this is a beautiful well-built brick/block home in a great neighborhood. Cost to me…nothing. This house has one of my best cash flows month-to-month.

The point here is to give you an idea of what kinds of homeruns rehab real estate investors look for. But, here is a key point…

It's truly NOT worth my time, or yours, to wait around for the homeruns. I firmly believe that these kinds of homerun deals come about by being an active investor. Rehabbers that keep 1-2 projects going at all times, get calls from wholesaler with great deals. Personally, I make the best buying decisions decisions with what I have among the properties brought to me when I am in my "buy mode." Some of these turn out to be homeruns, some don't.

If I waited around for only the homeruns:

- I would waste precious learning time. Since there is no substitute for experience, I want all I can get!

- I would lose money over the long run as a buy-and-hold investor. If I'm buying and rehabbing with little or none of my own money anyway, it doesn't make sense to wait around for homeruns if I can add properties to my inventory that fits my investment criteria. If you're in the buy and hold business, the important thing is how much property can be controlled with as little money as possible.

Question: Is it better to have $1,000,000 worth of property appreciating or $200,000?

Hitting a homerun in rehab real estate, and anything else, requires these two ingredients:

- You've GOT to be "in the game." By this I mean you have to have prepared in advance for your turn at bat. In the rehab business, this means you have enough knowledge to get started, you have a decided investment criteria, you have your money source lined up, and you are looking for property.

- You are "swinging." In the rehab business, this mean you are buying property, rehabbing, learning and turning. It's not enough to merely stay on the sidelines.

Let me say that again…

IT'S NOT ENOUGH TO MERELY STAY ON THE SIDELINES.



About the author:
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Bruce W. Ford is the editor of Rehab-Real-Estate.com Get his important Special Report entitled "12 Things Real Estate Investment Gurus Won't Tell You" at http://www.Rehab-Real-Estate.com

10 Tips for Successful Real Estate Property Investment

Just because real estate prices seem to have hit a temporary ceiling in many countries around the world, that doesn’t mean that profits from property investments are hard to come by.

Even during a real estate market slowdown, stagnation or depression profits can be made locally and overseas. This article shows you the top ten tips that real estate investors apply to their property portfolio building strategy to ensure success from their investments.

1) Research the curve - the concept of a property market cycle existing is not myth it’s a fact and is generally accepted to be based on a price-income relationship. Check the recent historical price data for properties in the area of the country you’re considering purchasing in and try to determine the overall feel in the market for prices currently. Are prices rising, are prices falling or have they reached a peak. You need to know where the curve of the property market cycle is at in your preferred investment area.

2) Get ahead of the curve – as a basic rule of thumb, professional real estate property investors seek to buy ahead of the curve. If a market is rising they will try and target up and coming areas, areas that are close to locations that have peaked, areas close to locations experiencing redevelopment or investment. These areas will most likely become ‘the next big thing’ and those who by in before the trend will stand to make the most gains. As a market is stagnating or falling many successful investors target areas that enjoyed the best levels of growth, yields and profits very early on in the previous cycle because these areas will most likely be the first areas to become profitable as the cycle begins turning towards positive once more.

3) Know your market – who are you buying property for? Are you buying to let to young executives, purchasing for renovation to resell to a family market or purchasing jet to let real estate for short term rental to holiday makers? Think about your market before you make a purchase. Know what they look for in a property and ensure that is what you are going to be offering them

4) Think further afield – there are emerging real estate property markets around the world where countries’ economies are going from strength to strength, where a growing tourism sector is pushing up demand or where constitutional legislation has been or is about to be changed to allow for foreign freehold ownership of property for example. Look further afield than your own back yard for your next property investment and diversify that real estate portfolio for maximum success.

5) Purchase price – set yourself a budget that will realistically allow you to purchase what you’re looking for and profit from that purchase either through capital gains or rental yield.

6) Entry costs – research fees, charges and all expenses you will incur when you buy your property – they differ from country to country and sometimes even from state to state. In Turkey for example you should add on an additional 5% of the purchase price for all fees, in Spain you will need to factor in an average of 10% and in Germany fees and charges can be in excess of 20%. Know how much you will have to incur and factor this amount into your budget to avoid any nasty surprises and to ensure your investment can become profitable.

7) Capital growth potential – what factors point to the potential profitability of your real estate property investment? If you’re looking overseas at an emerging market, which economic or social indicators exist to suggest that property prices will increase? If you’re buying to let out are there any indications to suggest that demand for rental accommodation will remain strong, increase or even decline? Think about what you want to achieve from your investment and then research and find out whether your expectations are realistic.

8) Exit costs – if you will incur substantial capital gains taxation liability if you sell your property investment for profit, will that render the investment profitless? In Spain a foreign buyer can incur up to 35% capital gains tax, in Turkey on the other hand property sales are capital gains tax free if the underlying real estate has been owned for four or more years.

9) Profit margins – what levels of capital growth can you realistically gain on your property investment or how much rental income can you generate? Work out these facts and then work backwards towards your initial budget to work out your potential profit margins. At all times you have to keep the bigger picture in mind to ensure that your real estate investment has good potential for profit.

10) Think long term – unless you’re buying property off plan and intending to flip it for resale and profit before completion you should view real estate investment as a long term investment. Real estate is a slow to liquidate asset, cash tied up in property is not simple to free up. Take a long term approach to your property portfolio and give your assets time to increase in value before cashing them in for profit.


About the author:
Rhiannon Williamson is a freelance writer whose articles about property investing and emerging real estate markets have appeared in publications around the world. She is currently working on a brand new property investment resource http://www.amberlamb.com/