BUYING A FORECLOSURE

Posted on August 1, 2010 by Steve

Current market conditions make it the ideal time for a small investor to purchase an  Arizona bank foreclosure.

There are some rare jewels out there with a price tag between 30%-40% below market value.  However,  the average foreclosure sells for about 5% under market value.

Many homeowners are requesting brokers to start their home search with

Before you purchase a foreclosure:

  • Find a real estate broker who works directly with banks that own foreclosed homes.
  • Get a preapproval letter from a lender.
  • Budget carefully.  Don’t let a small price tag deceive you.  Ask yourself:
    • Do I have the money to make all necessary repairs, and can I do them myself?
  • Make sure you have seen the house before bidding or purchasing, even if it’s only the outside.  Foreclosures almost always have interior and exterior damage.
  • Check out the neighborhood.
  • If the house has been empty for any period of time, there could be invisible damage like mold or bugs.
  • Found a house you like, search all the public records:
    • Are there any judgments or liens attached to the property?
    • Are there any unpaid property taxes?
    • Are there any notes mentioning that the deed of trust is being foreclosed on?
  • State Foreclosure Laws:
    • Find out what the law is in your state.  Each State’s legal guidelines and ramifications differ.
  • First Time Foreclosure Buyer:
    • Purchase your foreclosure through a lender.  It is the safest and smartest choice for new buyers.
    • There’s no risk, no taxes, no liens, and no tenants to evict.
    • Most bank-owned homes are vacant, which speeds up the process of moving in.
  • Hidden Foreclosure:
    • A brand new home that is foreclosed on due to non-payment of construction loans.
  • Buying at Auction?  It pays to know that:
    • You must pay cash for the property.
    • The auction may get postponed.
    • You may face a long waiting period before being able to take possession and move in.
    • The foreclosed homeowners may have stripped the house of all appliances, copper piping, etc….
  • Presale Foreclosure:
    • Buying a home through the homeowners before it is foreclosed upon.

Buying an Arizona bank foreclosure can be a very profitable venture.  However, you don’t have to do it alone.  An experienced real estate professional can save you time and money.

Contact Steve Weber with Peak Commercial Property Service for help with your next bank owned home in Arizona purchase.

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30% off foreclosures?

Posted on July 30, 2010 by Steve

Realtytrac, the marketer of foreclosed properties, reported that one third of sales in the first quarter of 2010 where from foreclosed properties.  These foreclosed properties sold, on average, at 27% less than traditional homes sales.

Homes taken back from borrowers, or REO’s, sold for almost 34% less than a traditional sale.

That’s the good news for real estate investors.  The bad news is that many of these foreclosed properties are in very bad condition with considerable damage to the interior and exterior both from deliberate damage and neglect.

If you are interested in buying foreclosed properties, contact Steve for more details.

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Flipping Houses – A quick start guide

Posted on July 29, 2010 by Steve

Flipping a house means buying a home and selling it quickly for a profit.

Flipping houses for profit is one of the most popular ways to make money from the property market, especially in this economy.

If you make the right decisions when flipping a house, there is a lot of money to be made.  However, if you make major mistakes they can cost you more money than the house is worth.

When most people decide to flip a house, they purchase a home that is under market value, give it a makeover and make necessary repairs.  It is then, hopefully, sold it for a profit within a short time frame, ideally 2-6 months.

Here are some quick tips for buying a home and flipping it for profit:

  • Pick an area where you would personally want to purchase a home.
  • Research the property values for that area, consulting a real estate professional if necessary to ensure your data is current.
  • Note what type of home sells fastest in that area.
  • Investigate the neighborhood – Drive around during the day and at night.   Is it a family neighborhood, mostly elderly or a mix?
  • In the beginning, stay focused on homes that only need minor makeovers like paint, landscaping and window treatments.  Stay away from homes that need construction work, new roofs, and other structural issues.  They take longer to complete, increase the amount of money you need to invest, and slow down flipping the house.
  • Cosmetic changes are easily fixed, are generally inexpensive, and greatly increase the value of the home.  Some inexpensive changes that will increase the selling price of your home are:
    • Bathrooms and Kitchen – including new counter tops, cabinets, appliances, hardware, etc….
    • Curb Appeal – colorful flowers, repainting fences, landscaped yard all add to the overall value of the house.
  • It is possible to flip a house without doing any repair work or touchups.  This is usually done during a time where the real estate business is booming and many newer homes are on the market.
  • Pick a budget and add 20% for the unexpected repairs.
  • Don’t get ahead of yourself and buy multiple properties the first time around.  Flipping a house is harder than you think.  It will most likely cost more money and take longer to complete than whatever “worst case scenario” you came up with.
  • Be realistic about how much your repairs will actually increase the value of the house.
  • For a video crash course, try checking out some of the current TV shows about flipping houses.

Flipping houses can be a very profitable venture.  However, you don’t have to do it alone.  An experienced real estate professional can save you time and money.

Contact Steve Weber for help when you want to learn how flipping houses can add to your bottom line.

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FHA REO properties

Posted on July 25, 2010 by Steve

Do you fall into one of the following categories?

  • law enforcement officers
  • teachers
  • firefighters
  • emergency medical technicians
  • nonprofits
  • local governments

If so, you may be eligible to purchase FHA REO (reposed) homes through HUD in a designated revitalization area.

Revitalization Areas are HUD-designated geographic areas authorized by Congress under provisions of the National Housing Act. Revitalization Areas are intended to promote “the revitalization, through expanded home ownership opportunities, of revitalization areas.”

Contact Steve to learn more about purchasing foreclosed homes at a discount.

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Quick Tips: Foreclosure properties for investors

Posted on July 23, 2010 by Steve

As a real estate investor, foreclosed homes can be some of the best deals in real estate if you know where to find them.

Start your search for foreclosures with these tips:

  • Identify the type of home that suits you and your family’s needs.
  • Create a budget and don’t forget to leave some wiggle room for the unexpected problem.
  • Get a preapproval letter from a lender prior to looking at foreclosed properties.
  • Do not search for homes outside your budget or outside the areas you want to live.
  • Realtor – Find one who works with banks that own foreclosed properties.
  • Pre-Foreclosures or Short Sale Properties- Your realtor can help you locate these types of properties, which are being sold just prior to being foreclosed on.  However, use caution when buying one of these homes.  Quite often the occupants who are being foreclosed upon decide to strip the house of appliances, and sometimes even vandalize the property.
  • Foreclosure Websites – For a fee, homeowners can find properties for sale across the country.
  • Foreclosure Listings – Subscribe to an online listing service and you will have access to lists of foreclosed properties in the areas of your choice.  These lists include a description and photo of the property.  You will also find that properties needing work are listed as “Distressed,” or “Handyman Specials”.
  • Real Estate Signs – if you drive through neighborhoods where you would like to live, you may see words like “Foreclosure”, “Bank-Owned” or “Bank Repo” attached to For Sale Signs.
  • Newspapers – believe it or not, you can still find foreclosures that are about to go to auction in your local newspaper.  It is also beneficial to note the name of the attorney handling the foreclosure.  You may be able to work out a deal prior to auction.
  • Banks – Many now offer a list of their foreclosed properties on their websites.
  • Government Agency’s – Try HUD, or Fannie Mae.  They both offer foreclosed properties to qualified buyers.
    • HUD’s listings are some of the most affordable in the country and are generally sold at close to ½ the original price of the home.
  • Auctions – Here you can bid on foreclosed properties.  The biggest advantage of an auction is that you are able to name your own price, and if your bid is accepted, you walk away with a steal.

Buying a foreclosure can be a very profitable venture.  However, you don’t have to do it alone.  An experienced real estate professional can save you time and money.

Contact Steve Weber for help with your next foreclosure purchase!

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What’s up with the forclosure market?

Posted on July 20, 2010 by Steve

It looks like there may be some signs of slowdown in the foreclosure market.

According to RealtyTrac, the online marketer of foreclosed properties, the number of foreclosures fell during the first six months of 2010.

There was a 5% decline in the number of foreclosure filings compared to the last six months of 2009.   However, there was a corresponding increase in bank repossessions during April, May and June of this year.

The increase in bank foreclosures may be due to banks catching up on outstanding repossessions rather than allowing them to remain in limbo.

What does this means for someone interested in purchasing foreclosure properties?   Whether through bank repossession or foreclosures, there are still plenty of investment properties available.

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Bank Owned Properties for First Time Buyers

Posted on July 18, 2010 by Steve

Buying a bank owned home is a detailed process that requires extensive planning and research.  In today’s market, you have the opportunity to purchase homes at below their market price.  Even first time buyers can benefit from buying bank owned homes for sale.

Take these steps to help make your first home buying experience a pleasant one:

Credit Score:
A buyer’s credit score is the most important thing when qualifying for a loan.  AnnualCreditReport.com provides individuals with a free credit report from all three credit bureaus.  This is the official site for getting your free credit report.   You can also, for a small fee, find your credit score.  Over the past few years, a person’s credit score has become far more important than details of what is on their credit report.  Once you have a copy of your report, review it carefully.  There may be mistakes, if so you will want to dispute the mistakes with each individual credit bureau.  Also, take a look for collection or unpaid accounts and accounts past due 60 days or more.  If your credit is less than perfect or if your debt/income ratio is less than ideal, you should start cleaning up your credit report at least 6 months in advance of looking for a house.

Get a Pre-Qualified Home Loan Before House Hunting:
Work with a real estate professional to help assess your housing needs.  They will be able to help you determine the size mortgage you can afford.  Don’t forget to include additional home owner expenses, such as Home Owner Association Fees, landscape upkeep, insurance, etc….

Down Payment:
Acquiring a down payment isn’t always an easy thing to do.  Look into a FHA loan, which requires a much smaller down payment than conventional loans.  If you are getting FHA financing, make sure to ask about Down Payment Assistance Programs (DAPS) for down payment assistance.

Contract with a Buyer’s Agent:
This agent works for you on the buying end.  This professional will help with research, pricing and contracts.  The best way to find a buyer’s agent is to ask friends and family members for referrals. Your buyer’s agent will help ensure you have all the necessary information for successful home buying.  They are also an incredible resource for contractors, inspectors, attorneys and anything else you might need to successfully buy your home.

Based on your preferences and the buyer’s agent suggestions, get to know your target neighborhood:
Once you have chosen an area you want to live in, make sure you investigate the neighborhood before making an offer.  Drive around during the day and the night and see what it’s like.  Are the houses well kept and in good repair?  Are there loose animals or consistent loud parties?

Your first house is both the place you live and an investment.  When you buy a house you can afford in a good neighborhood, you are starting a buying pattern that will last a lifetime.

Buying either a traditional or bank owned property can be challenging.  Talk to Steve Weber at Peak Commercial Property Services today.

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Homebuyer credit extension heads to Obama

Posted on July 12, 2010 by Steve

On Wednesday,  July 12, the Senate passed a bill to extend the $8000 first time home buyer credit until September 2010.

It’s expected that President Obama will sign the bill which has already been approved by the House.

This bill extends only to buyers who signed a contract by April 30, 2010.   Because of certain complications in closing, an estimated 20,000 people would not have been eligible for the tax credit without the introduction of this new bill.

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Make Building Improvements

Posted on July 6, 2010 by Steve

There are four (4) ways you can create value for your real estate investment:
1. Raising Occupancy
2. Raising Rental Rates
3. Reduce Operating Expenses
4. Make Building Improvements

There is no better time than right now to update your retail, commercial and industrial properties.

If you own retail, commercial or industrial property,   modernizing and updating it will help your property compete with new builds.   This equates to higher rents and a higher property value.  For example, raising the rental rate in office/retail building by 10% (from $12 per square foot to $13.20 per square foot) can raise the property value 10%.  This calculates to raising the value from $2.67 million to $2.93 million.  With the same scenario on a 75-unit apartment, by raising the rental rate 10% (from $546 to $600 for a 2 bedroom), it would raise the property value 10%.  This means that a property originally worth $3.2 million would now be worth $3.52 million.

The good news is that small fixes and upgrades can be done easily and cost effectively.

If you own retail buildings, consider adding new landscaping.  Landscaping ads a fresh look to your building at fairly low costs.  Painting or remodeling the exterior fascia/architecture helps your building stand out from the crowd. Are your existing spaces too big?  Demising bigger spaces into smaller ones makes them easier to rent out.   Check the roofing and replace if necessary.  The roof of a building, especially on smaller buildings, plays an important role in the “drive by” look of a building.

For office buildings, look at adding a conference room for tenants that includes a large screen monitor and appropriate AV equipment including a data projector, conference ready phone, web camera and wireless connectivity.   Many meetings are now held via the web and these tools are critical components.    As with retail buildings, ensure that your landscaping, exterior and interior walls are clean and freshly painted.   Consider updating the bathrooms with newer lighting fixtures and automatic toilets.    Confirm that the roof is solid and looks good.

If you own Industrial properties, the current trend is to ad offices to create a flex-type use (office and industrial combined).   It’s essential that you concentrate on the “look” of your industrial park if you expect retail customers to feel comfortable shopping there.    Make sure you have appropriate landscaping and parking for shoppers.

Apartment owners have many options to increase the value of their investments.    As with any other business establishment, updates to the exterior such as painting, landscaping, roofing, and lighting can make the difference on whether the property is rented.    Consider adding covered parking.

For interior upgrades, add washer / dryer hookups or convert stack washer dryer areas to full size.  Install or update dishwashers, stoves and refrigerators.   Color coordinated appliances look better and, if new and energy efficient, can help save tenants money on their electricity.    Accent walls are a very easy and inexpensive way of adding value to an apartment.  Ensuring that the flooring is updated regularly keeps the apartment looking new and fresh.   Consider modernizing the bathrooms as well.  New or larger bathtubs, updated lighting and fixtures go a long way towards raising the perceived value of the apartment to the tenant.

Small updates to your existing properties can mean big increases in both the long term value of your property and in your immediate cash flow.  For more information on upgrading your existing retail, commercial or industrial properties, contact Steve Weber at Peak Commercial Property Services (peakaz.net)

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Reduce Operating Expenses

Posted on July 2, 2010 by Steve

This blog relates to the third step in adding value to your investment or “Reducing Operating Expenses”. The four (4) ways you can create value for your real estate investment are:
1. Raising Occupancy
2. Raising Rental Rates
3. Reduce Operating Expenses
4. Make Building Improvements

SAVING MONEY – As in any business, excessive operating expenses can make or break the profitability of the business. What are some ways to reduce operating expenses and maximize the profitability of the investment? For commercial properties across the board (retail/office/apartments/industrial/etc), cost savings may be obtained in several categories, including:
• real estate taxes
• insurance
• maintenance/supplies
• utilities
• contracted services

When looking specifically at apartments, there are additional areas where an investor can save money, including:
• On-site payroll
• Marketing
• Legal/Administrative
• Repairs and Reserves

STAYING COMPETITIVE
How can you spot ‘high’ operating expenses? One of the better ways is to obtain data from industry averages, which you can obtain by asking brokers/agents/property managers who are in the business and have access to the data. Industry averages are important because you need to be competitive with your operating expenses, especially triple net leases where the tenants pay 100% of the expenses (typically in retail leases and partially in office/industrial leases). If you are not competitive, the building owner ends up ‘absorbing’ some of the expense, which is self defeating and reduces the net cash flow (and therefore the property value). For retail/office/industrial properties, I’ve found the best cost cutting measure is to get competitive bids for contracted services. For apartments, the categories that present the best opportunity to save money are on-site payroll, utilities, and maintenance/supplies.

ESTIMATING REAL ESTATE TAXES/INSURANCE/ COMMON AREA CHARGES ETC.
As far as numbers go in the Phoenix Metro Area, real estate taxes are estimated at $1.50-3.00 per square foot of building area, depending on the age and condition of the property. Property insurance is typically estimated at roughly .25 cents per square foot of building area. Common area charges (which are typically utilities, lot sweeping, landscaping, lighting, building maintenance, etc.) for commercial properties (retail/office/industrial) can range from $.75 per square foot, up to $2.50 per square foot, depending on the number of services provided. For apartments, the operating expenses run between 35-45% of effective gross income (EGI). These numbers would exclude capital improvements, which would be another 5-10% of EGI. When you see below normal operating expenses, take a good, thorough look when verifying the numbers to ensure the numbers are real/accurate. One last note about apartment operating expenses; in reference to utilities, older properties can be ‘master metered’, meaning there is only 1 electric meter on the property and the owner/landlord pays for this expense (i.e. utilities are included for the tenant). This expense is a key component in the analysis, as there is an opportunity to save money by converting the utilities (electric) to individually metered accounts, depending on the cost/benefit savings analysis. In our next discussion we’ll cover the last way to create value in your investment #4 “Making Building Improvements”.

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