Investors; If One is Good – A Dozen is Better

Second in a four-part series

Synergy: The working together of two or more things, people, or organizations, especially when the result is greater than the sum of their individual efforts or capabilities.

Synergy is a good way to describe the power of real estate investor groups. If one investor is good, a dozen or more investors working together is even better.

It’s simple.  Multiple investors working together can bring more money to the table, than an individual.  They also have the ability to borrow more funds and take on more debt and risk.  In addition, with the right members, an investment group could include attorneys, accountants, realty agents and other professionals to strengthen the team.

Tami Gosselin, Modesto Office Call-(209)557-2609 Email- tgosselin@c21mm.com

“Investors are buying in bulk,” said Tami Gosselin, a Century 21 M&M and Associates Realtor in Modesto.  “The minimum buy is $5 million.”

Gosselin, who works exclusively with investors, said $5 million could purchase 40 to 50 properties.  In addition, banks such as Citibank, Chase and Wells Fargo are interested in working with investor groups, as such large pool purchases helps them to clear out their inventory of REO — real estate owed — properties.

“They can buy from the banks at 50 cents on the dollar,” she said.

In bidding at the $5 million level, investor groups also have much less competition than a buyer competing for a $100,000 house.

Shannon Meredith, Lodi Office Call- (209)371-8241 Email-Smeredith@c21mm.com

Shannon Meredith, a Century 21 M&M Realtor based in Lodi, said she worked with a New York investor group from 2008 to 2009.  The group would “flip,” or resell the properties quickly.  Net profit per unit, after repairs and maintenance, would range from $5,000 to $10,000.

“I probably did eight to 10 deals with them last year,” she said.  “Some were high-end, up to $600,000.”

However, Meredith said the group eventually folded due to a financial mistake made by their in-house lender and being priced out of the market.

Meredith said there is a Modesto-based investment group actively purchasing area property.  She said she recently represented a seller, who sold the group a $275,000 single-family home in Lodi.

“They’ve got a well-oiled machine,” said Meredith.

Next Week: Flipping Real Estate

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Real Estate Investors Are In A Buying Mood

First in a four-part series

Cash-rich investors are scooping up bargain properties and often times beating out first-time home buyers competing for the same property.

Scott Abell, Oakdale Office Call-(209) 765-7929 Email-sabell@c21mm.com

Scott Abell, an Oakdale-based Century 21 M&M and Associates Realtor, said investors typically either buy and then resale a property, or buy and keep a property for rental cash flow and long-term appreciation.

“People that have the cash are buying them and doing a little lipstick and rouge and selling them,” said Abell, who owns 10 rental units.  “A lot of the investor buyers also have been buying low-end residential properties and turning them into rentals.”

Shannon Meredith, Lodi Office Call- (209)371-8241 Email-Smeredith@c21mm.com

Shannon Meredith, a Century 21 M&M Realtor in Lodi, said most investor property is bought “as is,” but the fixes usually are not too difficult or expensive.

“You can really spruce up a home with just paint and carpets,” she said.

Investors often beat out offers from first-time home buyers by offering an all-cash purchase.  Typical first-time buyers, many who can finally afford to buy a house, need a mortgage to complete the deal.

Abell said he has mixed feelings about first-time buyers, often young couples just starting out, losing out to cash-rich investors.

“I believe in free enterprise, it’s America,” he said.  “But it’s frustrating.  I’ve got a son, 21, and I know parents want their kids to get a piece of the rock.”

Tami Gosselin, Modesto Office Call-(209)557-2609 Email- tgosselin@c21mm.com

Most of the bargain homes are REO — real estate owned by a bank — foreclosed properties returned to the lending institution.  Banks want the easiest deal and FHA, VA, or conventional loans can be much more complex than an all-cash purchase.  Most mortgages require inspections, mandatory repairs and can fall through during the escrow process.

The recession and nearly 52,500 homes lost to foreclosures in Stanislaus, Merced and San Joaquin counties have driven down properties to bargain prices.  Prices for many “fix-it-upper” single-family homes are less than $100,000 and multiple-unit complexes* — including duplexes, triplexes, and fourplexes — can sell for $50,000 to $60,000 per unit.

“The investors are more after the multiple units than the single-family homes,” said Abell.

A fourplex, said Abell, purchased at $190,000 can generate $3,200 a month income.  Even figuring in financing, insurance and maintenance, there is a positive return, called cash flow in the industry, each month.

“They’re great deals.  That’s why I have three or four in escrow right now,” he said.  “They can make eight to 10 times what they can at a bank.”

Tami Gosselin, a Century 21 M&M Realtor in Modesto, said she has represented a client looking to buy their first rental to investor groups with a minimum of $5 million to spend.

NEXT FRIDAY: Investment groups

*In Property Search Criteria click on Type, then choose Multifamily.

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Pros and Cons of New Short Sale Regulations

The recently introduced new regulations for streamlining short sales sounded too good to be true. For some home sellers, they just might be.

Under the new federal regulations, with the new and improved short sale process:

• Homeowners receive $3,000 for relocation expenses when they complete a short sale or hand over the property deed to the lender.
• Lenders are required to set their minimum acceptable bid before the house is listed for sale. If the offer is at or above the minimum, the lender must accept it.
• Homebuyers making an offer should receive a reply in two weeks. This often took months.

However, there is a lot of fine print and many homeowners looking for a short sale — when a lender accepts less than the amount owed on the mortgage — as a way out of an financially upside-down home, will not qualify.

Lori Wehrli, Tracy Office Call (209)834-4964 Email-Lwehrli @c21mm.com

“I’ve had a couple of clients call that immediately didn’t qualify right off the bat,” said Lori Wehrli, a Realtor at Century 21 M&M and Associates in Tracy. “There are so many rules and regulations. I think it’s very specific, so it’s limited.”

Wehrili, who completed five short sales last year, said she closely looked over the new regulations and immediately found stipulations that eliminated many home sellers.

Some of the exceptions include:
• The home must be the seller’s principle residence.
• The home seller must be delinquent and default inevitable.
• Does not apply to loans guaranteed by Fannie Mae or Freddie Mac, which accounts for approximately half of all U.S. mortgage debt. The pair of government-operated firms is developing their own short sale program.
• The monthly mortgage payment must exceed 31 percent of the before tax income of the home seller.
• The balance of the mortgage must be less than $729,750.

“Every single program they put in place, there seems to be a lot of exceptions,” said Wehrli. “It’s really a letdown to a lot of people.”

Bonny Howell, LosBanos Office Call (209)829-7601 Email-Bhowell @c21mm.com

Bonny Howell, a Century 21 M&M Realtor based in Los Banos, said the new short sale regulations remind her of the complicated FHA and VA mortgage process.

“It’s a little like the FHA,” she said. “Everyone wants to get into a FHA or VA loan, but it’s difficult. There’s a lot of hoops to jump through.”

Howell said FHA for example, does not allow the purchase of a home by an investor, mandates two appraisals and the repair of some items.

Wehrli concurs and noted navigating through the new short sale regulations requires an experienced expert.
“You must seek a real estate agent, tax professional or an attorney,” she said.

Feel free to ask questions, make comments or suggest new topics for this blog. Just use the Comment box below, or send an email to newsandviews@c21mm.com. Why not subscribe to this blog? Just enter your email address in the Email Subscription box (above and to the right), and you will be notified anytime we add new articles.

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Accelerating the Short Sale Process

Can a traditional “short sale” drag on and on before it is completed or closed

Ask Chet Dilka, a Realtor based at the Century 21 M&M and Associates office in Stockton, he’s working on a short sale that is up to 654 days and counting.

“I just got written approval for that short sale,” he said.  “I close it in 30 days.”

Chet Dilka, Stockton Office call 209-403-7936 email cdilka@c21mm.com

While Dilka’s short-sale journey is extreme, short sales — when a lender accepts less than the amount owned on the mortgage — typically takes much longer than a conventional home sale.

Financially troubled homeowners prefer short sales to foreclosures, as a short sale impacts credit scores for a shorter term.  Lenders typically can net more from a short sales than the complications of a foreclosure.

Hopefully, that changed Monday.  A new federal regulation designed to streamline the sluggish process should help homeowners in financial trouble, lending institutions wanting to shed the toxic loans and buyers wanting to close escrow in a reasonable time.

With the new and improved short sale process:

  • Homeowners receive $3,000 for relocation expenses when they complete a short sale or hand over the property deed to the lender.
  • Lenders are required to set their minimum acceptable bid before the house is listed for sale.  If the offer is at or above the minimum, the lender must accept it.
  • Homebuyers making an offer should receive a reply in two weeks.  This often took months.

Dilka said the new regulation would have greatly shortened his short-sale odyssey.  He said the institution that held the mortgage would take three to four months to get back to his clients’ offers.  By then, the potential buyers had moved on to other properties.

Beth Latta, Lodi Office call 209-529-6111 email bgriffenlatta @c21mm.com

“I went through that process three times,” said Dilka.

Bankruptcies, mergers and general instability in the financial industry also caused short sales to drag on, said Beth Latta, a Century 21 M&M Realtor in Lodi.  She said papers and documents could be lost in the transitions and disruptions.

“They lost my documents three times,” Latta said about her efforts to close on five triplexes.  “It was over 1,250 pages of documents I had to fax.  It took me 10 hours to fax.  When they lost that 10 hours of faxing, I bawled on the phone.”

Feel free to ask questions, make comments or suggest new topics for this blog. Just use the Comment box below, or send an email to newsandviews@c21mm.com. Why not subscribe to this blog? Just enter your email address in the Email Subscription box (above and to the right), and you will be notified anytime we add new articles.

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For a Limited Time: Tax Credits Available – Up To $18,000

A rare, limited-time “double-dipping” of federal and state tax credits offers California first-time homebuyers up to $18,000 in federal and state tax credits.  Existing homeowners can qualify for tax credits up to $16,500.

Debbie Lintao, Century 21 Mortgage, Call 707-208-9585 Email Dlintao@ mortgagefamily.com

“It’s a one-time opportunity,” said Debbie Lintao, a mortgage advisor for Century 21 Mortgage.  “I don’t think it will happen again.”

Lintao, a 20-year mortgage veteran servicing Century 21 M&M and Associates offices in Fairfield, Green Valley and Vacaville, said homebuyers should be jumping on this opportunity.

The perfect storm of opportunity is due to the overlapping of the federal first-time homebuyers tax credit of $8,000, or $6,500 for long-time owners of existing homes. Both types of buyers must have a written, binding contract by April 30 and close escrow by June 30.

The second-part of the two-month opportunity is a new California homebuyers $10,000 tax credit program beginning May 1 and continuing on to July 31, 2011, with an enforceable contract signed no later than Dec. 31, 2010.  First-time homebuyers of existing homes qualify, as do existing homeowners purchasing new or previously unoccupied homes as their principle residences.

The state programs have allocated $100 million to each category of homebuyer.  The programs will end by the set deadline date, or sooner if the tax credits are exhausted. A previous and similar program it ran out of tax credits eight months before the June 2009 deadline.

Jill Alderson, Fairfield Office, call - 707-290-1630, email jalderson@c21mm.com

Jill Alderson, a Realtor at the Century 21 M&M office in Fairfield, said there has been interest in the new tax credits.

“I’ve got people calling me, ‘I want to get this tax credit.  What do I have to do?’” she said.

Alderson said the timing of the incentives are perfect for the spring and summer months.  “Kids are out of school and families are more likely to move during the period,” she said.

Jack Dhaliwal, West Sacramento Office Call 916-205-2083 Email jdhaliwal@c21mm.com

Jack Dhaliwal, a Realtor at Century 21 M&M in West Sacramento, stressed homebuyers will need to hustle to claim the state tax credit.

“It’s first come, first served,” he said.  “I don’t think it will last very long.  It ran out last year.”

Cindi Robbins, a Vacaville-based Century 21 M&M Realtor, said the real pressure would be collecting on the federal tax credits with the requirement of signing a contract by April 30 and closing escrow by June 30.

Cindi Robbins, Vacaville Office Call 707-592-5952 Email Crobbins@c21mm.com

“You have to be on your game to close in 30 days.  I can do it because I have the experience,” said Robbins, a former broker assistant and escrow coordinator.

One of her marketing strategies is to mine her files and the office’s files for past clients that purchased homes in 2000-2004, before home prices wildly jumped.

“I’m looking for someone wanting a bigger house that cost less than when they bought their house,” said Robbins.

Mortgage advisor Lintao, noted while homebuyers will have to rush to get a share of the tax credits, they still need to be good consumers.

“It’s not a benefit unless you get the right house,” she said, “because you’re going to live in it a long time.”

EDITOR’S NOTE: There are many fine points, exceptions and details to both the federal and state tax credit programs.  Is it highly recommended you contract a Century 21 M&M Realtor to discuss your individual situation.

Feel free to ask questions, make comments or suggest new topics for this blog. Just use the Comment box below, or send an email to newsandviews@c21mm.com. Why not subscribe to this blog? Just enter your email address in the Email Subscription box (above and to the right), and you will be notified anytime we add new articles.

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