Chris Sunday

Hi, going to the airport. Acceptance Group

Best time to buy investment real estate?

When is the Best Time to Buy Real Estate?

I'm asked at least a couple of times a day: "when IS the best time to buy real estate?"

The answer is: it depends on your investment goals and overall investment strategy.

Right now is a pretty good time to consider buying IF, you can find the right priced property that you expect to reasonably appreciate over the next 3 to 5 years, as long as you ar ein a "buy and hold" strategy. If you're a short range "flipper" you need to get a very good buy from a distressed seller - and a lot of them are beginning to be out there because of the "funny money" that was borrrowed over the past 5 years. We'll talk about some of these "short sales" and the "funny money" later in this post.

The reason why anytime is a good time to buy real estate investments is because somewhere in YOUR area, SOMEONE will sell their property at a price that's less than fair market value. The larger the margin between existing fair market value and what you can buy it for is the key.

Keep in mind that in a distressed market those numbers take on even more importance because if you want to flip it rather than hold the property, you may need to apply a discount to fair market value to get yours sold over the existing inventory in the market.

Yes, not only are you under pressure to sell a flip property in a relatively sort time span, but you also need to make the property attractive enough so that you can sell it while the market is clogged with other sellers' inventory. Also note that in seom areas of Florida there is a lot of NEW unsold inventory, so a several year old existing property that's otherwise in a similar location will not likely bring as much as a similar property that's new.

KEY: You need to find the distressed sellers. Where are they? They are everywhere, and there are probably more than you think. You neeed to have a network in place to do it. Mayeb real estate agents can help you because they're hungry. Sales are slower than they have been and marginal agents are trying to stay in the business. However, the "steals" in the market are never likely to make it to you, because they, a relative, or close friend of theirs are often likely to end up with the property instead of you, professed loyalty aside. There are some real pros who have been in ht ebusiness a long time and they recognize the value of the long term gain over a short term one by working with certain investors. So, if you find a really good broker willing to find YOU the best deals - keep him/her and buy from them.

We utilize a number of sources to find investment properties, including brokers, direct owner contact, referrals, foreclosure lists, deed registries and tax rolls.

Keep in Mind Highest and Best Use

This is where real fortunes can be made in any market. "Highest and best use" are terms applied to real estate and defined similar to:

"...being the value of a property is directly related to the use of that property; the highest and best use is the reasonably probable use that produces the highest property value. This use, the Highest and Best Use, may or may not be the current use of the property."

So, a modestly priced residential property in the path of shopping mall development may change in its "economic obsolescence," by declining in value as a desireable residence, but increasing more substantially in value as a commercial site.

A second quick example might be a home with an oversized lot that can be converted into a separate lot, with the existing home and lot selling for near what the purchase price was, and the remaining lot resold at a substantial profit.

There are many more examples, including raw land converted to subdivisions, rental to condo conversions, etc. It all has to do with enhancing value through different utilization than the existing use.

BEWARE: This is also the place where lots of money is lost. Just because a REALTOR designates a site as "commercial" doesn't mean it is so. Remember that when you see the word "potential," it means that is the purchaser's money and risk NOT the seller's. Sellers and their agents often try to sell potential, but the question to ask yourself is this: "if it has all this potential, then why didn't the seller do it?"

Back to the Funny Money

All those 1% mortgages are coming home to roost, and that negative amortization is beginning to balloon in geometric proportions causing many part-time "investors" to hemorrhage cash. Keys are being left on banker's desks, properties are being abandoned, lenders and owners are seomtimes being forced into "short sales."

CAVEAT: If you used a personally backed mortgage guarantee, you may still be on the hook - EVEN after a foreclosure. GET LEGAL ADVICE. We're not attorneys, but we can most assuredly tell you that if you're in foreclosure, or being threatened with the same you need legal counsel.

Don't just walk away from what turned out to be a bad investment for you. Try to work it out with the lender if you think you can. Get legal advice early. Discuss the ramifications a short sale might have on you - even after the lender has sold the property. Why? Because in the case of a personally guaranteed loan you may very well be liable for any lossess the lender incurrs.

There's a NOTE behind every mortgage, and their terms are for cash, and are usualyl very strict with few remedies for the borrower. The asset only "secures" the note. So, a foreclosed property that brings in $50,000 LESS than what is owed in back interest, foreclosures costs, etc., may still be owed by you. Will the lender forgive the debt? For the average small time homeowner/investor - yes quite often. That's if they think you have no other assets you can use to pay them off, or if the cost of going to court to attach those assets or force a sale i smore than the debt. Even if you have little or no assets left doe NOT mean you're off the hook. That's why you need an attorney.

Buy something. Have a great day!

ChrisAmigo

Anecdotal Survey of the Tampa Market

Hi All,

We've been digging our heels in and watching the market very very closely. Yes the market has a lot of inventory, yes prices have flattened somewhat, but here's what we believe.

For residential investors the market appears to be at or near the bottom with the exception of the condo market which may last a little longer. Builders have pulled way back and are projected to remain in a holding pattern for awhile until the existing inventory and committed ventures are sold. Expect more of the same while inventory continues to work its way down.

Single family's appear a little brighter. The inventory is being worked off in most of this market and it appears to us that by the end of the year things may again be on the upswing - provided the economy holds, and there are no catastrophic events.

Other good news is that the national unemployment rate is now at a 4.5% low. This was unexpected. In fact it is expected to rise a little by the end of the year.

In addition the state of Florida has done a great job in reducing insurance rates through their new insurance coverage programs, and we expect those insurers that were fleeing just months ago will want back in because the state may become their biggest competitor at bargain prices. Then, it's only a small political step to add other "property and casualty" lines of insurance. Pretty soon poof - the profitable good gravy business, which all insurance vendors want may begin to disappear too. Our guess is that they're going to have to step back in even if they lose some money in order to protect their market share? Who cares? Investors and homeowners do. Right now a lot of people still think there's a crisis, but it appears to us that the great state of Florida has done a yeoman's job of handling this tough issue.

While most of the real estate brokers are projecting flat to slight declines in the market, with some undertones of stress and distress to boost sales. We believe a lot of that is "fluff." The greater Tampa market continues to be blessed with varied employment and age demographics that can only continue to bode well for its current and future economy.

We agree that this is a buyers market and we're encouraging you to take a serious look. We don't flip real estate generally, and we like to hold for long term capital gains generally. That's why we didn't get caught in the speculative "crunch" like many investors in this market.

We would encourage you to give a second look at this market over the next 6 to 8 months. Then we think that if the economy continues to be a strong as it is, that the prices will begin to rise again in the mid to upper single digit ranges.

We're beginning to scour certain areas where we think there is some hidden equities based on the present and our anticipation of what will be happening in the next one to two years.

We're looking for capital partners. If you're interested we'd love to explain our no nonsense, no hype approach to investing for the long term.

ChrisAmigo
chris@allamigos.com