Raleigh-Durham Real Estate Blog

Well hello!

I know it’s been a while since my last blog entry. We’ve been very busy over here at the office.  But, given that we're at the start of a new year, I thought it a good time to touch base with you to share a few bits of useful info to help kick-start your 2012. 

Real Estate Tax Credits still exist

Gone are the wonderful days of the 1st time homebuyer's credit. But, there are other, lesser-known, tax benefits that investors and homeowners can leverage to their benefit.  In many cases, these tax benefits far exceed the former homebuyer tax credit's $7500-$8000 limit.

What would you say if I told you that we recently completed a project that netted approximately $50,000 in dollar-for-dollar tax credits, $1000/month in cashflow (after expenses) and over $100,000 in equity for one of our investors (on a single-family home). All with the use of historic tax credits! Historic tax credits are a powerful resource for investors interested in buy-and-hold investing, rehabbing, wholesaling, or “flipping”. Historic tax credits can benefit all 4 of these investing avenues. They can also be very useful for investors whose income/tax bracket negates some of the other tax benefits of real estate investing. BUT, it is VERY important to understand the ins and outs when using them. I’ve taught multiple live classes on this topic locally and have decided to open this up to our Investor Network (i.e. YOU). So, stay on the lookout for our upcoming teleseminar/webinar series on historic tax credits (for both homeowners and investors).

On a smiliar note, who says you can’t mix historic+green+affordable?   We've heard countless times that historic homes and energy efficiency don't mix.  Also that solid historic restorations can't be done affordably.  Visit our partner construction firm's site http://www.coralbuilt.com/#!press and select the “green+historic+affordable” article to see how we were able to combine all 3 of three goals into a successful project that is affordable, historically correct, and certified by the National Association of Homebuilders as an Emerald green-rated renovation (their highest award).  We hope that this will motivate other owners to keep energy efficiency in mind while renovating their historic properties.  The real surprise in this project is that the future owner will not only have a beautiful home, but will receive approximately 30k in historic tax credits to boot.

New Year insurance check-up

Call your insurance agent today to increase/decrease coverage limits on your properties. You might consider adding a provision that automatically adjusts your coverage each year to follow inflation/appreciation, or call annually to be sure your current property value (and the cost to rebuild in the event of a fire, etc…) is covered. We spoke with a client recently who suffered a fire, and, unfortunately, the replacement cost coverage on his policy wasn’t enough to rebuild the property, SO he had to get a loan on top of his insurance payout in order to rebuild. Don’t get caught in this situation. Call your insurance agent today to be sure you are covered. Or, visit our Service Professionals page for a few names of local insurance providers that can help. Tell "em Tiffany sent you!

New Residential Property Disclosure for 2012

As investors, as with all other home-sellers, there are a few forms that are REQUIRED upon receiving an offer from a potential buyer. One of these is the state-mandated NC Residential Property Disclosure. Keep in mind this form is a state requirement, per the NC General Statutes, for ALL residential dwellings up to 4-units. This IS NOT just a Realtor requirement. It is therefore required that you, as a seller, present this to potential buyers even if you are not leveraging the assistance of a Realtor. The form has changed for 2012 and includes some additional disclosures that you should be aware of. Visit http://www.ncrec.gov/forms/rec422.pdf for a copy of the new 2012 form (now titled the “Residential and Owners Association Disclosure Statement”). Keep this and all other state-mandated forms in your files to be sure your files are in order and in compliance with state law.

Featured Property

9 Sargent Place, Durham, NC

Solid cashflow in Durham for only $110,000!

4-unit (quad) rental. 2 stories (2 units on each floor). $1580 gross rents. 2011 tax value of $128,578 and property tax bill of $1676. Built in 1973. Each unit is approx. 750 sq ft, 2 bedrooms, 1 bath. Brick and vinyl exterior. All units occupied at $395/month. Property manager is in place and can take over management for the new owner, if needed. Viewings of 1 unit for interested buyers can be arranged with a minimum of 24-hour notice. (Your offer can include a provision, of course, to view and inspect remaining units. The owner doesn’t want to disturb tenants unnecessarily.) Per a conversation with one of our lenders yesterday, financing at 25% down and 4.5% is available to qualified buyers (based on 1/10/12 rates), so, with the right financing, this one is CASH FLOW STRONG! Contact Heather Sirgany with Harrington Bank @ (919) 945-7873 or Stephen Livesay with Prime Lending @ (919) 656-4516 for details on financing and/or preapprovals. Crunch your numbers and give us a call on this one!

Ok, I think I’m done now. To close, I want to extend my wish for you that 2012 is an amazing year (both personally, professionally and financially).  Our team plans to provide as much information as we can to help you meet your goals, because we realize that when our clients win, we win.  Let me know if there’s any way in which we can help.

Happy Investing!

It's been a while since my last blog posting, but that's a testament to the heating up of the local real estate market here in the Triangle. We've been pretty busy in the office, and this posting includes information that I hope will be of use in your investing endeavors.

Paradigm Properties is your One-Stop-Shop for Real Estate Success

A large percentage of our firm's business is focused on facilitating homebuyer and investment real estate purchases and sales. We appreciate the opportunity to help our clients reach their financial goals through real estate. Given the number of REO and other vacant properties on the market, we’ve found that residential and commercial property restoration and repair is a key component to our clients’ success. So is property management. For this reason, we’ve partnered with 2 licensed general contracting firms to assist our clients with their acquisitions, and to streamline the repair process. In addition, our property manager partners are prepped to assist with your landlording needs. We look forward to providing these and other vital services to our clients in the effort to provide a 1-stop-shop for your real estate success.

New offer form for NC buyers

Effective Janualr 2011, the state of North Carolina has implemented a new Offer to Purchase and Contract form. The new form streamlines the due diligence process and minimizes the number of dates in the prior Offer To Purchase form. One of the highlights of the new form is the new “due diligence” period, which defines the timeline allowed for buyers to cover ALL due diligence, including inspection, survey, loan approval, and a myriad of other items. Homeowners should be aware of this new requirement. Investors should make an effort to understand the changes as it will affect their pursuit of investment property portfolios as well as the offers they may receive on rehab and/or rental property. If you are in the Triangle area and want to learn more, feel free to attend an investor subgroup meeting on 2/28/2011 hosted by yours truly and the Triangle Real Estate Investor Association. We will review the new form and discuss its impact on real estate transactions. For more information, visit www.treia.com Click on the “Calendar” link and select the TREIAWest Subgroup meeting on 2/28/2011

Calling all Real Estate Wholesalers and Investors – I need your help

WHOLESALERS: Activity in our office shows that the Raleigh-Durham real estate market is picking up. In addition, the investment property market is on the rise. We need to hear from you because our clients are looking for GREAT DEALS and WE NEED WHOLESALE PROPERTIES FOR THEM. Now let me back up for a second. Please do not call me with a 200k home that you’re looking to sell for 190k. I can find those with my eyes closed. But, if you have a solid deal with solid numbers and are looking for a buyer, send it my way. We probably have a buyer for it. For example, a recent deal purchased by one of clients came in at 68k. After-repair value was 170k. and a majority of the repairs were cosmetic (albeit extensive), and totaled in excess of 60k. Another property currently under contract has an ARV of approx 160k. Purchase price is 98k. and the buyer expects to undergo cosmetic updates of approx 15k. Tenant-occupied properties are welcomed too as many of our clients are landlords. If you have a wholesale deal, send it over. If it looks like a good deal, we’ll be happy to share it with our investor network.

INVESTORS: If you are looking for specific criteria on a wholesale property, let me know what you’re looking for and I’ll be sure to contact you if anything fitting your interests crosses my desk.

To Your Success in 2011

We want to hear about your successes and lessons in real estate. If you do a deal, send me the details, purchase price, rehab, sales price, rents, profits, challenges, whatever you consider to be a learning point for others. It’s ok to brag a little bit! If you made a mistake and recovered, tell me how so that others can learn from your experience. By sending it to me, you give me the right to post the info on my blog. The name of the game is motivation, so share your successes and lessons and motivate others to accomplish the same!

A quick example: Our recent client requested our assistance with the purchase of a 16-unit property. Purchase price of approx 550k. We structured a loan assumption and private money deal that will net the owner in excess of 4k/month after expenses once full occupancy is reached. The numbers get even better a few years down the line. Not bad for 1 property acquisition. Although this is a multifamily, we want to hear your single-family, commercial and multifamily stories, so be sure to send ‘em over.

Raleigh to be a Top Hot Spot in 2011
More people are moving, according to Atlas Van Lines’ annual Migration Patterns study and that’s good news for one North Carolina city. The Migration Pattern study indicated Raleigh to be among the top three cities projected to have some of the strongest household growth rates in 2011, along with Phoenix (Arizona) and Austin (Texas).http://www.realtor.org/RMODaily.nsf/pages/News2011012003?OpenDocument

Now is the time to swap out those toilets!

The City of Durham Department of Water Management has expanded the WaterSense High Efficiency Toilet (HET) Rebate Program to increase program participation. Now homeowners, and landlords can benefit from the rebate. I’ve recently bought HET toilets recently for approximately $100 and the rebate is currently $100, so this can effectively negate the cost of the toilet (but not installation). The rebate is credited to your water bill, so be sure to have this handy when you apply. Additional info is available at : http://www.ci.durham.nc.us/departments/wm/toilet_rebates.cfm

Triangle Market Update Reports

• Entire Triangle Region
• Durham
• Orange
• Wake

Your Opinion Counts

If there is a topic of interest that you feel would be of benefit to the home-buying and/or investing community, let us know. If a recurring theme surfaces, we’ll do the research and include the info in an upcoming blog.Thanks in advance for your feedback. We look forward to working with you in 2011.

Live For Free!

Thank you to those of you who have played a role in reviewing a short e-book that I wrote last year. For the rest of you, this will hopefully be a timely read, especially if you are thinking of buying a home or investment property in the near future. This quick read can show you how to LIVE FOR FREE. I actually learned this ‘secret’ from my parents, who used it to jumpstart their real estate investing career decades ago. Visit www.tiffanyelder.com/LiveForFree and use the code “liveforfreenow” for your free copy. Please note: I have a few edits to make to the final copy, but I’m looking forward to your comments to round these out. The free code will expire this Friday, 12/3/2010 at 11:59 pm, so be sure to download your free copy before then!

Investing in International Rental property (article provided by NuWire Investor)

Many of our overseas neighbors are are picking up US property to leverage the benefit of favorable exchange rates. Our office has worked with a number of international investors over the years and given the current lower property values available in numerous countries, US investors should strongly consider overseas acquisitions if the numbers work and a good team is working on your behalf. The article “8 Things To Consider When Investing In International Rental Properties” is provided by NuWire investor and covers a few additional considerations for international rental property acquisition.

North Carolina Ranks Fourth in CNBC Survey
CNBC ranks North Carolina as most improved among the top five states for doing businessaccording to this Charlotte Business Journal article. The ranking elevated the state to fourth from ninth in the annual America’s Top States for Business survey. Quite a few organizations are eyeing the state for corporate relocation and satellite offices. Facebook is the most recent company to join the NC bandwagon and will be building a reported 450 million dollar data center in nearby Rutherford county (source, Triangle Business Journal 11/19/10).

Check your Insurance Coverage

Many real estate investors overlook the importance of good insurance coverage. Or, they skimp on insurance coverage because doing so lowers their upfront closing costs when buying a property. This mistake can cost you big time in the long run. Don’t cost yourself dollars because you’re too focused on pennies. Items such as extended vacancy riders, escalation increases, lost rent coverage, replacement cost, theft and vandalism riders, etc… might seem insignificant now, but become HUGE when something happens at your property that causes the need to file a claim. At a minimum, be sure to review your policy in full when you initiate coverage and again annually with your insurer to be sure your coverage is adequate. Our previous cartoon video on “Setting realistic Expectations” seemed to be well-taken by our blog readers, so we’ve decided to continue the series with a light-hearted focus on insurance. We hope you enjoy it and...Happy Investing!

N.C. Ranks No. 3 for Hospitality Job Growth

While much of North Carolina’s economy is still struggling, the state’s leisure and hospitality sector is on the rebound. Figures from the U.S. Bureau of Labor Statistics show N.C. has added 26,600 jobs in that sector during the past five years. Only New York and Texas have done better.  investors may fare well by securing property in tourist areas within the state.   Click here for full article provided by the Charlotte business Journal

Property Alert: 816 Ridgeway, Durham, NC

Adorable 3 bedroom home is ready to rent. Wood and ceramic flooring, recently updated kitchen and bath. Recently rented for $600/month. Only $42,500. Loads of cashflow for the buy-and-hold investor. Call our office for more details!

Setting Realistic Expectations

Setting realistic goals/expectations is the first step toward a successful career in real estate investing. You’d never guess, however, the types of conversations the brokers in our office have with potential investors. Although some investors are realistic with regard to their real estate expectations (and the associated risks and rewards involved in investing), some investors miss the mark by a longshot! Hopefully the following short film will provide a bit of comic relief on the topic in the midst of a very busy week.

Bedbugs…YUCK!

Keep your eyes open as bedbug infestations are on the rise. What were previously thought of as imaginary critters meant to scare children at bedtime are now relentless "squatters" wreaking havoc for property owners. One of my landlord-clients called several weeks ago regarding an infestation in one of his units here in the Triangle. And the property was only 2 years old! Apparently these infestations were commonplace in other geographic areas, but they now are rearing their ugly heads here in Raleigh-Durham. The problem is that ridding your home of these critters is not as easy as it seems. Read more on MSN.

More Rankings

Durham, and North Carolina as a whole are ranking high in just about everything, huh?!

Durham is the #1 best place to retire (per CNN.com)

Durham is the #1 Best Market for Conservative Real Estate Investors (per CNN Money)

CNBC ranks North Carolina #4 as most improved among the top five states for doing business. The ranking elevated the state to fourth from ninth in the annual America’s Top States for Business survey.

PROPERTY ALERT! Tax Credit Rehabbers Take note – Historic Oakwood property available for sale. Only $80,000

Pocket listing. Amazing price on a bungalow in Historic Oakwood. Only $80,000 (less than land value). 206 Linden Avenue is ready for you to transform it into a gem. Outstanding potential for a solid rental property minutes from downtown Raleigh.  This one can also provide historic restoration tax credits if the property is renovated according to the NPS standards. Similarly-sized renovated homes within 2 blocks of 206 Linden have sold between 220k-300k within the past year. Call today for details. This one won’t be around for long. Cash buyers or rehab-financing only. Not recommended for new rehabbers as this one will require structural and systems work, as well as cosmetic updates. Given my penchant for historic restorations and tax credit projects, I would buy this one myself if I wasn't already up to my neck in construction projects, but I'd be more than happy to advise you on your first tax-credit rehab project if this fits your portfolio interests.

A FREE training you can't afford to miss

One of my all-time favorite real estate educators, Greg Pinneo is hosting a FREE 2-day training in Greenville NC on October 16-17.  More info can be found at his website.  While you're at the site, but sure to visit the "Library" for articles from his webinar series. For those of you who are not yet familiar with Greg, he is a truly inspirational speaker and is 100% committed to helping investors understand real estate beyond the "typical" topics that your inboxes are flooded with everyday. If you are committed to leveraging real estate to create an extraordinary life, you need to be in Greenville on October 16th and 17th.  I hope to see you there!

Q&A with a new real estate investor.

(The following is a brief Q&A stemming from a question posed via email by a new real estate investor with a bit of cash and little direction.  Keep in mind that there are many ways to get started in real estate investing.  Hopefully this Q&A will spark a few ideas for those of you looking for a place to start.)

Q: Hi Tiffany, what is the best way for me to invest and grow my money? I have 50k in capital. What do you recommend?

A: Thanks for your note. Your best option depends on your goals and risk tolerance.

1. You can serve as a private lender and get an 8% to18% return on funds (possibly more), depending on the investor and project/property. This is a good passive way to grow your money for other types of investing. In this case, you would be in a relatively safe position as long as you make sure you are in first position with a low LTV on the property. Also try to have yourself added to the property’s hazard insurance policy, which will protect your investment in the event of a fire or other loss at the property.

2. You can purchase a foreclosure, wholesale or other property to resell for a profit. You may have to tidy it up to prep for resale, but this is another option that can net you a quick return if you buy in a good location.

3. You can start to build a portfolio for passive income. Your 50k can likely serve as a downpayment for 1-2 properties, depending on the locations and property types you prefer. This is the most desirable option for the long-term because you will start to grow your long-term equity position and passive income (i.e."sleeping money").

4. If you have funds in retirement accounts that are losing value, you might consider opening or rolling over to a self-directed IRA through Equity Trust, Entrust, or one of many other self-directed custodians. These allow you to put your funds into a tangible investment(real estate) that you may be able to have more control over as compared with stocks. Then you can partner your available cash with your IRA funds for larger investments. Keep in mind that the proportion of profits stemming from your IRA’s participation in the investment have to go directly back into your IRA without you touching them, so these need to be funds/profits that you will not need to live off of in the short-term. Otherwise you'll violate IRS rules and will be heavily taxed/penalized.

These are just a few options for you to consider as a starting point. I hope this helps!

10 year anniversary…I’m now officially “Unemployable”!

This summer marks my 10 year anniversary for putting the wheels in motion to leave “Corporate America” (I actually left in 2001). Many of you know of my former life as a software engineer and web developer. Although it was a great career start after college, I soon learned that life behind a desk wasn’t a fit for me. Fortunately, business school and real estate (brokerage, investing and construction) have created new opportunities. I’ll admit, it was scary, to say the least, but I can honestly say that I’ve never looked back. I remember reading Les Brown’s Live your Dreams in 2000, and a line from that book sparked my courage to make a change. I know I’m going to butcher his words but it went something like, “In order to be truly happy in life, consider what you would do with your time if money wasn’t an issue. Whatever that activity is, seek to make it your career.” For me,creating a break from routine, helping people, and mentoring were the items that caught my attention at the time. What are the activities that would fill your days if money wasn’t an issue?

To celebrate, I think I’ll get a shirt made that reads “Unemployable”. The idea of returning to my prior corporate routine isn’t attractive, so that seems to be the best term to describe my current mindset! Entrepreneurship (especially in real estate) definitely has its benefits, but I will admit that you often work twice as long and many times harder than you would for someone else. It is definitely a goal worth working toward for those with the desire to break free from traditional expectations and create their own life path. The current real estate market has created an unprecedented opportunity for individuals seeking change in their lives. If you have a similar goal of creating change in your life and want to see if real estate can assist with getting you there, feel free to give me a call. I’d be happy to share more of my lessons with you and assist in your investing endeavors in whatever way that I can.

NC Legislative Update (Thanks Liz Wiederhold for the update!)

For those of you who have been following SB 1015 (Homebuyer and Homeowner Pretection Act), the bill passed the Senate this week with concurrence. While several porposed amendments were presented, it did not dissuade Senator Stein from presenting the bill on the floor for vote. It passed with very little dissent.

The articles of this bill will go into effect in October. For the full text of the bill, visit the NC General Assembly website

Thanks you to all of the investors who called, emailed, faxed or otherwise communicated with our NC legislators. Lest you feel discouraged that we did not win this final battle, remember that we had several major wins as we had many items removed from this legislation prior to passing. Most importantly, we rescued the lease/option from almost total elimination by removing the entire section on title requirements. We also had the definition of foreclosure rescue changed from 82% to 50% - a huge accomplishment. Several other significant changes were made due to everyone's hard, hard work.

Local Market update reports

The Raleigh-Durham area is holding up well in the real estate markets, despitea still-troubled economy.  Year-over-year prices and sales volume are up in some areas, and there are still great buys out there in others. Interest rates have dropped as well, so initiating or expanding your rental portfolio is a great option.

• Entire Triangle Region
• Durham County
• Orange County
• Wake County (includes Raleigh)

Happy Investing!

Home Size Continues to Decline; Buyers Increasingly Opt for Single-Story Homes

Current housing stats may surprise you. In years past, “ bigger is better” was the mantra of many homebuyers. Quantity outweighed quality. These trends have turned a corner and the average home size is decreasing. So are the preferences homes buyers are looking at, including # floors, interior amenities and siding preferences (who would have thought vinyl would replace wood and hardiplank as siding preferences?). Buyers looking for a low-maintenance lifestyle are looking to low-maintenance building techniques and materials. The numbers don’t lie. Read more here.

There is a new Fannie Mae requirement that will require borrowers to have a new credit report pulled 1 day prior to closing. This is going to be a HUGE change for buyers that marginally qualify. If any new inquiries or account appear on the credit report, the buyer might not qualify for the loan. So, it is very important that you advise your buyers not obtain any more new debt between application and closing. It is also imperative that your lender advises your buyer on things to do to keep their scores up. If a score drops the day before closing, it could mean that your buyer has a higher interest rate or may be disqualified for the loan. These new rules can make or break your deal If you’re proactive and educate your buyers up front, you shouldn’t have any issues with this change.

STEALS OF THE WEEK:

Residential rental property:

44 Redbud Court, Durham 27713. Not yet on the market! Wholesale deal with approved shortsale. Neighboring homes on the market for over 20k more! recently sold comps range from 97k to 120k. Equity + cashflow for ready investors.. Long term tenant in place at $895/mo with year left on lease. Only $80,000 in desirable Parkwood location. Potential for $325+ cashflow, 27% cash-on-cash return and 9%+ caprate. Minutes to Southpointe Mall and Research Triangle Park. Those of you who are familiar with Parkwood know that this one won’t last long enough to hit the open market. Call today for details

Commercial property:

945 E. Main. 1900+ sq ft (960 main level heated sq ft and 960 unfinished in basement and ready for expansion). Only $100,500. Located next to Goldenbelt, just east of Downtown Durham. Ideal for retail or office. On busline. New roof in 2010! An ideal space for a starting business or for a current businessowner looking for space to expand. Seller will finance for qualified buyer and sufficient downpayment, which makes it much more affordable than renting a comparable space.

Housing shortage forthcoming?

Yesterday, I attended a meeting that focused on the sharp decrease over the past 3 yers in new construction in many metro areas. This decrease is in distinct opposition to the increase in family size and number of households in many areas. Based on these factors, some economists are predicting a housing shortage in the next 3 years. What does that mean to you? Investors and buyers who leverage today’s great pricing and low mortgage rates will be in a better position when and if the market turns in for the better. My advice: take these predictions with a grain of salt and be sure that any purchase that you make today is solid based on TODAY’S numbers. If you do, you’ll be in a better position for whatever the market has in store.

Strategies for Getting Shortsales Approved

http://www.nuwireinvestor.com/articles/negotiating-a-short-sale-55364.aspx

Senate votes to extend home tax credit deadline

http://www.reuters.com/article/idUSTRE65F5U320100616

Also, be on the lookout for information on our upcoming webinar series. Topics will include “Rehabbing Basics”, “New Construction for Investors”, “Analyzing the Numbers”, “Where Do I Start?” (for new investors), “Historic Restoration Tax Credits”, “Skyrocket Your Retirement Accounts with Real Estate Investing”, “Advanced Topics”, and many more. We look forward to providing even more ammunition for your investing endeavors in 2010!

Happy Investing!

There are several interesting articles of note in this week's update. Some point to a slow but steady turnaround in the US housing markets. Others speak to areas that are well-positioned for solid investing opportunities (Raleigh-Durham area included).  One of the most interesting is the article outlining mistakes made by new investors.  If you are just starting out, be sure to take a few minutes to read this one.

• Home foreclosure rate posts first annual decline in five years
• Further indication that the National market is turning. (Click here and wait a few seconds for the video to load)
• Common New Real Estate Investor Mistakes
• Durham Mayor “State of the City” Address
• Top 10 Buyers Markets For Real Estate Investors

Happy Investing!

I know I haven’t written in a while, so this week’s update will be a long one. Things have been pretty busy over here with the pending expiration of the homebuyer tax credit (this Friday), but there’s a lot on the horizon that warrants an update, so here goes:

N.C. in the News
It’s been a good week for N.C. cities this month. Raleigh was named the eighth best value destination in the United States (http://tinyurl.com/ydmyujl) and Fayetteville was listed among the top 10 cities for real estate “steals” (http://tinyurl.com/yd5c67v).

N.C. Cities Named Among Best Places for Business
Four N.C. cities – Raleigh (No. 3), Charlotte (No. 17), Asheville (No. 21), and Durham (No. 23) – were recently named among the top 25 best places in the country for business and careers, according to a new report released by Forbes.com. Click here to view the ranking

$8000 first-time homebuyer tax credit expires this Friday.

If you haven’t yet taken advantage of the homebuyer tax-credit, you still have time. To qualify, buyers must be under contract by this Friday, April, 30, 2010 and must close their purchase by June 30, 2010. Current homeowners, keep in mind that you haven’t been left out. If you have owned your home for at least 5 years, you may qualify for a $6500 tax credit as well. So if you’ve been on the fence about buying, be sure to call us ASAP. Our lenders tell us that they are ready to get loans in line for last minute buyers!

Durham Hosts Landlord Training on May 20, 2010

If you will be in the area on May 20^th, this training is well worth your time. I attended a few years ago and the information shared is invaluable. In addition, several city offices are present, so it’s a great chance to meet the decision-makers who will affect your rental activities.

Fast Facts:

• The Landlord Training Workshop is specifically designed to assist landlords, property managers, resident managers, and any others who are actively involved in managing rental housing.
• The workshop will demonstrate effective property management practices to significantly contribute to safe and decent housing as well as provide successful techniques on how to halt illegal activity on rental properties.
• Workshop topics include how to build landlord, renter, homeowner, and business relationships; applicant screening techniques; rental agreements and fair housing issues; management techniques; the eviction process; how to achieve a stable, satisfied tenant base; how to maintain property to habitable standards; and City code enforcement.
• Seating is limited, so interested participants must register by Friday, May 7, 2010. The cost to attend this one-day workshop is $30 per person and includes workshop materials and a landlord training manual as well as a light breakfast, lunch and refreshments for registered participants.
• To register, download the workshop brochure and registration form here. Interested participants may also contact Lynwood Best, community engagement manager with the City’s Department of Neighborhood Improvement Services, at (919) 560-1647, extension 34254 or via e-mail at Lynwood.Best@durhamnc.gov.

Capitol Hill Hosts Real Estate Investors

This week, I was honored to accompany a group of business-owners, investors and other real estate professionals from across the US on a lobbying trip to our nation’s capitol. The visit was led by National REIA, which is the nonprofit organization that oversees TREIA and countless other Real Estate Investor Associations across the US (a total of over 40,000 small businesses). Our goal: To encourage our nation’s Senators and Representatives to remember the positive impact that real estate investors have on the real estate markets, and to share our concerns regarding pending legislation affecting our industry.

There are a number of bills currently in process that were intended to strengthen consumer protection. Unfortunately, deep within the countless pages of these bills are a few lines here and that that may threaten private property rights and/or unnecessarily restrict investing activities. Overall, our visit was well-received, and we made quite a bit of headway in opening up the lines of communication with these decision-makers. Although several topics were covered in our meetings, the following are a few pending bills of note:

HR4173 (Wall Street Reform and Consumer Protection) S3217 (Restoring American Financial Stability Act of 2010) and the SAFE Mortgage Act. If these bills become law as currently written, a new Consumer Financial Protection Agency will be created. Among other things, it will incorporate new mortgage reform and anti-predatory lending regulations. Many of these are good ideas and are necessary. But, what is not obvious in the title of these bills is that they will prohibit property owners from selling their own properties on terms (i.e. seller-financing and partial seller-financing) if the owner doesn’t hold a mortgage license. Seller financing has many benefits in our real estate markets. Often, selling a property in exchange for payments is one of the only options available to owners facing foreclosure. In the current climate of tighter lending standards, seller-financed notes are often the only option for self-employed buyers or buyers who are just beyond being able to qualify for traditional financing. There are also a number of property types that are difficult, if not impossible to finance in the current mortgage climate (mobile homes, raw land, properties in flood-plains, property needing extensive repair, etc…) Finally, many individuals who are facing retirement, leverage seller-financing on their properties to create a predictable income stream. This law will disallow this option for retirement income.

Seller-financing is a age-old tradition based on private property rights. It is not a traditional loan given that the principal amount of the loan never changes hands and there is no 3^rd party lender involved; It is an agreement for payments between a seller and a buyer. Think about it this way; You don't HAVE to use a Realtor to sell your home if you want sell as a FSBO (for sale by owner). Similarly, if no new loan is needed to sell your home and you want to offer seller financing to a buyer, why should a licensed mortgage originator be required?  Even the current $8000 first-time homebuyer tax credit allows purchasers using seller-financing to receive the credit, so the validity of these transactions is proven. If these pending bills concern you, take a few minutes to read through them, and fax or email your legislators to let them know how they will affect you. Be polite, but ask them to exclude seller financing from the bills.

You can also visit www.nationalreia.com to find a local REIA (Real Estate Investor Association) in your area. Your local group can help you to stay on top of local and national law affecting your real estate business.  They are also a great resource for education and networking.  If you are in the Raleigh-Durham area and have any degree of interest in legislative activities,or want to ind out about TREIA (Triangle Real Estate Investors Association), shoot me a note, or visit the TREIA website for additional information.

In addition, President Obama is reaching out to all US citizens for feedback on housing finance reform. Click here to find out more, and be sure to participate in the open sessions. You never know; your idea could be just what this country needs to get our housing finance system back on track

Recession Ends in 2010, UNC Charlotte Economist Says
The N.C. economy should grow 3.5 percent in 2010, the first year of growth following two years of decline, according to the quarterly forecast of UNC Charlotte economist John Connaughton.
http://tinyurl.com/y8ao5ah

Happy Investing!

Following are 4 tools to benefit your property pursuits.  Some put money directly in your pocket and others provide other information and benefits that will make your homebuying and investing easier.  In either case, I hope you put these to good use right away!

Only 50 days left to lock in on $8000

First-time buyers…the clock is ticking. Only 50 days remain for you to qualify for the $8000 first time homebuyer’s tax credit. The deadline for going under contract on your home is April 30^th.and your closing must take place by June 30^th. If you are considering a purchase, now is the time to get your mortgage loan lined up and start the home search. Current homeowners: If you have owned your home for 5 years or more, you may qualify for a $6500 tax credit if you are considering a move into another home. Call today for details, and for assistance with your purchase and/or sale.

Live For Free

Over the past year, my team has been working on a program that we’ve dubbed the “Live for Free” program. The program encourages smart property ownership with the goal of eliminating the homeowner’s mortgage expense (i.e. “Living for Free”) from day 1 of ownership. Yes, you heard it right, eliminating the homeowner’s mortgage expense from day one. By removing this expense, which is often the family’s largest monthly expense, new homeowners are launched on the fast-track to financial success.

It’s not my brainchild; I actually “borrowed” the idea from my parents, who got their start in real estate decades ago by using this method. Our team is currently looking for 2 future homeowners to walk step-by-step through the program. (We wish it could be more, but we don’t want to bite off more than we can chew just yet). No smoke and mirrors. And no costs are involved other than those involved in buying your first home. So, if you are already working toward a home purchase, why not take a few minutes to learn how to “Live For Free”.

If you are currently considering a first home purchase in the Raleigh-Durham area, call or email our office today to find out more. We’re working on a version for current homeowners as well, but we’re not quite there yet. Thanks in advance. We look forward to sharing your success story and encouraging others to “Live for Free” in the very near future.

Even if you don't fit the parameters above, I'm sure this has sparked your curiosity.  Don't worry, we will be sending this out to everyone on the mailing list soon.  For now, we ask that you hold your curiosity so that we can focus on our first 2 Live for Free-ers.  More to come soon.

For the New Year... A Look Back at the Housing Market Over the Last Decade
In an effort to track the U.S. housing market's rise, fall and rebound over the last 10 years, Moody's Economy.com supplied data for five charts showing the housing industry's boom and bust this decade and the possible course of its recovery over the next three years, as reflected in home sales,prices, housing starts, the supply of homes available for sale and mortgage defaults.  It's a clever tool with a sliding bar at the bottomto track trends over time.   Click here for more information and to view the article/tool.

Investor’s Toolkit: Google Maps (maps.google.com)

Knowing the area in which you plan to invest is key to ensuring your peace of mind as well as your success as an investor. Some of you invest in areas that are not your home cities and rely on the advice of your colleagues to understand the areas in which you are investing. Google Maps makes this process much easier. Visit maps.google.com and enter a full mailing address at the top of the page. You might want to start with your own address to get a feel for the system. When the map of the area appears, click on the address you just typed in (it will appear on the left side of the page). This will bring up a pop-up on the map with a picture o f the home. Click “streetview” to view the home as seen from the street. This is where the fun begins. If you put your pointer on the map, the program will show arrows on the street. Click on these to “drive” up and down the street to view neighboring properties. Use the up, down, left and right arrows in the circle to turn around and view properties across the street. Although the photos may not be as recent as yesterday, they will paint a pretty accurate picture of the area. Be sure to check Google Maps before your next purchase!

Attention all Homebuyers: Act now before the market for mortgage financing changes. 

3 upcoming changes that are scheduled to take effect within the next 2 months may affect your future mortgage financing options. Get in now while the “gitting is good”.

• The Fed has indicated an intention to stop the purchase of mortgage-backed securities at the end of March, which could push mortgage interest rates higher for all buyers.
• FHA has committed to increasing its upfront mortgage insurance premium (MIP) from 1.75%-2.25% starting for all loans originated on or after 4/5/10. This will increase your closing costs by $500 for every $100,000 borrowed on an FHA loan.
• The first time homebuyer $8000 tax credit and current homeowner $6500 repurchase tax credit will expire for buyers who are not under contract by 4/30/10 and who close by 6/30/10. Remember, you have to have your purchase in process by 4/30/10 to qualify for the tax credit. So, if you’ve been sitting on the fence, now is the time to act. Our lenders can close your FHA loan in 3 weeks or less, so call today. In addition, you may want to accelerate your timeline to find a property before the end of March if you want to avoid all 3 of these potential changes that can add to your cost of buying a home.

Attention all Investors... CASH IS KING – Consider buying your next property with cash and refi to get a better price.

Below is an interesting article on REO/asset manager preferences when selling REO property. Lenders are fickle nowadays, and a deal can fall apart with the wrong lender or wrong appraiser.  REO managers know this and are leaning toward cash offers in some cases, even if it means a slightly lower sales price.  In what could already be the ideal buyer’s market, many would-be homebuyers, armed only with financing, are coming across stiff competition -- real estate investors with the means to pay for a home in cash. Keep in mind that most banks still seek to net as much as possible on the sales of their non-performing assets, so this won't work in all cases.  If you really want the property, make sure to put in your best offer, BUT a cash offer may be a way to seal the deal.  http://www.ncrealtors.org/news_display.cfm?nid=1216

Bad Things Happen To Good People

Call us today if you are underwater or behind in payments on your home, commercial property, or rental property. We are the shortsale experts. Our team has been resolving foreclosures in the Triangle since 2003, well before the current market correction. Options are most plentiful the earlier you engage professional assistance. Visit our testimonials page for feedback from recent foreclosure and shortsale clients our team has assisted.

New EPA rules for renovations
Lead based paint poisoning has been a rising concern in the US. On April 22, 2010, the EPA and the state of North Carolina will require contractors, painters and maintenance workers to be trained and certified as renovators if they disturb paint in homes and child-occupied facilities that were built before 1978. Contractors will also be required to train their workers to follow lead-safe work practices to reduce potential lead exposure to protect children. If you are fixing up a pre-1978 property and hire a contractor  or subs for renovations, be sure to confirm that they are certified by the state to complete your project. I recently sat through the certification class and although “lead paint” initially wasn’t a topic I would have had in mind as a preference for an 8-hour class, the information gathered was eye-opening. Take a guess, for instance on how much lead it takes to poison a child. The amount is incredibly small: only 10 micrograms per deciliter of blood.

If you're metrically challenged (as am I), here's a way to visualize what that means.

• A deciliter is approximately 1/2 of a cup.
• A packet of sweetener (either the pink or blue stuff) is one gram.
• There are one million micrograms in a gram.
• So, divide the stuff from one packet into one million piles. (Pretend!)
• Now, discard 999,990 of those "piles."
• Take the remaining 10 piles and mix them into half a cup of liquid.

Voila! You now have a representation of how much lead it takes to poison a child.

Now consider how much potential lead dust and debris is airborne in your home during a typical renovation project, or even small routine maintenance, like changing out a window. Protect your family by making sure your renovations and maintenance work are completed with the EPA precautions in place. Require that your contractor is certified. Visit the EPA site for more information on the Renovation, Repair and Painting (RRP) Program

Landlords and Property Managers: Be sure to update your leases to comply with new NC state regulations.

Some of the changes affect security deposits, penalties and fees paid during evictions, and repair charges. Scroll down to view my previous post from August 19, 2009 entitled “NEW LAWS That Will Affect Your NC Rentals and Investment Property” for details and instructions on where to find a copy of the full law.

Durham considers Landlord Registration and Rental Occupancy Permits

With the goal of improving rental housing and lowering the number of calls to the local housing board concerning unsafe housing conditions, the City of Durham is considering implementation of a Landlord Registration process. If implemented, landlords will be required to register all of their properties annually along with an update of current contact information, so that the city can more easily contact owners requiring repairs to their property. A nominal fee, per property, has been proposed to facilitate this process. In addition, the city is reviewing rental permitting and inspection processes currently in effect in Greensboro and other cities in the state. If implemented, ALL Landlords (not just Section 8 landlords) may be required to pay for periodic inspections of their rental properties and to make necessary repairs in order to receive a Rental Occupancy Permit. Without this permit, renting the unit to a tenant will be illegal. The city is seeking feedback on the best way to implement these changes, and all interested landlords/residents are invited to participate in the discussion. Interested parties can find out more by contacting Lorisa Seibel @ the Durham Affordable Housing Coalition at (919) 683-1185 ext. 25 or Lorisa@dahc.org. Click here to access the website for the Durham Affordable Housing Coalition. The next meeting on this topic will be led by the Campaign for Decent Housing and is scheduled for Tuesday, February 16, 5:00-6:30pm at Neighborhood Improvement Services, Golden Belt, Building 2, 3^rd floor, 807 E Main St (off Morning Glory Ave), 27701. Come out and be heard!

Increase in Upfront Premiums for FHA Mortgage Insurance (01/21/10)

Effective for FHA loans originated on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25% (an increase from the current 1.75% upfront premium). This policy change will increase premiums for purchase and refinance transactions. Rehabbers keep this in mind as it may result in an increase in closing costs that your buyers will ask for. Homebuyers, keep in mind that this will increase your closing costs by $500 for every $100,000 you borrow on an FHA loan. But, if you buy before the April 5 change, you will not only save on the addition fee, but you may be eligible for the $8,000 homebuyer tax credit. Remember, the early bird gets the worm!

Big Banks Accused of Short Sale Fraud

If you are asked to make a side-payment in a shortsale transaction (i.e. a payment not noted on the HUD1 settlement statement and/or a payment not approved by the primary lienholder). BEWARE…this is an ILLEGAL practice. Some banks, in an effort to recoup their losses in a shortsale will ask the buyer to pay them outside of closing or sign a promissory note if the payoff amount dictated by the 1^st mortgage lender or lienholder doesn’t allow enough funds to go to the 2^nd mortgageholder or other junior lienholder. Again BEWARE as you may end up facing mortgage fraud charges if your lender finds out about it after closing. The full CNBC article can be read here.

Buyers: Get off the fence and get your mortgage loans locked before rates go up!

If the fed stops buying mortgage backed securities at the end of March, mortgage loan rates might go up. If you have been considering a purchase or refi, now is the time. The full Wall Street Journal article can be read here.

New Year Resolutions (a thought for the weekend)

Happy New Year! Whether you are who likes to start the new year with resolutions, or you prefer to set occasional goals for yourself despite holiday influences, don’t forget to include real estate investing as part of your financial goals for the new year. A few ideas to get your real estate goal-setting started:

1. Set a goal to let 2010 be the year that you benefit from low property prices, low interest rates, and property ownership tax benefits by purchasing an investment property. Recent reports show the real estate market is taking a turn for the better. Don’t miss out on the low-price deals and low mortgage rates currently available. They won’t last forever!

2. Create both short and mid-term investment goals to augment your (early) retirement goals. Example:

Short-term: Give yourself an instant $6000 raise. How? Buy 2 cashflow properties that each net a minimum of $250 per month in cashflow after expenses. ($250 per month cashflow on 2 properties = $6000 per year in your pocket). Also leverage these 2 properties to provide interest expense write-offs, depreciation and other tax shelters for the upcoming year. Your CPA can fill you in on all of the benefits of rental property ownership.

Mid-Term: Buy 2 properties each year for the next 5 years. (10 properties in total). In 5-7 years, if the market allows modest appreciation, sell 5 of the properties and use the proceeds to pay off/ pay down the debt on as many of the remaining 5 as possible (hopefully at least 2). This will allow you to pocket the full rents received on the paid-off properties and the additional cashflow from the other 3 properties with mortgages remaining.

3. Set a goal to solidify your investing team. A team of reliable professional can make or break your investing experience. Key professionals you will need on your team include a property manager, repairman, inspector, lender, and of course the world’s best Realtor (but you can call me for that). Visit www.tiffanyelder.com/serviceprofessionals for a few names to start with.

4. If you haven’t yet purchased a primary residence, you’re leaving money on the table. $1000 per month in rent totals $12,000 per year down the toilet. However, a $1000 mortgage for a qualified buyer at today’s rates can potentially buy a home worth $140,000. But, the homeowner will have a net housing payment of only $835 after the tax write-offs associated with homeownership (assuming a 25% tax bracket). So not only can homeownership be less expensive than renting,  homeownership provides the potential for appreciation and equity growth. Finally, for first-time buyers under contract by 4/30/10, you can have an additional $8000 in your pocket this year from the first-time homebuyer tax credit. Existing homeowners who want to sell their homes and purchase another home can get $6500 if they have owned their existing home for at least 5 years. Call today to get on the road to homeownership. Also, be sure to check out the “Rent vs. Buy” calculator at http://www.tiffanyelder.com/MortgageCalculators to see how homeownership can change your financial outlook in 2010.

In a Sign of Confidence, Downpayment Standards Eased (article c/o the Wall Street Journal)
In what’s sure to be good news for many potential homebuyers, some mortgage insurers and lenders are beginning to relax their downpayment requirements. The changes, which are being done on a market-by-market basis, mean buyers in some parts of the country can now borrow 95 percent instead of 90 percent of a property's value. http://www.ncrealtors.org/news_display.cfm?nid=1158

Tiffany Elder noted in Businessweek Magazine

Many of you know that I am a real estate broker, general contractor and investor, and that I strive to consult my clients from the standpoint of one who faces the same opportunities and challenges that they do with regard to investment real estate. Many of my personal investing activities center around new construction and historic restoration tax credit projects, with a focus on sustainable (i.e. “green”) building methods. In 2009, I was fortunate to participate in the BASE Program at UNC’s Kenan Center for Sustainable Enterprise, which was featured in Businessweek Magazine’s “Incubator Options” article. Yours truly was interviewed for the article @ www.tinyurl.com/bizweektiffanyelder  It's just a brief mention, but exciting for our team nevertheless. To learn more about our team’s construction/development activities, visit www.legacygreen.com  Don't hesitate to call the office if you want to learn how "greener" renovations and eneregy-efficient new construction investing can benefit your wallet.

Durham Crime Mapper

In the office, we are often asked about the prevalence of crime in different areas of the Triangle, especially from investors considering the purchase of an investment property. The following links are for the Durham and Raleigh Online Crime Mappers. At each site, you can enter an address and see crime statistics in the surrounding area. I typically tell clients to put in their home address and use that as a baseline since it is an area they are already familiar with. Look at the crime stats in your home area and compare it with your personal experience in that area. Then go back in and pull up other areas and see how they compare. I hope this helps with better understanding the communities in which you will be investing.

Durham Crime Mapper:

http://www.durhampolice.com/crimemapper.cfm

Raleigh Crime Mapper:

http://imaps.co.wake.nc.us/imaps/main.htm?mservice=ralcrime&msize=425

Happy Investing!

Welcome to the 2^nd decade of the new millennium! I hope you enjoyed your holidays and are ready to make 2010 a great year. Market trends are looking positive, with an upswing in property sales prices over the last 2 quarters in some areas. Also included in this week’s blog:

• Introducing Paradigm Properties: A new vision for real estate
• More competition leaves landlords with difficult decisions to make
• Triangle MLS Market Trends Report (Durham, Wake, Johnston & Orange counties)

We hope you enjoyed the holidays and we look forward to working with you in 2010. Happy investing and Happy New Year!

---------------------------

Introducing Paradigm Properties: A new vision for real estate

A few of you have noticed the company name change in my email footer from Realty Executives to Paradigm Properties. Since the cat is out of the bag, I’ll spill the beans…After 5 wonderful years with Realty Executives, the time has come to branch out. I am excited to announce that I am now Broker-Owner of Paradigm Properties. Our tagline: “A new vision for real estate”. Many of you know that my style of brokerage differs from most brokers and that I enjoy, above all else, helping my clients learn the ins and outs of property ownership and real estate investing. Paradigm Properties will build on this reputation with a webinar series on home-buying and investing, a continued focus on investment property brokerage and a learning series on a broad range of non-traditional real estate techniques that will support our client’s endeavors (we’ll tell you about these later). The past few months have been extremely busy given all of the activities surrounding the launch of our firm. We are excited for what is to come and we look forward to working with you again in the new year. Be on the lookout for our client survey and for info on our company launch celebration in early 2010. We look forward to reconnecting with all of you there. In the meantime, you can reach me, as always, at tiffany@tiffanyelder.com or at the Highgate office location.

More competition leaves landlords with difficult decisions to make

A recent conversation with one of my favorite property managers prompted this next note. She shared with me the dilemma in which many of her landlord clients are finding themselves; this being the decision to not only forego cashflow on their rentals, but to have to put money toward the debt coverage on their property in order to avoid vacancy. The cause for this? Simple supply and demand. There are too many rentals on the market and not enough tenants.

Where did all the unexpected rentals come from? Quite a few of them are from unexpected sources, foreclosures and builders. Foreclosures seem to be tapering off in the Triangle, but there is still quite a bit of inventory sitting on the market. Vacant new construction and condo projects are sitting on the market as well. In recent months, I’ve seen both banks and developers renting out their vacant properties to help with carrying costs on these properties. What does this mean for landlords? COMPETITION. Potential tenants now have many more options, and with so many properties available for rent, lease prices are being forced down in some areas.

What this means for existing landlords: If a ready, willing and able tenant puts forth an offer to rent that is a bit shy of your asking price, you may want to consider biting the bullet in the short term as it may take longer to get your unit rented out, and there is the possibility that you might not get your price. Take a small hit in the short term to win in the long term. Not too many things are worse than having to cover full carrying costs out of pocket for months at a time. In addition, the current market of low prices and low interest rates provides an opportunity for you to purchase another rental with sufficient positive cashflow to balance out your negative cashflow and bring your overall portfolio back into the black.

What this means for investors looking to buy rental property: Run your numbers based on conservative rental income projections and look for properties in areas that tend not to suffer from higher vacancy rates in difficult markets. These include neighborhoods near universities and solid employment centers. It’s fine to expect the best, but prepare for the worst. It’s still a great time to buy given that prices and mortgage rates are still very low. Many of my colleagues who have been in the business for decades mention that both prices and mortgage rates have not been low at the same time before. So definitely take advantage of the market because we probably won’t see this again for a long time. Be reasonable in your expectations, however, as the national media has painted a more desperate picture of the overall real estate market than we are facing here in the Triangle. As those of you who have been forced to sit with me in the office already know, one of my favorite sayings is: “A game is more likely won with a series of base hits, not by waiting for the homeruns alone.” A steady stream of smart “base hit” investments will propel you forward in 2010 and beyond. Waiting around for the “homeruns” may lead you to miss out on a lot of opportunities (and cashflow) in the meantime.

Triangle MLS Market Trends Report

The following market reports summarizing activity through November 2009 are available online at the Triangle MLS website. Following these reports is a great way to stay on top of real estate trends in our area.

Entire Triangle: http://www.durhamrealtors.org/pdf/mreports-1109/entire-triangle-region.pdf

Durham County: http://www.durhamrealtors.org/pdf/mreports-1109/durham-county.pdf

Johnston County: http://www.durhamrealtors.org/pdf/mreports-1109/johnston-county.pdf

Orange County: http://www.durhamrealtors.org/pdf/mreports-1109/orange-county.pdf

Wake County: http://www.durhamrealtors.org/pdf/mreports-1109/wake-county.pdf

Happy investing, and here’s to a wonderful 2010!

HUD’s new 3-page Good Faith Estimate will be implemented January 1, 2010.

The goal is ensure that borrowers understand the terms of their mortgage loans and can more effectively compare financing offers from different lenders. The form completely revamps the way lenders disclose mortgage terms and explains to the borrowers what fees can and can’t change at closing. It also breaks down other charges that the homeowner can shop for, in order to receive a lower fee. It is written in user-friendly, plain language and is a victory for consumer protection efforts in the mortgage lending realm. A copy of the proposed new GFE can be found at the HUD’s website at http://www.hud.gov/content/releases/goodfaithestimate.pdf

One proposed feature of The Good Faith Estimate is not going to make lenders happy. It would require that lender payments to mortgage brokers (often called Yield Spread Premiums) be disclosed. It will be interesting to see how this debate pans out. Finally, HUD is proposing that settlement agents read a "closing script" to borrowers at the settlement table and that a copy be provided to the borrower. This will likely extend the timeframe required for roundtable closings, so those of you who are used to in-and-out quick closings on your properties will need to be aware of this if mortgage financing is a part of the purchase.

Tiffany and her clients mentioned in Black Enterprise Magazine

I was thrilled to receive a call from a Black Enterprise Magazine reporter recently regarding their interest in a feature article on getting started in real estate investing. As a subscriber, I’ve always found their articles to be both motivating and informative and I was glad to have the opportunity to contribute. I’d recently closed a deal with my clients, Jahmal and Angela Pullen and thought they would be an ideal case-study for the article so I suggested the reporter speak with them about their experience investing in rental property in Durham. The final article “Who wants to be a Landlord” is a great example of sound investing, and can be read in the print and online editions of this month’s issue. http://www.blackenterprise.com/magazine/2009/12/01/who-wants-to-be-a-landlord Congrats, Jahmal and Angela, both on the feature article and on your new rental property!

Home Prices Rise in Q3

Home prices rose for the second consecutive quarter this year, according to Freddie Mac's recently released quarterly national Conventional Home Price Index (CMHPI) Purchase-Only Series, adding evidence the nation's housing market is warming up. The full article is available at:

http://www.ncrealtors.org/news_display.cfm?nid=1137

Did you know ….

• First-time homebuyers accounted for a record 47% of U. S. home sales between July 2008 and this year.
• The national median income for a first-time homebuyer is $61,600.
• The average homebuyer signs their signature 47 times from contract to closing.
• The biggest question among first-time homebuyers, “Should I buy now or wait?”
• The biggest concern for first-time homebuyer is, will they miss out on the $8,000 tax credit and will interest rates go up if they wait.
• There have been 1.6 million households that have taken advantage of the $8,000 first-time homebuyer tax credit since its inception.
• It is anticipated that an additional 2.6 million households will take advantage of the extended tax credit by April 30, 2010, now that the move up buyer has been included.
• The chief economist of NAR, Lawrence Yun, is anticipating the overall sales will be up 20% in 2010.

Triexta…a miracle carpet fiber that can save you money

For all of you landlords out there…I recently installed “triexta” carpet in a rental unit at the advice of my flooring supplier. He mentioned a new “miracle fiber” called triexta and stated that it was resistant to bleach and red dye #5 (i.e. dreaded red kool-aid stains). Apparently, rather than spraying the carpet fibers with a stain-inhibitor that can eventually wear off or wash away, the stain-resistance is engineered into the individual fibers to make it more permanent. Being the skeptic that I sometimes am, I took some of the extra carpeting from the rental unit back to the office and we poured ample bleach and red wine on it to see if the “stain-resistance” claims were valid. Note: I will not answer any questions as to why we had red wine in the office on Friday! ;-)

We let it sit over the weekend, and believe it or not, after 3 days, there were no bleach stains on the carpet or the carpet backing. The red wine wiped away as well with a little bit of elbow grease. I AM A BELIEVER and will use this carpeting in rental units from now on. Given our unofficial tests, I suspect it will clean up well between tenants and, surprisingly, the price is comparable to traditional nylon carpeting. To find out more about triexta carpet fiber, visit http://www.mohawkflooring.com/smartstrand/triexta.aspx

Happy Investing!

1. Raleigh-Durham Market update

2. Federal Shortsale Guidelines Released

Raleigh-Durham Market Update

For those of you who like to stay on top of real estate trends in our region, below are links to last months market activity reports, as reported from data in the local MLS.

Entire Triangle, Durham County, Wake County, Orange County

Federal Short Sale Guidlines Released

Short sale procedures have been standardized in an attempt to streamline these often difficult transactions.  Short sale procedures for loan servicers are now standardized in guidelines that were released earlier this week under the federal government's Making Home Affordable loan modification initiative for troubled home owners.  The guidelines create a path for a short-sale or deed-in-lieu of foreclosure for eligible borrowers for whom loan modification isn't a viable option. The guidelines provide:

--$1,500 in federal funds to help borrowers relocate,
--$1,000 to help servicers offset their processing costs
and up to $1,000 to investors to secure release of subordinate liens.
--For each $3 an investor pays to secure the release of a lien, the investor receives $1 in assistance. The guidelines prohibit a reduction in agreed-upon commissions (if they're not more than 6 percent) and take effect April 5, 2010, but can be implemented by servicers at any time.

Full guidelines can be found here.

Happy Investing!

Data released today by the Triangle Multiple Listing Services shows that Durham, NC is leading the way in increased sales prices in the Triangle.  With a 7% year-over-year increase in the average home sale price (currently $208,210), Durham is bucking the national trend of price decreases and is dwarfing the gains seen in nearby Raleigh and Chapel Hill.  The Triangle overall witnessed a 0.7% increase during the same timeframe.

Read more at:

http://www.durhamrealtors.org/pdf/mreports-0909/entire-triangle-region.pdf

http://www.durhamrealtors.org/pdf/mreports-0909/durham-county.pdf

http://www.durhamrealtors.org/pdf/mreports-0909/wake-county.pdf

http://www.durhamrealtors.org/pdf/mreports-0909/orange-county.pdf

http://www.durhamrealtors.org/pdf/mreports-0909/johnston-county.pdf

So...the North Carolina General Assembly's session has closed and with it comes a wave of legislation that will affect inveestment property owners across the state.  The following is a summary of items you should be aware of as they may have tremendous effect on your investment properties, current and future.  Consider this a summary and check with your property manager and/or the NC state legislature website for full details.

1.  Federal "Protecting Tenants Fron Foreclosure" Act

This act likely came about because of landlords, who after collecting rents, failed to pay their mortgage lenders, resulting in a foreclosure on the home.  In some cases, tenants weren't notified and were left with few options after the sheriff came to evict anyone living in the home after the foreclosure sale.  The new law, which expires in 2012 offers additional protection for tenants in these situations:

• Only affects federally-funded loans in foreclsoure (FHA, VA, Fannie and Freddie)
• The purchaser must buy the property subject-to any existing lease
• The lease can only be terminated with 90 days advance notice if the property will be the buyer's primary residence.

Suggestion: Be very aware of what you are buying at a foreclsoure sale and take additional steps to verify if the property is, in fact, occupied (i.e. check to see if the utility meters are running, lights on in the evening, evidence of furniture or other belongings onsite).

This is a definite win for tenants, and a possible drawback for Landlords, so Score "1" for Tenants.  We'll keep a tally to see who comes out as the overall winner below.

2. NC General Statute 42

• Goes into effect on October 1, 2009
• Creates a new class called "eminently dangerous conditions" (i.e. "The dirty dozen").  These are unsafe conditions that can affect the tenant's enjoyment/safety in the  rental property and include the following (to name just a few):
• unsafe wiring, flooring, steps, ceilings, roofs
• broken windows
• lack of operable locks on exterior
• lack of adequate heating

Of course, keeping these items in a safe condition is areasonsble request of any landlord, and hopefully your properties will not suffer deficiencies in these areas.  The kicker, however, is that these repairs must be remediated when they surface, EVEN IF YOU SUSPECT YOUR TENANT CAUSED THE CONDITION.  There is a provision, however by which the property owner can bill the repair cost back to the tenant.

Be forewarned, there is a lot of ambiguity in the definition of "unsafe" so be prepared for a discussion on this if your tenant brings this up.  Also be prepared to remediate any issues immediately as you can not wait for the tenant to resolve any "eminently dangerous conditions" they may have caused.  The owner must cure these immediately.

(Score 1 for Tenants...again.)

 3. Additional "New" Fees for Evictions

Have you ever lost time from your workday stuck in eviction court because of a tenant who failed to follow the guidines in your lease?  Well now there may be additional compensation available to you for time lost.

1. A complaint filing fee of $15 or 5% if you have to file an eviction complaint.

2. A court appearance fee of 10% of the monthly rent (if you win the case).

3. A 2nd trial fee of 12% of the monthly rent if your case is appealed to district court (i.e. a 2nd day in court for you) and you win.

These fees are in addition to the 5% late fee, court costs and reasonable attorney fees you are already allowed to charge to a tenant.

    BEWARE:

• You can only charge ONE of the above fees (you can not stack them).
• No other fees can be charged for an eviction.  If your lease provisions that dictate any other fees to the tenant upon eviction, you may be frowned upon in court and the lease provision will be considered void. (i.e. get rid of your "eviction administrative fees").
• You can not collect any of these fees unless your lease states it.
• Existing leases will be grandfathered in until the end of their initial tems (i.e don't try to get around it by keeping your tenant in on a month-to-month lease after the initial expiration).

So, prepare to edit your leases, and/or be sure that your property manager's lease reflects these new laws.  You might also need to have a discussion with your property manager as to who the fees go to in the case of an eviction (to you or to the property manager).

(Score 1 for Landlords)

4. MORE TIME TO PROVIDE SECURITY DEPOSIT ACCOUNTING:

Until now, Landlords had 30 days after a tenant lease termination to send an itemization for costs to be taken our of the tenant's security deposit (for repairs, unpaid rent, etc...)

The new law allows for more time:

• 30 days for an initial (interim) itemization
• 60 days for a final (complete) itemization

So in the case of repairs that need to be estimated, and bills still owing but not yet collected, the landlord now has a bit more time to get final numbers for these items.

(Score 1 for Landlords)

5. Stronger Penalties for Security Deposits

A Landlord who willfully fails to itemize and return a deposit, or who fails to put the deposit into a trust account and notify the tenant of the banking institution holding the account loses the right to retain the deposit.

I'd say this one is a wash as current law requires security deposits to be held in a trust account so that they are not comingled with the owner's operating and/or personal funds.  If you work with a property manager, you're probably ok as most property managers hold these funds in trust.  If you manage your properties yourself, be sure to get to your bank, and ask them to open a trust account for tenant security deposits, if you haven't already done so.  They'll know what you are talking about and can guide you from there.

So, overall we came out with a tie in the new legislation.  2 points for Landlords, 2 points for Tenants and a wash.  Not bad. 

Oh, and 1 final note:

Believe it or not, I am sometimes wrong (on rare occasion; and if you bring up this blog I'll deny ever saying this!), so please consider this a short "Tiffany Summary" of the new legislation, which was gathered from a quick skim of the bill and a conversation with a local landlord-tenant law attorney.  I urge you to visit the NC General Assembly website and search on these topics by inputting "S661" in the "Find Bills By Number" searchbox .  This will pull up Senate Bill 661.  The NC General Assembly website is at http://www.ncleg.net/

 Until next time...

The following 3 items are on the real estate horizon this week:

• Interest rates are still resting at their recent lows. As of Monday, a 30 year fixed-rate mortgage on investment property hovered at 5.5%. Owner-occupied conventional financing could be found at or below 5%.
• A new guideline will soon require 2 appraisals on all FHA loans over 85% LTV. In many cases, this will create an additional cost for the buyer, as some lenders will not be able to absorb the expense of an additional appraisal. Keep this in mind when considering seller-concessions on properties you are marketing to homebuyers, as some buyers will require a bit more assistance with their closing costs.
• FHA and VA minimum credit score requirements have increased to 620.

Why invest in real estate?

Do you have an interest in real estate, but don’t quite understand all of the financial benefits of investment property ownership? Visit Financial benefits page on this site for a straightforward explanation of how owning just 1 small rental property can put an additional $43,000+ in your pocket in just 5 years.

Cashflow in New Construction

Stricter loan requirements have made it more difficult for buyers to purchase a first home. Because of this, landlords in the Triangle are benefitting tremendously from positive cash flow on their newly-in-demand rental properties. Everyone knows that now is a great time to purchase foreclosures. But did you know that new construction is offering strong returns as well, without the worry of upfront repairs and extensive ongoing maintenance? Visit http://www.tiffanyelder.com/NewConsructionCashflow to learn how investing in new construction multi-family properties can create solid returns for your investment portfolio.

Diary of a New Real Estate investor

“With risk comes reward.” Visit http://www.tiffanyelder.com/DiaryofaNewInvestor to follow the ups and downs of a new real estate investor during her first 18 months as a rental property owner.

Featured Investment Property – 123 Star, Raleigh, NC

123 Star is a fully-occupied, solid cash-flow property located just minutes from downtown Raleigh. It features a low maintenance exterior, large living units, convenient location, and property management already in place. 10% down financing is available. Call our office today to find out more. http://www.tiffanyelder.com/123Star

Topics in this market update:

1. Real Estate Stimulus Update

2. Landlord Registration/Raleigh PROP Ordinance Affects landlords (***VERY IMPORTANT TO KNOW!!!***)

3. Property Focus

Real Estate Stimulus Update (visit www.realtor.org for details)

By now you have probably heard bits and pieces about the portion of the Stimulus Package pertaining to real estate. A number of proposed items were omitted from the final bill, and the following list highlights a few items of note:

1. The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

2. The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. The FHA loan limit for a single-family home in Durham, NC is $334,650. For Raleigh, the limit is $271,050.

3. Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commercial property owners' investment in energy efficiency upgrades.

4. The bill provides an additional $500 million to existing USDA Rural Housing programs. The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program’s eligibility criteria.

5. Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation. Previous 10% caps have been lifted to 30% on most items. Visit http://www.energystar.gov/ for more details.

Landlord Registration and the Raleigh PROP Ordinance (visit www.treia.com for details)

2 important items are currently in effect for owners of rental property in Raleigh:

1. The new Landlord Registration requirement is for all non-owner-occupied properties. The city wants to be sure to have accurate contact information for all tenant-occupied properties as the tax records are not always accurate when an owner moves. If you are an out-of-state owner, the city asks that you designate an in—state contact person for their files. Registration is not optional and late registration carries a hefty fine ($50 per day up to $2000). The registration window is March1-April 30 of each year. (Yes, that means registration is now open). Visit the following link for more details: http://tinyurl.com/RaleighLandlordRegistration

2. The Probationary Rental occupancy Permit (PROP). The quick-and-dirty summary: Essentially 3 strikes and you’re out. If you own a rental property in the city limits and it suffers certain violations (even those caused by your tenants, and without your knowledge), your property gets a strike. If your property get 3 strikes, it is put on “Probation’ and you have fines, etc… in order to allow its continued use as a rental. The key to the PROP is that STRIKES DO NOT CANCEL OUT UPON A CHANGE IN OWNERSHIP. This means that an investor might purchase a property with 2 strikes and find him/herself on the PROP list upon just 1 additional violation (potentially from something as simple as a mattress or other trash left in the wrong location on the grounds of the property). It is therefore critical that all potential buyers check with the city inspections department on the status of violations/strikes against a property before purchase. Visit http://tinyurl.com/treiapropsummary or the City of Raleigh website for an in-depth PROP summary.

Property Focus (Strong Cashflow and/or Equity Positions)

Many of you have asked for updates on solid cashflow opportunities in Raleigh-Durham. From time to time we will close out the Real Estate Market Updates with a highlight on properties that are very strong in their cashflow and/or equity positions. Feel free to contact our office if any of these deals interest you.

STRONG CASHFLOW IN RALEIGH!

Great 4-unit rental for sale in Raleigh with large 1100+ sq ft units. Priced at only $195000. Appraised in September 2008 for $215,000. Immediate cash flow potential. Rents total in excess of $1800/month. Fully occupied. One of the best-priced 4-unit buildings in Raleigh. Less than 5-minute drive to downtown Raleigh. A great way to get into this growing market. Partial seller-financing available, along with potential for long-term financing at only 10% down. Motivated seller will pay $3000 in closing costs for the buyer.

There's a lot happening on the real estate front in the Triangle this week.

Topics in this market update:

1. Fannie Mae raised its current 4 property limit for 2nd homes and investment properties back to 10.
2. Gov. Bev Purdue signs off on additional tax credit for NC homeowners
3. 2 versions of the bill allowing for an updated $15,000 tax credit for homebuyers are in their final stages.

10 Property Fannie Mae Limit Returns

Today, Fannie Mae returned the limit for financed properties from 4 to the previous 10 allowed under its guidelines.  Requirements for properties 5-10 are tighter for investors and 2nd home owners, but the change should increase activity in the  purchase and selling market for investors.   For specifics and guidelines for the increased limits, click here. A quick summary follows:

• Lower LTVs will be allowed for investors holding 5+ properties (30% down required in some cases)
• Investors will be required to hold more substantial reserves for each property financed.  Reserves must cover PITI, homeowner association fees and related costs.
• Rental income for all held properties must be documented by 2 years of tax returns
• Stronger credit scores required from all borrowers.

Be sure to touch base with your lender for rates and specifics, or our office can refer you to solid financing sources.

Gov. Purdue Authorized Tax Credit Program to Lift Housing, Build Economy (c/o  www.DurhamRealtors.org)

In a move today to help stimulate the economy with the sale of more than 1,500 North Carolina homes, Gov. Bev Perdue signed the authorization that will provide new financial assistance to first-time home buyers. The authorization enables the North Carolina Housing Finance Agency to expand its Mortgage Certificate Credit (MCC) program, which allows eligible home buyers to reduce their federal tax liability by 20 percent of the mortgage interest they pay annually. The program is one of a handful in the nation and could save North Carolina home buyers more than $30 million.

“The MCC will help stimulate the housing market, which is integral to the recovery of our state’s economy,” Gov. Perdue said. “This is just the type of innovation from a state government agency that will help spur our economic recovery.”

Hello and Happy New Year!

In the spirit of keeping you informed on the real estate market in the Triangle, we have reset our communications schedule to allow us to forward regular market updates and properties that may be of interest to you.

SHORT-SALES

If you are focusing your efforts on short-sales, foreclosures and pre-foreclosures, look forward to many more opportunities in this area. If you are not familiar with short-sale investing, visit http://www.tiffanyelder.com/ShortSaleInvesting for a quick overview on the topic.

DURHAM, NC MARKET CONDITIONS:

The Triangle is weathering the current economic storm quite well. We are optimistic that changes in the pipeline regarding the president’s stimulus package and legislation affecting lending and homebuyer incentives will present even more opportunity for growth in this region. Currently, price decreases on listed properties are offering opportunities for investors to buy at very formidable prices. In addition, interest rates for investment property are hovering at an all-time low, further supporting cash-flow opportunities for rental housing.

A few facts from the Triangle Area Residential Realty Report (TARR) Report (available via subscription at http://tarr.smapublications.com), as of 4Q2008:

Positive Factors:

· Durham realized an overall 2.45% appreciation rate over the past year

· Overall inventory has decreased 8% over the past year

· Average days on the market has decreased from 132 to 127 for active listings

· Current supply of housing in Durham based on 2008 closings is 8 months

· Average sold price is $196,400, down 2% from 4Q2007

· 2 of the top selling neighborhoods in Durham were located in the South Durham area near Research Triangle Park . One additional neighborhood in NE Durham, rounded out the top 3. In these 3 neighborhoods, properties sold for and average of 96.6% of their asking price. Feel free to contact our office for properties available in these 3 areas.

· New home inventory decreased 21% from 4Q2007, likely due to the very strong incentives being offered by builders and the slowdown in speculative new construction builds.

Other Factors:

· Durham was recently ranked the #3 Safest City In The US To Ride Out The Recession (full article can be viewed here)

· The unemployment rate in Durham is currently at 6.5%

· There is an overall decrease in showing activity for listed properties (43% decrease in Q4 of 2008 as compared with Q4 of 2007). For this reason, we are advising clients to amend their investment strategy to “buy-and-hold” until market activity picks up.

As you can see, although purchase activity has slowed, overall activity in Durham, NC points to a continued slow-and-steady growth trend; very similar to years past.

We look forward to your investing success in 2009!

(Business Week, 10/14/08)

Durham, the home of Duke University and the world’s largest Research Park (Research Triangle Park) has long shown itself to be insulated, to a large degree, from the ups and down in the national real estate markets. During the past 5 years, when many markets were seeing steep increases in home values, Durham stayed its slow and steady course. For the new investor, who was looking for quick cash, this didn’t make for exciting investment prospects , but buy-and hold investors appreciated the stability and cashflow opportunities in this area. Now, with many US markets plummeting and values on the decline, Durham looks very exciting to most investors. Although the number of home sales has decreased in recent month, values are still moving on their slow and steady path upward.

Why is this city so insulated from large swings? Well let’s take a closer look. Durham is:

1. A college town (home to no less than 3 colleges and universities – Duke, Durham Technical Institute, and North Carolina Central University)

2. Flanked on both sides by economically vibrant college towns (Chapel Hill and Raleigh)

3. Minutes from the ample government job opportunities in the state capital (Raleigh)

4. Home to Research Triangle Park, the world largest research park and countless biotech, healthcare and IT companies (large and small)

5. Home to 6 hospitals

6. A haven for start-ups

These items offer a very healthy supply of employment opportunities. Companies have taken note of the low cost of living and corporate tax incentives as well. These companies want to locate in a city where they can retain their talent and offer a positive quality of life on the average wage. As a diverse town with a relatively low cost of living and a wealth of activities for both families and singles, Durham is the ideal place for this. For this reason, the city benefits from a consistent influx of new corporate relocation to the area.

Cashflow opportunities on rental property are still widely available. Average rents versus purchase price support positive net cashflow in most areas of the city. This applies to certain new construction as well, which in many locales is very difficult to cashflow in year 1.

For more information on this vibrant and growing town, and the Businessweek ranking on the safest cities for the recession, visit:

http://tinyurl.com/DurhamRecessionProof

and

http://tinyurl.com/DurhamRecessionProofRanking

In the end, it looks like, in this race, the turtle does beat the hare.

--Tiffany

www.tiffanyelder.com

Happy New Year Fellow Investors!

I thought it appropriate to share some joy in the midst of all of the "reported" economic gloom in the US. Good news... Raleigh-Durham is weathering the storm quite well, and the hiccup in the national real estate market seems to have largely passed over this vibrant metro area.

The good news seems endless, and includes continues employment growth, and a strentghening rental market. These items are a plus for investors building portfolios in the Raleigh-Durham market.

While housing starts are down in the Northeast, West and other regions, they are up in the South. This is likely due to the positive outlook for appreciation in this region, along with affordability, an influx foreign direct investment, and local economic and employment growth. Read more on these items at:

http://tinyurl.com/BusinessweekSERegionGrowth

Although Raleigh, Durham, Chapel Hill and surrounding areas make up what is known as the Triangle, each city is very distinct and has different norms, especially when it comes to real estate characteristics and pricing. All 3 offer VERY solid investment opportunities. Durham, however - which is home to Duke University the new Southpointe Mall Commercial District, a revitalizing downtown, and Research Triangle Park - is pulling ahead of the pack and becoming known as a great location for bargain real estate buys. Read more here:


Now if you're anything like me, there is no such thing as "too much information". I have to admit, I hoard data to a certain extent but then again, I am a techie at heart, so online research is a must in my day-to-day routine. I've gathered much of this information together for the benefit of my clients and others interested in this market. Feel free to visit www.tiffanyelder.com/TriangleMarketFAQ for a range of information and market data to round out your understanding of the area.

Once again, Happy New Year and Happy Investing!

--Tiffany
www.tiffanyelder.com

Question 1: "I am interested in purchasing some investment property. What considerations should I keep in mind as I decide between targeting single family homes versus multi-unit (i.e. duplex, two-flat, three-flat etc.) properties?"

There are pros and cons to both single-family and multi-family rental properties:

Single Family

Pro: These properties tend to appreciate well if located in a desirable location. In addition, upon reselling the property down the line, you will likely have a much larger pool of potential buyers, which can make for a quicker sale. Keep in mind that your potential pool of buyers will include both investors and individuals who wish to use the home as their residence.

Con: A single-family home will typically have only 1 tenant (except in the case of a rooming house). This can be a drawback if the property is located in a slow-renting area, given that the exit of one tenant will result in the loss of 100% of rental income until another tenant is found.

Multi-family

Pro: A multi-family rental property has several tenants and therefore will not result in the loss of 100% of rental income when 1 tenant vacates. Often the rents on the other units will be enough to cover most, if not all of the underlying mortgage payment until a new tenant is found for the vacant unit(s).

Con: Resale of multi-family properties (3 units and up) require a larger down-payment than single-family units or duplexes. At the time of this writing, 5% down-payment residential funding is available for 1-2 unit rentals, while 15-20% is the minimum down-payment for a 3-4 unit. Any property over 4 units will require commercial funding, which is another discussion in itself.

I’ve found that many new investors find 1-2 unit rentals easier to start with given the availability of financing for these types of purchases. In the ideal case, an investor’s portfolio will have both single-family and multi-family rentals. The US tax laws have many loopholes available to property owners, one of which allows the owner of a property to sell without realizing an immediate tax hit on the gain (IRC Section 1031). This mechanism can be a strong ally in growing your investment portfolio. Leveraging this resource alongside a portfolio with easy-to-sell 1-2 unit rentals and larger multi-family properties can be a powerful resource for buy-and-hold investors.

Question 2: “A couple of friends and I have discussed pooling our funds to purchase some investment property. How should we organize ourselves to make things, such as the mortgage, taxes, and hopefully the future addition of new properties to our portfolio, go smoothly?”

I’m glad you’re considering pulling your group’s resources together to invest in real estate. Keep in mind that working with friends can make for a fun and fulfilling learning experience, or it can end a friendship, if handles inappropriately. There’s quite a bit of legwork you need to do upfront to prevent the latter. The key is to be very open with your partners up front to avoid disagreements down the line.

1. Discuss each of your goals to be sure these are in line. If one of you wants to flip and other wants to buy-and-hold this conversation will offer an early indication that you may not want to venture into this partnership because is unlikely your actions and expectations will line up.
2. Put everything in writing upfront. Ideally, you’ll speak with an attorney to set up an entity (LLC, Corporation) or a limited partnership (LP) to invest through. The operating documents for these will spell out almost everything you’ll need to know up front (roles, initial investments and other monies required form each partner) the goal of the entity, etc…
3. Plan your exit are the outset. Don’t leave this part undone. When will your company dissolve? What requirements does the group require before a partner can exit? Will there be penalties if a partner decides to pull out early? Given that you are pooling your money together, it might not be fair to allow partners to exit early on because if will leave the remaining partners with a heavy financial burden. How will liability and profit be split between you?
4. If you plan to purchase property directly into your entity (LLC or Corporation), you’ll need to speak with a commercial banker. Residential lenders will not allow a buyer to purchase a property in the name of a company, because they want to have direct recourse against the owner in the case of default. Commercial lenders will allow this (but will likely require a personal guarantee from each partner) but commercial funding typically has higher rates and higher down-payment requirements, so depending on your combined financial strength, there may a drawback to this avenue if you are just starting out.
5. Speak with a CPA - as a group on behalf of the entity, and also individually with your personal CPA/tax preparer. The way you set up the partnership (C-Corp, S-Corp, LLC with flow-through taxation, LLC taxed as a corporation, LP, etc…) will have a direct impact on your tax burden, so plan accordingly.

These are just a few items to consider. A lengthy and open conversation with your partners is the best place to start. Then speak with a CPA, corporate attorney (if you choose to set up an entity) and any other professionals related to your cause. This will be time consuming, but trust me, it will save a lot of headache down the line. Other than that, sharing the research and learning process with your friends can speed up the learning process and give you an outlet to share ideas and concerns with others who are on the same page, which is a benefit many individual investors don’t have. Keep me posted on your progress and good luck!

The Raleigh-Durham Area real estate market is on a definite upswing and for more than 1 reason.  The following article was taken directly from the Raleigh Convention and Visitors Bureau and lists may of these accolades Visit http://www.visitraleigh.com/media/accolades.html  for the full article.

Raleigh Ranks Right on Top

RALEIGH, N.C. (June 2007) -- North Carolina's Capital City area certainly makes the grade when it comes to positive accolades.  Over the past five years, numerous third parties have praised Raleigh for its quality of life, excellent education, entertainment options and business climate.  After all, Raleigh embodies, "City Life, Carolina Style."  Among Raleigh's most notable accolades:


LIFESTYLE

Top 5 City for Young Singles 
(Top 25 Cities for Every Stage of Your Life List) 
Kiplingers Finance, May 2007

#3 Best Place for African Americans
Black Enterprise, May 2007

Top 10 – Best Place to Find A Mate    
Men's Health, April 2007

Top 10 Tech Towns
Wired, January 2007

#8 Safest City (Cary)      
Morgan Quinto Press, October 2006

#6 Area for Relocating Singles    
Primacy Relocation, October 2006

#13 Overall Quality of Life     
Business Dev. Outlook, September 2006

# 9 Health Rating      
Tampa Bay Partnership, September 2006

#15 Climate Rating      
Tampa Bay Partnership, September 2006

#1 Area Overall (Raleigh-Durham)    
Tampa Bay Partnership, September 2006

#6 Best Cities for Singles     
Forbes.Com, July 2006

#4 Best Places to Live      
Money Magazine, July 2006

#3 Best City for US Bargains     
Hotwire Travel Index, January 2006

Top 20 Place to Live, Work & Play    
Homebuilder.com, November 2005

Top 10 Best Budget Weekend City    
MSN.Com, August 2005

One of "7 Cool Cities"     
Kiplingers, August 2005

#4 Best Cities for Singles     
Forbes.Com, July 2005

#34 "Top 100 Places to Live" (Cary)    
Money Magazine, July 2005

#17 Best Place for U.S. Running    
Runner's World, July 2005

# 8 Best Place for Wireless Connections   
Intel, June 2005

Five Star Quality of Life (Raleigh-Cary)   
Expansion Management, April 2005

Top 50 City: Quality of Life (Raleigh-Cary)   
Expansion Management, March 2005

#4 Best City for Dating (Raleigh-Durham, NC)
Sperling's Best Places, May 2004

#4 City That Rocks
Esquire Magazine, April 2004

Hottest Town in the East (Cary, NC)    
Money Magazine, January 2004 

#6 Most Fun City       
Cranium, January 2004

#1 College Town (Raleigh/Durham/Chapel Hill) – Tier II 
USA TODAY, August 2003

#10 Lowest Rents-CBD     
Expansion Management, August 2003

#1 Best Place to Live      
MSN House & Home, July 2003

MEETING

#20 Expo's Top 25 Bargain Destinations   
Expo, July/August 2004

#3 Cost-Effective Location for Corporate Meetings  
GetThere, December 2003

#10 Successful Meetings 10 to Watch   
Successful Meetings, December 2003

#1 Best Place to Live & Work    
Employment Review Magazine, June 2003

#9 Best City for Singles      
Forbes Magazine, June 2003

#3 Best Place to Reinvent Your Life    
AARP Magazine, May/June 2003

#10 Low-Stress City (Raleigh-Durham-Chapel Hill, NC) 
Sperlings Best Places, 2003

Top 20 Best Urban Trails (Raleigh's Umstead Park)  
Runner's World, October 2001

#4 Healthiest Metro Area in the US    
Demographics Daily, June 2001

#2 Best Place to Live and Work    
Employment Review, June 2001

EDUCATION

#1 School District in the Nation for Certified Teachers National Board of Teachers, January 2007

#2 Most Educated City     
US Census Bureau-American Community Survey,
2003 (Released April 2005)

#2 Best Public Education System    
Expansion Management, April 2005
(Raleigh – Cary)

#2 Most Educated City     
US Census Bureau-American Community
Survey, 2002 (Released May 2004)

#6 Best Public School System
Expansion Management's MSA Education
(Raleigh-Durham-Chapel Hill MSA) Quotient Rankings, April 2004

2005 National Superintendent of the Year    
American Association of School
(Bill McNeal, Wake County Public Schools) Administrators, 2004

#3 Best Education In The Biggest Cities    
Forbes, February 2004 (Wake County Schools)

Gold Ribbon School District – Wake County
Expansion Management, December 2003

# 2 Best Place for Education
Forbes Magazine, June 2003

#1 Best City for Education
Places Rated Almanac, Millennium Edition


BUSINESS

#3 Best Jobs in the Hottest Cities
Business 2.0, May 2007

#7 Business Boomtown
Inc Magazine, May 2007

#4 Hottest Job Market for Young Adults
Bizjournals, April 2007

#1 Best Place for Business
Inc Magazine, April 2007

#1 Best Place for Business & Career
Forbes.com, April 2007

#1 Best City for Jobs
Forbes.com, February 2007

Top 50 Hottest Cities for Expanding &
Relocating Companies
Expansion Management, February 2007

Top 10 Place in the South for the Creative Class
Southpoint Business & Development, Winter 2007

#1 Best City for Women Entrepreneuers
Allbusiness.com, November 2006

#6 Most Wired City
Forbes.com, August 2006

#2 Best Place for Business & Careers
Forbes, August 2006

Named one of 15 Top Fast Cities (Raleigh-Durham, NC)  
Fast Company, November 2005

#7 Top Metro for Scientists & Engineers Per Capita  
Expansion Magazine, May 2005

#10 Top Metro for University Spending   
Expansion Magazine, May 2005

#7 Best Educated Workforce     
Expansion Magazine, May 2005

#2 Best Place for Business & Careers    
Forbes, April 2005

#4 Best City for Entrepreneurs and Small Business  
Gold Guide Rankings, May 2004

#5 Best City for Economic Dynamism    
Gold Guide Rankings, May 2004

#2 Best Place for Business (Raleigh-Durham, NC)  
Forbes, May 2004

#1 City with the Happiest Workers     
Hudson Employment Index, March 2004

#3 High Value Labor Market Quotient 2005   
Expansion Management, March 2004

#6 Least Expensive Midsize Metro Area for Businesses 
KPMG LLP, February 2004

#1 Hottest Job Market (Raleigh-Durham-Chapel Hill, NC) 
Business 2.0, March 2004

#4 Top State for New Business Sites and Facilities   
Plants Sites and Parks, January 2004

#13 Hottest Cities (Raleigh-Durham, NC)    
Expansion Management Magazine, January 2004

#11 Choice City for Biotechnology
Business Development Outlook, December 2003

#9 Hottest Job Growth Market 2003-2013   
Business 2.0, September 2003

#7 High Value Labor Market Quotient 2003   
Expansion Management, July 2003

#4 Top High-Tech City
Business Facilities, May 2003

#9 Best City for Corporate Headquarters
Business Facilities, April 2003

#3 Best Place for Business and Careers
Forbes Magazine, May 26, 2003

#1 Fastest Growing Local Online Population   
Nielson/Netratings Report, February 2003

#3 Highest Mobile Phone Penetration   
Telephia Report, February 2003

#10 Real Estate Market
Expansion Management, August 2002

#3 in New Biotechnology Companies in the 1990's. 
Signs of Life: The Growth of the Biotechnology Centers in the US. Brookings Institute, June 2002

Top 60 Cybercity
Site Selection Magazine, March 2002

#2 City in the US for Relocation
Expansion Management, January 2002

#3 Hottest Metro
Plants, Sites & Parks, March 2002

Fastest Growing State in Venture Capital Investment
Plants, Sites & Parks, January 2002

5-Star Ranking for Best Economic Metro
Demographics Daily, January 2002

#5 for access to venture capital 
Progressive Policy Institute, April 2001

#3 for access to high-tech jobs
Progressive Policy Institute, April 2001

#8 Most Wired City       
Yahoo! Internet Life, March 2001

#3 for percentage of households using the Net  
Yahoo! Internet Life, March 2001

#4 for broadband use and interest    
Yahoo! Internet Life, March 2001

#7 State (NC) for New Facilities/Expansions in 2000 
Site Selection, March 2001

#4 Best City to Start and Grow a Company in Now  
Inc., December 2000

#3 Best City in the Nation for Entrepreneurship  
Entrepreneur, October 2000

#6 for Directory Density (sites per 1000 capita)  
Yahoo! Internet Life, March 2000

#5 for Hosts Per Capita     
Yahoo! Internet Life, March 2000

#6 Hottest City      
Expansion Management, January 2000