New Mortgage Lending Rules in effect this week
ATTENTION HOMEBUYERS , SELLERS, AND INVESTORS...
New mortgage lending rules affecting residential purchase mortgages went into effect on October 3rd of this year. The Good Faith Estimate, Truth in Lending Disclosure, and HUD1 Settlement Statement will be replaced by new disclosure forms, the “”Loan Estimate” and the “Closing Disclosure”. The most noticeable change is that the Closing Disclosure must be presented to the borrower a full 3 days prior to closing. Even more importantly, if certain changes are made to the Closing Disclosure within the 72-hour period, the closing may be delayed.
The days of last-minute changes on the HUD1 may be long gone (especially changes made immediately before closing).
Loans are also expected to take longer to close. Keep this timeframe in mind if you have pending loan lock expirations. Buyers should consider longer (minimum 45 day) loan locks when going under contract. Also, additional due diligence time may be needed to secure your loan commitment. Taking shorter loan lock might cost less, but missing your closing date will more than likely cost you much more. Rate shopping and waiting to submit your application to your lender may cost you more in the long-run. Likewise, buyers of shortsale properties that have firm payoff dates will need to schedule their closing well in advance, to be on the safe side. Same-day closings (i.e. selling your home and closing on the purchase of another home on the same day), will be even more challenging. Also be aware that attorney fees are expected to increase due to the additional work required by the closing agent.
I had the pleasure of sitting through my 3rd course on this topic today (I know….3 non-required classes on a single topic seems like overkill…BUT I love to learn, and it’s even more important to me that our team is ahead of the competition when it comes to representing our buyers and sellers, and providing them with the information they need to WIN in the local real estate market.)
More to come on this topic, but consider this a quick update so that you’re not caught off guard by the new loan documents, and settlement statement that are presented to you on your next purchase!
Are we in a Buyer’s Market or Sellers Market?
The Raleigh-Durham area is in the media as one of the hottest markets in the US.; And for good reason. Inventory is quite low in many areas. Prices and multiple offer situations have increased. So this means it’s a seller’s market right? Well…MAYBE...It depends on the type of property and the location. For example, in a particular Triangle location with properties under 300k , it is currently a strong seller’s market, as there is only approx. 1 month of inventory available for this type of property, and demand is very high. Another particular submarket in Raleigh that has properties priced at over 800k, however, has approx. a year of inventory available, which makes it a buyer’s market. So take the media reports with a grain of salt, and make sure that you understand the specific local submarket that you are buying in before placing your offer. Given recent competition for properties, having this knowledge in hand can make a world of difference in the success of your purchase or sale!
More reasons why NOW is the time to buy Raleigh-Durham Real Estate…
Local Market Update
This has been a heck of a summer season in the Raleigh-Durham market. Properties in sought-after areas, and others with strong cashflow, or locations in the path of revitalization are going under contract at lightening speed. If you’re interested in Raleigh-Durham investment property, be sure to have your financing in line, as the early bird gets the worm!
Triangle Market Update Reports (provided by www.trianglemls.com)
All 3 of the following articles point to a solid (and growing) economy, population, and real estate market in the Triangle area. Hint: BUY NOW in locations that are projected for future growth. But don’t buy at a loss unless you have very good reason to do so (I've only seen 1 or 2 cases in 10+ years in real estate where buying at loss made sense). Make sure that your numbers work TODAY, and also have potential for growth down the line. Part of our in-house property review process looks at current cashflow, and other factors in the area that may create additional benefits for long-term holds. Given that the Triangle has multiple educational and employment centers, there’s something to suit everyone’s preferences for investment property. Call our office for assistance with your search!
Articles of Interest
And for a little fun, here’s a short film that illustrates how homes have changed over the past few decades (and a fun refresher on fashion and automobile changes over the years!)
Happy Investing!And remember...
“Don’t wait to buy real estate, buy real estate and wait!”
Hello Fellow Investor!
This installment of the Raleigh-Durham Real Estate update will focus of upcoming changes that will affect your real estate purchases, sales, holdings and/or renovation/construction projects. If you are currently in real estate anywhere in the US, or plan to be in the future, you need to read this update. These changes are HUGE and will affect millions of property owners.
Note: There are more changes forthcoming than can reasonably fit in a single update. For this reason, the next few updates will cover these changes, so that you can be prepare in advance, and adjust your investing activities accordingly.
New settlement statement and closing process will affect ALL purchases and sales as of August 1, 2015.
Good Faith Estimates and Truth -In-Lending disclosures will soon disappear. These will be replaced with a “Loan Estimate” document that must be provided by borrowers soon-after their documents are collected by the lender.
We all know the frequency at which last minute changes are made on the HUD1 settlement statement prior to closing. Those last-minute changes will be a thing of the past after the new law takes effect. The HUD1 Settlement Statement will be retired as well, in favor of a new “Closing Disclosure”. This disclosure will need to be provided to the buyer 3 days prior to settlement, and if it is delayed, closing will have to be rescheduled. This will affect investors who are buying or selling a property and are held to a firm closing date (due to a short-sale or other deadlines). So plan accordingly, and be sure to leave ample time for closing and avoid settling closing dates at your hard deadlines.
More info here.
New SEER requirements of water heaters AND HVAC units
New water heater rules will take affect tomorrow, 4/16/15. Newly manufactured water heaters will be required to meet new energy standards. These standards may increase the size of the units so if you’re short on space (or have a water heater located in a tight closet space), consider swapping now to buy yourself more time. Once the existing new units gone, they’re gone!
Likewise, new efficiency requirements have already taken effect for HVAC units. The prior 13 SEER ratings have increased to 14 SEER on all newly manufactured units. If your unit breaks down, Again, if you are short on space, now is the time to consider repairs and/or replacement while 13 SEER parts and units are still in stock.
More info here and here.
Shortsale opportunity in sought-after Audubon Park!
This 3 bedroom, 2/5 bath, approx 1716 sq ft home with 2 car garage awaits your offer. Convenient to I-40, Southpointe Mall, Research Triangle Park, and a myriad of other amenities. Seller asking $189,900 but says make an offer, and is open to investors. Similarly-sized homes in the neighborhood have sold for 220k+ Needs cosmetics. Ideal location for family or rental purposes. Contact our office for additional information.
I hope your 2015 is off to an amazing start! I heard a quote recently that came to mind as I sat down to write this update. "You are not born a winner or a looser. You are born a chooser.” It resonated with me because it's pretty true. Each of us is faced with countless choices every day. Each of these choices weighs in to our successes and/or failures (i.e. whether we win or lose in life). So, in keeping with the theme of "choice", I challenge you to CHOOSE to make 2015 your best year yet! If acquiring property during the upcoming year is one of your goals, feel free to touch base with us to help you along the way. Also, the following are a couple items that can help you to get started.
For all of you pet fans out there, Raleigh was even a top dog in dogs last year: #1 top dog friendly city in America (PetCareRx).
What: August 2014 Landlord Training WorkshopWho: City of Durham Neighborhood Improvement Services Department, Durham Police Department, Solid Waste Management Department, Public Works Department Stormwater & GIS Services Division, Water Management Department, and the Durham City/County Planning Department. Other sponsors include Durham Housing Authority and Legal Aid of North Carolina, Inc. When: Thursday, August 21, 2014, from 8 a.m. to 5 p.m. Where: City of Durham Neighborhood Improvement Services Department Main Conference Room 807 E. Main St., Suite 2-300 Durham, N.C. 27701 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 Landlord Training Workshop is conducted on the third Thursday of every month as part of the Proactive Rental Inspection Program to provide regular training opportunities to help landlords become more effective property managers. • This monthly 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 will 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; City code enforcement; Proactive Rental Inspection Ordinance (PRIP); and the Property Management Entrepreneurs Program Plan (PMEP). • The cost to attend is $10 per person and includes workshop materials. Seating is limited. Attendees may pay by check or money order by Tuesday, August 18. To download the workshop brochure and registration form, visit this link• Interested participants may also contact Community Engagement Manager Lynwood Best with the City’s Neighborhood Improvement Services Department, at (919) 560-1647, ext. 34254 or by email at Lynwood.Best@DurhamNC.gov. About the Neighborhood Improvement Services DepartmentThe Neighborhood Improvement Services Department works to preserve and improve quality of life conditions for Durham residents, and to encourage active participation in neighborhood redevelopment and public policy and decision making dialogue. The department is responsible for enforcement of quality of life ordinances and state statutes including the City’s Minimum Housing Code; Nonresidential Code; Weedy Lot, Abandoned & Junk Vehicle ordinances; and the State of North Carolina’s Unsafe Building Statute. The department’s rapid responders, known as the Impact Team, remediate non-compliant housing properties; abate public nuisances, such as litter, graffiti, illegal dumping, and abandoned shopping carts; and conduct neighborhood service projects. The department’s Community Engagement staff provides outreach and education to Durham residents and community organizations. Guided by the City’s Strategic Plan, the department helps ensure that Durham has thriving, livable neighborhoods by providing the highest quality of services to engage and educate the community, eradicating blight, ensuring safer neighborhoods and enhancing neighborhood revitalization. For information, visit this link.
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 Landlord Training Workshop is conducted on the third Thursday of every month as part of the Proactive Rental Inspection Program to provide regular training opportunities to help landlords become more effective property managers.
This 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 will 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; City code enforcement; Proactive Rental Inspection Ordinance (PRIP); and the Property Management Entrepreneurs Program Plan (PMEP).
The cost to attend is $10 per person and includes workshop materials. Seating is limited. Attendees may pay by check or money order before Tuesday, May 13. To download the workshop brochure and registration form, visit http://bit.ly/1jE8V4u.
Interested participants may also contact Lynwood Best, community engagement manager with the City’s Neighborhood Improvement Services Department, at (919) 560-1647, ext. 34254 or by email at Lynwood.Best@DurhamNC.gov.
This update focuses on 2 important topics that will help you to remain profitable in your real estate endeavors. First, always stay on top of local market trends. You’ll find market update links below. Second, make sure that the professionals on your team have integrity, and maintain your best interests throughout the working relationship. See “How to Make Sure Your Property Manager Isn’t a Crook”.
Local Market Update Data
(Info provided by Triangle MLS through February 2014)
Entire Triangle Region
How To Make Sure Your Property Manager Isn’t a CROOK!
This topic came to mind after witnessing the devastation caused by an unscrupulous property manager who conned some of our investor clients out of thousands of dollars.
Property management can make or break your landlording experience. A good property manager is a valuable partner to have on your team. This person can lower your cost of ownership by minimizing vacancy times and repair costs. A bad or unscrupulous property manager, however, can squash any chance of profitability. Keep in mind that cheaper is not always better when it comes to property management. To illustrate this, let’s start with a story:
Darlene has owned a few rental properties for several years. The properties have been relatively profitable, but she realizes she doesn’t have time to manage her tenants, so she decides to try out a new property manager. The property manager she finds quotes a 6% management fee (which is much lower than other local managers in her area). She states that the fee is low so that she can “prove” herself to the owner as a good manager, but that the fee will increase over the next year to a max of 7%. Likewise, the manager negotiates a 1/2 month rent as her fee for getting a new tenant into a vacant unit on a 12 month lease. She also negotiates that she will keep the late rent fees, as compensation for having to follow-up with the tenants. She also sets fees for handling evictions and for screening tenants (running credit checks, verifying employment, etc…). Darlene feels the fees are fair, and signs off on the management agreement.
Everything starts out well. The property manger is responsive and seems to be on the ball. Over time, however Darlene notices that her phone calls aren’t returned in a timely fashion. She is also noticing that her rents aren’t coming in on schedule. She receives notice that she has a vacancy in one of her units and repairs are needed. She pays for the repairs, but when she visits the property, she doesn’t see evidence that work was done. She calls the property manager for clarification on repairs and receives an email that the manager will call her the following day. But she doesn’t receive the call. She receives notice that a new tenant has occupied another vacant unit, but she won’t receive the full rent for that month since the property manager’s 1/2 month fee is paid from this amount. She is relieved at the new tenancy, but disturbed when the following month’s rent from this unit doesn’t come in on time. More and more items start to pile up, and she finally decides to fire the property manager. The manager doesn’t want to let her out of the agreement, however, and states that a lot of front-end legwork has gone into setting up management for her units. So Darlene decides to leave the manager in place for a bit longer to see if things improve.
Things however, don’t improve, and one day Darlene receives a letter in the mail stating that the real estate commission has revoked the property manager’s license and she will be closing her doors. The manager refers her to another management firm, but Darlene decides she’d rather go back to managing herself. Just over a year has passed and she has new tenants that she needs to get to know; especially the ones who aren’t paying on time. So she visits the property and speaks with tenant #1, who tells her that she has an agreement with the property manager to pay rent on the 21st of each month, rather than the 1st, since that is when her paycheck arrives. The manager had never relayed this to Darlene, but kept the late fee every month and made it look like the tenant was just slow-paying. Likewise Darlene meets tenant #2 in another unit. She finds out that his credit is insufficient, he is a sex offender, and his monthly income is less than the monthly rent. Never-the-less the property manager took her 1/2 month fee up front to occupy the unit with this under-qualified tenant. Finally, upon visiting the county courthouse to follow-up on eviction proceedings for another non-paying tenant, she learns the eviction was never filed; despite the property manager taking the eviction fee out of her proceeds and stating it was pending.
To make matters worse; Despite the property manager’s license being revoked by the state, the manager continued to manage properties through yet another company, not knowing that both past clients/tenants, and the real estate commission were watching. So to avoid falling victim to an unscrupulous manager such as this, consider the following:
We hope these pointers will help to ensure profitability for your rentals when using the services of a property manager. Above all else, don't assume all property managers are bad, as there are outstanding property managers out there who work very hard to create a positive experience for their landlord clients. BUT, when you see signs of mismanagement, don't overlook them!
Fellow and Aspiring Investors:
It's been a while.
Between completing some exciting construction projects, working with our investor and homebuyer clients on their purchases and sales, and travelling quite a bit (Israel, Ghana, and Brazil within the past year or so), I realize that I haven't reached out to my blog subscribers in a long while. Hopefully this update will provide you just the right amount of information+inspiration to keep you on track in your real estate endeavors! Let’s dive right in…
RALEIGH-DURHAM MARKET UPDATE
The Triangle (Raleigh-Durham) market is picking up. It felt like a slight tweak at first, but competing bids and shrinking inventory are proof that the local market is heating up. As of August 2013, Triangle closings were up over 19% as compared to 2012, and the median sales price was up by almost 8%! Local market updates are at the links below:
Entire Triangle Region
CALLING ALL WHOLESALERSGiven the uptick in the market, investors are coming out in droves to snag solid properties. But, as we all know, all of the good deals aren't on the open market. Wholesalers, my clients need good properties!!! If you are a property wholesaler in the Triangle market and have properties currently available, shoot me an email at email@example.com with the details. I'm specifically looking for small multifamily (2-4 unit) properties in solid areas, single family rental properties, and and historic district properties in need of repair.LET’S TALK PERMITS
You’ve likely noticed an increase in home remodeling articles and television shows over the past few years. That’s because homeowners, who were unable to sell in a down market, decided to improve their home and wait the market out. This increase in remodeling/improvements was met with an increase in unpermitted work. How does this affect you as a homebuyer and/or investor you might ask? It can have devastating effects on your property value and increase your liability many times over. Let’s look at the following example:
You find a gem of a home in a great neighborhood and consider buying it as a rental property in your portfolio. It doesn’t have a garage, as do the other homes on the block, but it has an amazing 4th bedroom suite (other homes on the block have 3 bedrooms). The price is right, the potential cashflow is great, so you move forward with the purchase. You have a home inspection completed and it comes back with flying colors. The home is in great shape. Unbeknownst to you, that 4th bedroom suite used to be an unheated garage and was converted to a bedroom by the prior owner in anticipation of a sale. There were no permits pulled for the remodel, but you aren’t aware of this because your home inspection showed that the home is in solid condition So, you put the home on the market for rent and snag a great tenant right out the gate. Not long after your tenant moves in s/he starts to complain about a dank odor in the 4th bedroom suite bathroom. You investigate and nothing seems to be out of place, so you make a mental note to keep an eye on the problem. A few months later, you learn that your tenant’s child is at the hospital from an electrocution. It turns out that electrical and plumbing were installed improperly in the walls and created an unsafe zone in the bath. The renter complains to the city housing department, and they come out to see the home, and impose hefty fines on you (the owner) until the remodel is either reversed or properly permitted. To correct it, the city/county/municipality requires all drywall in the bath and bedroom suite to be cut open/removed so that they can view the wiring/plumbing/etc behind the walls prior to signing off on the work retroactively. Remember, the city’s records have this entire space listed as unheated square footage, so in order for it to count as heated living space, it will need to be inspected. In addition, all incorrect work has to be reinstalled by a licensed tradesman. This will be costly. Not only that, but your tenant pursues you for hospital bills, and you find out that your insurer might not cover the losses since the portion of the home where the incident occurred was unpermitted construction. Not only have you incurred tremendous headache and expense, but you have jeopardized the other properties in your portfolio due to increased liability.
Your takeaway: If a home has been remodeled and has extensive new systems and/or added heated square footage, be sure to check with the municipality to see if permits were pulled for the work. You can do this in most cases by contacting your city Planning/Inspections Department. Or, if you notice that the square footage listed in your appraisal far surpasses the square footage listed in the property tax records, you might want to give the city a call before closing, as the additional heated space might have been completed without permits
Our upcoming blog will cover several example of when permits are required. That way you can be sure that, when buying a renovated home to hold in your portfolio, or when buying a property with the intention to fix it up yourself, you are covered.
LET’S TALK TENANTS AND EVICTIONS
To be honest, I am speaking on this topic from a theoretical standpoint, as in my 10 years as a real estate investor, I’ve never had to evict a tenant. I believe this has to do with proper tenant screening, and being flexible with tenants as life-events occur that might create setbacks for them. We’ll discuss both of these topics in a future blog post, as property management and evictions seem to be topics that come up often in the investor community. For now, I just want to point out a few items to consider when you’re faced with the decision to evict a tenant. Hopefully these will help to minimize your losses.
· Speak with your CPA or tax advisor about filing a form 1099-C if you don’t pursue a money judgment from the tenant. This will report rents not paid by the tenant, which is then counted as income to them and they pay the taxes.
· There are tenant collection agencies out there that will handle the collection headache for you.
· There are also companies springing up that claim to “insure” your leases. For an annual fee (that is often dependent on the monthly rental amount), the company will pay out your lease if the tenant defaults. We don’t have experience in working with any of these companies, but it is a novel idea. Sort of like a home warranty but for your tenant’s lease. If you have experience with this type of company, and want to share your experience (good or bad), contact our office.
· If you are managing your own properties, save time by outsourcing your notifications and evictions. There are a number of attorneys in NC that specialize in evictions. For a nominal fee, they can expedite the process and get possession of your rental unit more quickly than an inexperienced investor who is just learning the process. Remember, time is money, and each vacancy day is money out of your pocket!
HVAC theft is still a reality. According to WRAL, more than 200 copper wire thefts were reported in Raleigh last year and in 2013 copper theft is on the rise. It still confounds me that a thief would destroy a $5000 HVAC system just to get $100 or so of metal out of a unit. Another annoying fact is that some insurance policies insure theft but not vandalism (or vice-versa), so if the unit is vandalized, but still onsite, the loss might not be covered (go figure?!). Check with your insurer to be sure your personal residence and portfolio properties are properly covered. In addition, consider installing a metal cage around the unit. For a cost of a few hundred dollars (more, if the unit is large), you can sleep well knowing that you have an effective theft deterrent in place to stave off vandalism at your properties. Keep in mind that a determined thief will find a way to work around the additional safety measures, but given that a majority of these crimes are those of opportunity, having a cage in place, will likely send a rushed thief away from your property and down the street to another property/unit that is unprotected. Also consider installing exterior floodlights to illuminate the unit/cage at night. Our office works with multiple metalworkers, so feel free to contact us for a referral if you are considering this option for your properties. If you don’t like the idea of a cage, consider an audible alarm (or silent alarm) that notifies the police when the power to the unit is cut by a thief. We don’t currently work with an alarm provider, but a quick online search may provide some options for you.
WHAT DO YOU WANT TO HEAR ABOUT?
Let me know! These updates are for your benefit, and I can only accomplish that goal if I know what topics will make the greatest impact in your investing activities. Feel free to post here on the blog, any topics that are of interest, and they will be considered for future updates. Thanks in advance!
MAKE IT HAPPEN!
On another note: I had a "eureka moment” recently, as I presented on real estate investing at a business conference. Despite presenting at countless events/classes/seminars over the years, I found myself a bit choked up on stage, because it hit me in that moment that real estate (and, more specifically, passive income/cashflow) has created tremendous freedom in my life. In that moment, I determined to switch gears a bit to allow myself to share as much of my lessons/experiences with others, in hopes that it will lead them to leverage real estate to create similar freedoms. So be on the lookout for more info soon! Also, I’m currently embarking on a land development project that has been quite a while in the making. So, for those of you interested in land development topics, these are on the horizon for future blog updates.
In closing, I just want to share my excitement about the changing market and what it means for homeowners and investors alike...Think about it; real estate is supposed to create opportunities to do the things you enjoy, right? For me, that's travel and a general sense of freedom. What is it for you? Is it more time for hobbies, time with family, travel, an escape from the 9 to 5 job, volunteer opportunities, lavish “toys”. Whatever it is, DECIDE TODAY to take it off the backburner, and make it a priority. A few small, CONSISTENT steps in the right direction can create tremendous change in your life over time! And you’re worth it!
August 2012 Market Update Video with Stacey Anfindsen.
View the Triangle Market Update here to find out the trends in the local real estate market for August 2012.
Ok, so there's no real rhyme or reason to this update. I've included a few snippets of information that should serve beneficial for your homebuying and investing activities. be sure to read all the way through, as the last post outlines a potential deal on 22 units and 3 lots for 175k!
PRIP- The Durham Proactive Rental Inspection Program went active on 7/2/12.
The Durham PRIP has passed city council and is now in effect. The new regulations support safe and healthy housing and designates a rental inspection program. If you own properties in the target areas, you will be notified prior to any planned inspection of your property. The notification might come directly to you or through your property manager, so be on the lookout. You can also self-certify your property with the city through its Neighborhood Improvement Services department. The city is held several information sessions about the PRIP. If you have any questions about the program, or how it affects your rental property, contact Neighborhood Improvement Services at (919) 560-1647. Their office is located at 807 E Main Street, Durham NC (2nd floor).
For program guidelines, a map of the target areas, and other important information, visit this page and use the links on the right to navigate through program information.
Copper Theft Bill is Law! (from NCAR)
The NC state legislature gave its final approval, and Gov. Perdue has signed HV 199. Metal Theft Prevention Act of 2013, that addresses the theft of nonferrous metals (mainly copper). Theft of nonferrous metals has become an increasing problem in North Carolina. Criminals have discovered that these metals can be sold quickly and easily for a large profit. No one is immune to this theft and it is causing a great deal of property damage and can create serious safety hazards.The NCAR government affairs team worked with a large business coalition to support this legislation, which is aimed stopping or greatly diminishing the number of thefts of nonferrous metals. This legislation helps deter criminals from stealing nonferrous metals as it will cut down on the ease of getting fast money by:
State of Durham’s Economy Breakfast Recap
I had the pleasure of attending the annual “State of Durham’s Economy” breakfast recently. The event is always well-attended by city leaders, city staff, influential decision-makers and inquisitive residents. The presentation focuses on local employment, tax base growth and real estate trends. This year’s meeting weighed heavily on the topics of entrepreneurship and small business as the Triangle is emerging as one of the nation’s newest meccas for start-ups and entrepreneurial endeavors (especially in the tech sector). Apparently, a lot of angel investors have their eye on start-ups in this area and there have been murmurs of Durham being the next Silicon Valley. I look forward to seeing how that notion pans out.
One of the notable takeaways from the presentation was a look at area population growth and projections. Given the relatively compact size in the city-centers, property owners and rental owners in key locations should fare well as the area continues to attract a diverse population of business leaders and support staff in these growing business sectors.
A short list of Durham’s recent accolades include the following:
1. 17th most walkable city (www.walkscore.com)
2. #2 metro area with less than 2million population
3. 12th best place for business and careers (Forbes 2011)
4. Highest Paying in the South (Triangle Business Journal 2011)
5. #37 on Businessweek’s list of American’s 50 best cities (2011)
6. #1 Best Place to Retire
7. #4 Most Educated City
8. #9 Hospital in America (Duke University Hospital)
9. #3 Housing Market
10. #5 America’s Geekiest Cities
In addition, construction permits increased over 50% from 2010-2011 which illustrates a promising turn for the construction sector. The overall tone of the presentation was very upbeat. Keep your eyes and ears open for more down the line.
Rental prices are heading higher – Ownership is becoming more attractive
Apparently the perceived savings from renting is wearing thin. Recent trends show that renting is, on average, 15% more expensive than owning a comparable home. This is due to a lack of inventory of available rentals and the lower cost of homeownership due to price drops and low interest rates. Check out this Wall Street Journal article for more info on this trend here.
100% financing and matching funds are available for homebuyers if you know where to look. Don’t miss out!
Not only are mortgage interest rates dropping even lower, but a few local lenders are offering additional incentives to homebuyers. For example, Harrington Bank has 100% financing for qualified primary residence buyers. They also offer matching grant programs for 1st time homebuyer purchases and will provide up to $5000 toward the purchase of a 1st home. Their energy efficiency and weatherization program provides up to $15,000 for improvements to an existing owner-occupied home. Be sure to contact Harrington Bank for additional information on qualifying for these programs @ (919) 945-7800 (ask for Stephanie Cox @ extension 875). Rehabbers, be sure to keep these in mind for your potential buyers as well. It might be just want you need to close out your next potential buyer!
Score 22 rental units and 3 lots for 175k at upcoming auction!
No, that isn't a typo. A 16 unit building, 3 duplexes and 3 lots will be auctioned off in 2 weeks. Minimum bid is 175k. The lucky high-bidder will walk away with this portfolio of properties. Note that the duplexes are 100% occupied at $545/month each. Interested buyers can contact our office. Serious inquiries from qualified buyers only. There is a 20k non-refundable deposit due with all bids and 10 days for closing after the winning bid is announced. If interested, contact your lender before contacting our office to determine if this closing timeline will work for you.
New City Ordinance to Affect Durham Landlords
City Council has approved a Proactive Residential Inspection Program (PRIP) with the goal of decreasing the number of “undesirable” homes in Durham. The city’s office of Neighborhood Improvement Services stated that a city map showing areas of higher crime rates coincided with a map of areas with higher numbers of blighted/boarded and below-standard housing. The Durham PRIP will inspect properties based on the City’s Minimum Housing Code. Note that Section 8 homes, which have been inspected and approved for that program, may be required to also pass a PRIP Inspection, and in some cases, the City’s Minimum Housing code may be more strict that Section 8 inspection requirements. Do not assume that passing a Section 8 inspection will clear you for PRIP Inspections.
This program is quite different than Raleigh’s PROP Ordinance. In both cities, owners need to contact the city to find out if a particular property is on the violations list before purchasing. Violations don’t disappear upon a sale to a new owner, so be sure not to adopt someone else’s problem. Owners in Durham can elect to self-certify their properties, which will leave them open to random inspections, but will relieve them from the area-specific home inspections to be scheduled by the city over the upcoming months. For more information, to receive an updated version of the new ordinance, or for any other questions contact Rick Hester at the City of Durham Neighborhood Improvement Services office firstname.lastname@example.org or (919) 560-1647
Also be sure to notify your property manager of the new ordinance. There were initial concerns that certain groups were not adequately notified prior to the ordinance passing. Your property manager might not be aware. The ordinance can be viewed here . A link to the Self-Certification Checklist can be found here.Tips for Buying Property
Durham Accepting Applications for Energy Savings Program
Durham’s Home Energy Savings Program (HESP) subsidizes professional home improvement. To qualify, homes must be single-story, or 2-story with both floors having the same shape. Homes must be 2300 square feet or less. Visit www.greenerdurham.net or call Tobin Freid at (919) 560-7999 for more information.
Updated Market Statistics can be viewed here
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.
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.
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
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 SurveyCNBC 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.
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.
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.
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
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
Senate votes to extend home tax credit deadline
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!
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.
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 NewsIt’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 BusinessFour 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 20th, 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.
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 3rd 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 SaysThe 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
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 30th.and your closing must take place by June 30th. 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”.
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 renovationsLead 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.
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, 3rd 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 1st mortgage lender or lienholder doesn’t allow enough funds to go to the 2nd 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:
Raleigh Crime Mapper:
Welcome to the 2nd 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:
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 email@example.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!