By Victor Hairapetian, Attorney
Question to Victor: A 60 day notice that I served ends on the 15th of the month, I know I am only suppose to receive 15 days, but the tenant paid the whole month, what should I do?
Victor’s Advice: This is an area that most landlords easily confuse. You may demand and accept rent that covers through the 15th, however you should not accept a check that includes any amount beyond that final day. This means that you should not accept a month’s check, and then offer a refund or credit since the acceptance of the payment alone can invalidate the notice. The simplest and clearest solution is to compute what is due, and return the original check to the tenant and ask that they replace it with the amount you computed.
Question to Victor: Am I responsible if my tenant’s dog bites someone or another tenant at the property.
Victor’s Advice: The answer to this question is too detailed for this article, and California premises liability law is still evolving, however keep in mind that the primary consideration that will be taken into account is your knowledge or reasonable opportunity to know of the likelihood that the animal is a danger to others. Certainly, the type of dog and its prior history in the property will be relevant to such considerations.
Question to Victor: Can I serve a tenant with a 3 day notice for a property in REAP.
Victor’s Advice: Yes, you may serve the tenant the amount that REAP has set, but be sure to check with REAP to see whether the tenant has paid REAP directly. For those readers who are unfamiliar with REAP, it constitutes the “Rent Escrow Account Program” in Los Angeles that regulates rents for units deemed to be in substandard conditions.
Question to Victor: Is there any way I can stop a tenant from just getting up and leaving a unit in the middle of their lease.
Victor’s Advice: No. A tenant may vacate your unit at any time, however you still have rights to sue for the breach of a lease including all of the future rent you will be losing until a replacement is found.
Question to Victor: My landlord hired a lawyer who keeps sending several threatening letters to me alleging things that are not true and scaring me that he intends to evict me, what can I do.
Victor’s Advice: You should immediately respond with advising the landlord and his
attorney that you dispute all of the allegations and to instruct them to
cease the harassment. As a tenant you also have rights, and should
not be bullied just because the other person has a lawyer. You
should consult with a lawyer so a response can be prepared that
assertively addresses their threats and gets your message across.
Victor’s Advice: Someone told me that I have to pay the interest on the security deposit to the tenant even though the building is in rent control, is this right.
Question to Victor: Sounds like your tenant’s giving you advice, it does not sound right since you are not in rent control.
Question to Victor: What is the consequence of demanding rent above the MAR (maximum allowable rent) in a rent control jurisdiction.
Victor’s Advice: A landlord who demands rent in excess of the MAR may be held liable for the excess charged, interest, attorneys fees, costs, and even punitive or treble damages. Definitely not a good idea.
Question to Victor: A judge dismissed my eviction since I was late to court, can he do this.
Victor’s Advice: Yes. This can be easily corrected and your case will be reinstated if the reason was due to your inadvertence or excusable neglect. See a lawyer.
Quote of the Month: “..I am moving by the end of the month and do not want to cause
any problems..”
Victor Hairapetian is an attorney licensed to practice law, and has conducted thousands of evictions in California. Feel free to submit your questions to him, and have them answered in the Apartment Management Magazine, or otherwise feel free to contact his office for any questions at (818) 500-9881 or email him at victor@lawandadvice.com.
Wednesday, July 30, 2008
Friday, July 25, 2008
US foreclosure filings more than double in 2Q
Taken from Forbes
By J.W. ELPHINSTONE
NEW YORK -
The number of households facing the foreclosure process more than doubled in the second quarter compared to a year ago, according to data released Friday.
Nationwide, 739,714 homes received at least one foreclosure-related notice during the quarter, or one in every 171 U.S. households, Irvine, Calif.-based RealtyTrac Inc. said. That's up 121 percent from the second quarter of 2007.
Soft housing sales, declining home values, tighter lending standards and a sluggish U.S. economy have left strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.
Foreclosure filings increased year-over-year in all but two states, North Dakota and Alabama.
Nevada, California, Arizona, and Florida continued to clock in the highest foreclosure rates. One in every 43 Nevada households received a filing during the quarter.
Cities in California and Florida accounted for 16 of the worst 20 metro foreclosure rates. Stockton, Calif., had the worst rate, with one in every 25 homes in the town receiving a foreclosure filing. That's nearly seven times the national average.
CLICK HERE to view full article
By J.W. ELPHINSTONE
NEW YORK -
The number of households facing the foreclosure process more than doubled in the second quarter compared to a year ago, according to data released Friday.
Nationwide, 739,714 homes received at least one foreclosure-related notice during the quarter, or one in every 171 U.S. households, Irvine, Calif.-based RealtyTrac Inc. said. That's up 121 percent from the second quarter of 2007.
Soft housing sales, declining home values, tighter lending standards and a sluggish U.S. economy have left strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.
Foreclosure filings increased year-over-year in all but two states, North Dakota and Alabama.
Nevada, California, Arizona, and Florida continued to clock in the highest foreclosure rates. One in every 43 Nevada households received a filing during the quarter.
Cities in California and Florida accounted for 16 of the worst 20 metro foreclosure rates. Stockton, Calif., had the worst rate, with one in every 25 homes in the town receiving a foreclosure filing. That's nearly seven times the national average.
CLICK HERE to view full article
Thursday, July 24, 2008
The Latest on Vacation Homes and Section 1031
I have a vacation property at Lake Tahoe that I’ve owned for several years. My kids have grown and aren’t interested in going there for vacation. Also, I’ve been too busy with my business to get up there much over the past few years. So I think that it’s time to sell it, but I have not placed it on the market yet. I think it will sell for about $800,000. My tax basis is $100,000, so I’m looking at about $700,000 of gain, which means approximately $105,000 of federal taxes and another $65,000 of California state taxes. Can I exchange the home under Section 1031 to defer the $170,000 in taxes?
A property must be held “for investment or in a trade or business” to be eligible for gain deferral under Section 1031. “Investment” means primarily for appreciation and not for personal use. Therefore, the Lake Tahoe property will only qualify if you hold it primarily for appreciation.
You will want to know what “primarily” means, of course. The Tax Court addressed this issue in 2007 in the case of Moore vs. Commissioner. The Moores owned a vacation home in Georgia. The family used the property for recreational purposes two or three weekends per month from mid-April to Labor Day each year. They would also visit the property intermittently during the “off season” to perform maintenance and other caretaking duties. The Moores moved to a new primary residence farther away from the vacation home and weren’t able to visit it. They decided to exchange it for a closer vacation home. They claimed an exchange on their tax return, stating that the vacation homes were held for investment. The Tax Court disallowed the exchange because the Moores’ primary intent was personal enjoyment and not investment. The Moores never rented out either vacation home, or even attempted to rent them out.
I guess that I should compare myself to the Moores. I’ve used the Lake Tahoe property about 15 to 20 days per year over the past few years. I have not rented it out other than to friends and family members. I did not want renters that I did not know. I’ve heard horror stories about irresponsible renters who caused thousands of dollars of damage. The rentals to friends and family amounted to about 10 days per year. I’m not sure if the rent I charged was fair market. I never checked for comparable rentals, although I’m sure other properties in the area are rented.
So you have issues similar to the Moores. While they did not rent their properties out at all, your rentals are minimal. You need to be concerned that the IRS might assert that you held the property primarily for personal purposes. Let’s look at other factors that go to the issue of investment intent. How have you treated the property on your tax return? The Tax Court pointed out that the Moores did not have investment intent because they did not claim depreciation or investment expenses on their tax return, and they deducted the interest on the mortgage as home mortgage interest. If you have taken similar reporting positions, you would have difficulty in an audit. I would recommend that you wait to sell the property and try to come within the IRS safe harbor for vacation homes. You have a lot of tax dollars at stake.
That seems wise. I’m not in a hurry to sell and I want to defer the taxes. What is an IRS “Safe Harbor” and what are the requirements to meet it?
This IRS recently issued Revenue Procedure 2008-16, and if you meet the requirements of this revenue procedure, the IRS will not challenge whether your vacation home qualifies as property held “for productive use in a trade or business or for investment” under Section 1031. That’s why it is called a “safe harbor”. Under the safe harbor, your Lake Tahoe property will qualify as for an exchange if it is owned by you for at least 24 months immediately before the exchange. You’ve met that requirement. However, in each of the two 12-month periods immediately preceding the start of the exchange: (i) you must rent the property to another person at a fair rental for 14 days or more, and (ii) your personal use of the property cannot exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the property is rented at a fair rental.
No Problem! I’ll just rent it to my kids for 14 days in each of the next two years, and limit my use to 14 days total. That sounds too good to be true. Will that get me
in the safe harbor?
That is too good to be true. The IRS is not that kind and gentle. The 14 day rental must be to unrelated parties. You are deemed to have used the property for personal purposes if used by you or your family members. So rentals to your kids, even at fair market rent, count as personal use by you and not towards the minimum 14 day rental requirement. Family members include your children and grandchildren, your siblings, and your parents. You can however rent to friends, in-laws or extended family members. You also can’t “trade” rentals with someone under a reciprocal use arrangement, even if rent is charged. Likewise, if you were to co-own the property with another person, you can’t rent to each other. For example, if you and your friend each owned a 50% interest in the property, you can’t meet the 14 day rental test by renting to each other. In short, you must rent the property to non family members for fair market rent. Any rental at less than fair market rent is counted as personal use by you too.
If you have a buyer in mind for the property, you may rent it to the buyer for the next two years and give the buyer an option to purchase the property with a reasonable earnest money payment too.
I have some friends that I could rent it to for 14 days or so. How do I determine what constitutes “fair market rent”? This seems to be an important key in fitting into the safe harbor.
You are correct that it is important. According to the Revenue Procedure, “fair market rent” is determined based on all of the facts and circumstances that exist when the rental agreement is entered into, and all rights and obligations of the parties to the rental agreement are taken into account. You should obtain an appraisal or other evidence from local rental agencies as to the fair market rent, at the time of the rental. Don’t wait till you’ve been audited several years later! Remember that you have significant tax dollars on the line and you want to go into an audit armed with good evidence of fair market rentals.
Don’t forget the other requirement. You and your family members cannot use the property for more than 14 days per year, or 10% of the rental days, if greater. This includes rentals to friends at less than fair market rental. I should mention that you may rent the property to your child if he or she uses it as a principal residence (and not a vacation home) and pays fair market rent. You may also be allowed some usage for repairs and annual maintenance, but be prepared to prove that you were there principally for that purpose. Have receipts, pictures, or other evidence of the work done.
This is great! I can apply some of the $170,000 in tax that I’m deferring to the cost of vacations to new places over the next two years. I’ve always wanted to go on a
cruise in the Greek Islands.
Yes, but remember to carefully document the rental to unrelated parties as well as your personal use. If you meet these requirements, the IRS cannot question whether the Lake Tahoe property is held for investment. Also, be sure not to claim the home mortgage interest deduction because it will not qualify since you are not using it for more than 14 days. And deduct the expenses related to the property as investment expenses under Section 212 of the Internal Revenue Code.
What about the replacement property in the exchange? Suppose I find a vacation home that suits my current needs, or would make a good retirement home later? How does the safe harbor work with respect to the replacement property?
You can do the same thing with the replacement property for the two years after the exchange. It will qualify as replacement property if you own it for at least 24 months immediately after the exchange, and, in each of the two 12-month periods immediately after the exchange, you rent it out to unrelated parties for 14 days or more. Like the Lake Tahoe property, your personal use of the replacement property cannot exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental. Generally, all the safe harbor requirements that we’ve discussed for the Lake Tahoe property will also apply to the replacement property.
Kevin A. Williams, President of North 1031 Exchange is currently the Managing Director of the North Wealth Management Company LLC. He has a Bachelor’s Degree in Economics and holds the following securities registrations: FINRA series 6, 7, 24, 63 & 65 and is licensed by the California Department of Insurance. He has allocated his talents to the institutional investment services arena for over 15 years. Kevin can be contacted at North 1031 Exchange, 4667 MacArthur Boulevard, Suite 220, Newport Beach, CA 92660. Toll Free: 866-700-1031 or 949-975-1031 or Kevin@north1031.com.
A property must be held “for investment or in a trade or business” to be eligible for gain deferral under Section 1031. “Investment” means primarily for appreciation and not for personal use. Therefore, the Lake Tahoe property will only qualify if you hold it primarily for appreciation.
You will want to know what “primarily” means, of course. The Tax Court addressed this issue in 2007 in the case of Moore vs. Commissioner. The Moores owned a vacation home in Georgia. The family used the property for recreational purposes two or three weekends per month from mid-April to Labor Day each year. They would also visit the property intermittently during the “off season” to perform maintenance and other caretaking duties. The Moores moved to a new primary residence farther away from the vacation home and weren’t able to visit it. They decided to exchange it for a closer vacation home. They claimed an exchange on their tax return, stating that the vacation homes were held for investment. The Tax Court disallowed the exchange because the Moores’ primary intent was personal enjoyment and not investment. The Moores never rented out either vacation home, or even attempted to rent them out.
I guess that I should compare myself to the Moores. I’ve used the Lake Tahoe property about 15 to 20 days per year over the past few years. I have not rented it out other than to friends and family members. I did not want renters that I did not know. I’ve heard horror stories about irresponsible renters who caused thousands of dollars of damage. The rentals to friends and family amounted to about 10 days per year. I’m not sure if the rent I charged was fair market. I never checked for comparable rentals, although I’m sure other properties in the area are rented.
So you have issues similar to the Moores. While they did not rent their properties out at all, your rentals are minimal. You need to be concerned that the IRS might assert that you held the property primarily for personal purposes. Let’s look at other factors that go to the issue of investment intent. How have you treated the property on your tax return? The Tax Court pointed out that the Moores did not have investment intent because they did not claim depreciation or investment expenses on their tax return, and they deducted the interest on the mortgage as home mortgage interest. If you have taken similar reporting positions, you would have difficulty in an audit. I would recommend that you wait to sell the property and try to come within the IRS safe harbor for vacation homes. You have a lot of tax dollars at stake.
That seems wise. I’m not in a hurry to sell and I want to defer the taxes. What is an IRS “Safe Harbor” and what are the requirements to meet it?
This IRS recently issued Revenue Procedure 2008-16, and if you meet the requirements of this revenue procedure, the IRS will not challenge whether your vacation home qualifies as property held “for productive use in a trade or business or for investment” under Section 1031. That’s why it is called a “safe harbor”. Under the safe harbor, your Lake Tahoe property will qualify as for an exchange if it is owned by you for at least 24 months immediately before the exchange. You’ve met that requirement. However, in each of the two 12-month periods immediately preceding the start of the exchange: (i) you must rent the property to another person at a fair rental for 14 days or more, and (ii) your personal use of the property cannot exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the property is rented at a fair rental.
No Problem! I’ll just rent it to my kids for 14 days in each of the next two years, and limit my use to 14 days total. That sounds too good to be true. Will that get me
in the safe harbor?
That is too good to be true. The IRS is not that kind and gentle. The 14 day rental must be to unrelated parties. You are deemed to have used the property for personal purposes if used by you or your family members. So rentals to your kids, even at fair market rent, count as personal use by you and not towards the minimum 14 day rental requirement. Family members include your children and grandchildren, your siblings, and your parents. You can however rent to friends, in-laws or extended family members. You also can’t “trade” rentals with someone under a reciprocal use arrangement, even if rent is charged. Likewise, if you were to co-own the property with another person, you can’t rent to each other. For example, if you and your friend each owned a 50% interest in the property, you can’t meet the 14 day rental test by renting to each other. In short, you must rent the property to non family members for fair market rent. Any rental at less than fair market rent is counted as personal use by you too.
If you have a buyer in mind for the property, you may rent it to the buyer for the next two years and give the buyer an option to purchase the property with a reasonable earnest money payment too.
I have some friends that I could rent it to for 14 days or so. How do I determine what constitutes “fair market rent”? This seems to be an important key in fitting into the safe harbor.
You are correct that it is important. According to the Revenue Procedure, “fair market rent” is determined based on all of the facts and circumstances that exist when the rental agreement is entered into, and all rights and obligations of the parties to the rental agreement are taken into account. You should obtain an appraisal or other evidence from local rental agencies as to the fair market rent, at the time of the rental. Don’t wait till you’ve been audited several years later! Remember that you have significant tax dollars on the line and you want to go into an audit armed with good evidence of fair market rentals.
Don’t forget the other requirement. You and your family members cannot use the property for more than 14 days per year, or 10% of the rental days, if greater. This includes rentals to friends at less than fair market rental. I should mention that you may rent the property to your child if he or she uses it as a principal residence (and not a vacation home) and pays fair market rent. You may also be allowed some usage for repairs and annual maintenance, but be prepared to prove that you were there principally for that purpose. Have receipts, pictures, or other evidence of the work done.
This is great! I can apply some of the $170,000 in tax that I’m deferring to the cost of vacations to new places over the next two years. I’ve always wanted to go on a
cruise in the Greek Islands.
Yes, but remember to carefully document the rental to unrelated parties as well as your personal use. If you meet these requirements, the IRS cannot question whether the Lake Tahoe property is held for investment. Also, be sure not to claim the home mortgage interest deduction because it will not qualify since you are not using it for more than 14 days. And deduct the expenses related to the property as investment expenses under Section 212 of the Internal Revenue Code.
What about the replacement property in the exchange? Suppose I find a vacation home that suits my current needs, or would make a good retirement home later? How does the safe harbor work with respect to the replacement property?
You can do the same thing with the replacement property for the two years after the exchange. It will qualify as replacement property if you own it for at least 24 months immediately after the exchange, and, in each of the two 12-month periods immediately after the exchange, you rent it out to unrelated parties for 14 days or more. Like the Lake Tahoe property, your personal use of the replacement property cannot exceed the greater of 14 days or 10 percent of the number of days during the 12-month period that the dwelling unit is rented at a fair rental. Generally, all the safe harbor requirements that we’ve discussed for the Lake Tahoe property will also apply to the replacement property.
Kevin A. Williams, President of North 1031 Exchange is currently the Managing Director of the North Wealth Management Company LLC. He has a Bachelor’s Degree in Economics and holds the following securities registrations: FINRA series 6, 7, 24, 63 & 65 and is licensed by the California Department of Insurance. He has allocated his talents to the institutional investment services arena for over 15 years. Kevin can be contacted at North 1031 Exchange, 4667 MacArthur Boulevard, Suite 220, Newport Beach, CA 92660. Toll Free: 866-700-1031 or 949-975-1031 or Kevin@north1031.com.
Myths and Realities of Low Income Housing
by Bryan Wittenmyer
Before I explain what I believe are myths about lower-income housing let me first clarify a few important points. First, low-income landlording, or even regular middle-income landlording is not for everyone. I’m not one of these guys who says everyone should be a professional landlord. A good portion of the population just isn’t cut out to be anybody’s landlord, or even in business for that matter. Landlording of any stripe or flavor is not easy. It just isn’t.
In addition to that bit of negativity let me add this. Landlording, again any type, is not a rapid one or two year process that will liberate you from all of your money troubles or cares of this world. Professional landlording is very similar to being in business: It requires constant vigilance.
Now having taking the gloss off of income property and having lowered your expectation back to earth, let me very briefly and succinctly explain a few big benefits of income property before we get into my myths and realities segment. I’ll list just three benefits, although there are many, many more.
First, owning real estate assets just makes a whole lot more tax sense than buying and selling, although buying and selling has it’s place in the business world. You can grow large amount of capital faster, starting with virtually no cash, with income properties, than with other assets or businesses. And, ten years from now, you’ll be far better off for it.
Second, while developing a cash flow is no easy trick with income properties, it is like any other business or trade, a developable skill. And, this cash flow will come into your mailbox every month, whether or not you work. Furthermore, once properties have all or most of the debt service paid off, you have what I have coined, Perpetual Income. The income stream from a rental asset can literally be maintained for ten, twenty, even thirty years, without expending or depleting the corpus of the asset. At the end of your rental career, or if you just feel like it, you can sell this undepleted body of capital known as the building.
Third, while many consider landlording a lowly or pitiful career, I consider owing income property as one of the top careers, even glamorous. It has a mystique to it that people respect. I occasionally meet old school mates, and I often hear them ask in wonderment, “I hear you own rental properties.” They say it with amazement.
3 Myths
There are countless books on the market explaining rental properties and landlording. The interesting thing is precious few talk about low-income landlording. Almost like it doesn’t exist. The fact of the matter is, and this is big: Most landlords are engaged in at least some form of low-income housing. Doubt me? Ever hear of Section 8 housing? Hmmm. Seems to me that good ol’ Section 8 housing is low income housing by the governement’s own definition. Here’s another zinger: The vast majority of folks who are full-time housing entrepreneurs are involved in some form of lower-income housing.
The truth of the matter is a huge portion of the tenant populace is classed as lower-income, especially when you factor in their net worth. I hang around dozens of landlords, and at least in my little world, these guys have a lot of low-income rentals. It’s the yield.
So, myth number one: Very few investors are involved in low-income housing, except a hardened bunch of “slumlords”. The reality: a good portion of professional landlords are involved in at least some forms of lower-income housing.
Myth number two: Low-income housing is slum landlording; low-income property investors invest in deplorable and bombed out ghettos where few dare to trod. The reality: There are at least 3 levels of lower-income housing, only one of which is blighted, war-zone property (which by the way, I strongly urge you to avoid) . There is an upper level of lower-income areas which is marginally desirable. This is the area where folks will live and stay and pay their rents. So the point is, there are acceptable and relatively safe areas that technically are lower-income, but depending on interpretation could even be classed lower-middle income.
Myth number three: There are no good, low-income tenants; they all trash property, and don’t pay their rent. The reality: While yes, there are some bad tenants in the bunch, even a higher percentage than in middle-income housing, there is a solid core of folks in the lower-income areas who, when managed properly, will pay their rent and even remain in a house or apartment for several years. There is an art and craft to finding these folks, and occasionally you’ll make the wrong tenant selection, but you can find acceptable rental clientele in the right areas.
What Does All of This Mean?
There are housing needs in lower-income areas that can be serviced with minimal to moderate amounts of risk with a very high yield potential. That potential, is cash flow. Secondly, aggressive investors who aren’t afraid to get their hands dirty can at build a cash flow base from which to launch a more upscale rental portfolio. This again is not for everybody. You have to find a comfort level. If any mistake is made, folks buy in too tough of areas. There is a point of diminishing returns in tough areas. It’s all about yield. Don’t even think of messing with lower-income houses unless you absolutely buy at sub-wholesale levels. If the deal isn’t stunningly cheap in terms of price or financing, don’t buy it.
Before I explain what I believe are myths about lower-income housing let me first clarify a few important points. First, low-income landlording, or even regular middle-income landlording is not for everyone. I’m not one of these guys who says everyone should be a professional landlord. A good portion of the population just isn’t cut out to be anybody’s landlord, or even in business for that matter. Landlording of any stripe or flavor is not easy. It just isn’t.
In addition to that bit of negativity let me add this. Landlording, again any type, is not a rapid one or two year process that will liberate you from all of your money troubles or cares of this world. Professional landlording is very similar to being in business: It requires constant vigilance.
Now having taking the gloss off of income property and having lowered your expectation back to earth, let me very briefly and succinctly explain a few big benefits of income property before we get into my myths and realities segment. I’ll list just three benefits, although there are many, many more.
First, owning real estate assets just makes a whole lot more tax sense than buying and selling, although buying and selling has it’s place in the business world. You can grow large amount of capital faster, starting with virtually no cash, with income properties, than with other assets or businesses. And, ten years from now, you’ll be far better off for it.
Second, while developing a cash flow is no easy trick with income properties, it is like any other business or trade, a developable skill. And, this cash flow will come into your mailbox every month, whether or not you work. Furthermore, once properties have all or most of the debt service paid off, you have what I have coined, Perpetual Income. The income stream from a rental asset can literally be maintained for ten, twenty, even thirty years, without expending or depleting the corpus of the asset. At the end of your rental career, or if you just feel like it, you can sell this undepleted body of capital known as the building.
Third, while many consider landlording a lowly or pitiful career, I consider owing income property as one of the top careers, even glamorous. It has a mystique to it that people respect. I occasionally meet old school mates, and I often hear them ask in wonderment, “I hear you own rental properties.” They say it with amazement.
3 Myths
There are countless books on the market explaining rental properties and landlording. The interesting thing is precious few talk about low-income landlording. Almost like it doesn’t exist. The fact of the matter is, and this is big: Most landlords are engaged in at least some form of low-income housing. Doubt me? Ever hear of Section 8 housing? Hmmm. Seems to me that good ol’ Section 8 housing is low income housing by the governement’s own definition. Here’s another zinger: The vast majority of folks who are full-time housing entrepreneurs are involved in some form of lower-income housing.
The truth of the matter is a huge portion of the tenant populace is classed as lower-income, especially when you factor in their net worth. I hang around dozens of landlords, and at least in my little world, these guys have a lot of low-income rentals. It’s the yield.
So, myth number one: Very few investors are involved in low-income housing, except a hardened bunch of “slumlords”. The reality: a good portion of professional landlords are involved in at least some forms of lower-income housing.
Myth number two: Low-income housing is slum landlording; low-income property investors invest in deplorable and bombed out ghettos where few dare to trod. The reality: There are at least 3 levels of lower-income housing, only one of which is blighted, war-zone property (which by the way, I strongly urge you to avoid) . There is an upper level of lower-income areas which is marginally desirable. This is the area where folks will live and stay and pay their rents. So the point is, there are acceptable and relatively safe areas that technically are lower-income, but depending on interpretation could even be classed lower-middle income.
Myth number three: There are no good, low-income tenants; they all trash property, and don’t pay their rent. The reality: While yes, there are some bad tenants in the bunch, even a higher percentage than in middle-income housing, there is a solid core of folks in the lower-income areas who, when managed properly, will pay their rent and even remain in a house or apartment for several years. There is an art and craft to finding these folks, and occasionally you’ll make the wrong tenant selection, but you can find acceptable rental clientele in the right areas.
What Does All of This Mean?
There are housing needs in lower-income areas that can be serviced with minimal to moderate amounts of risk with a very high yield potential. That potential, is cash flow. Secondly, aggressive investors who aren’t afraid to get their hands dirty can at build a cash flow base from which to launch a more upscale rental portfolio. This again is not for everybody. You have to find a comfort level. If any mistake is made, folks buy in too tough of areas. There is a point of diminishing returns in tough areas. It’s all about yield. Don’t even think of messing with lower-income houses unless you absolutely buy at sub-wholesale levels. If the deal isn’t stunningly cheap in terms of price or financing, don’t buy it.
Wednesday, July 16, 2008
In Slowing Economy, Apartment Vacancy Rates Remain Stable
Taken from Multi-Family News
By Anuradha Kher, Online News Editor
New York--Amidst headlines of doom and gloom in the economy, the multifamily industry is holding relatively strong. “Vacancy rates in the apartment sector have been stable in the last three quarters and apartment rent growth in the second quarter of 2008 has seen the strongest gain as compared to all other types of commercial real estate,” Dr. Sam Chandan, chief economist and senior vice resident for research at Reis Inc. said today in a virtual conference hosted by Reis.
“Overwhelmingly and in all parts of the country, buyers are preferring to rent now as a result of which effective rent growth is expected to keep going up. The overall slowdown and situation in the slowing labor market will negatively affect apartments and in some markets, the condo shadow market will compete with the apartment sector with more units coming online,” he said. As a result, asset prices for apartment units have been falling from their peak period to the first quarter of 2008, by 13.3 percent.
Chandan also talked about the ongoing housing crisis, resulting financial troubles, low consumer confidence levels and slowing labor market and then went on to outline how this will affect commercial real estate. He said there will be greater regulatory oversight, more significant intervention in the housing market as is already happening and tighter credit conditions in the housing market.
CLICK HERE to view full article
By Anuradha Kher, Online News Editor
New York--Amidst headlines of doom and gloom in the economy, the multifamily industry is holding relatively strong. “Vacancy rates in the apartment sector have been stable in the last three quarters and apartment rent growth in the second quarter of 2008 has seen the strongest gain as compared to all other types of commercial real estate,” Dr. Sam Chandan, chief economist and senior vice resident for research at Reis Inc. said today in a virtual conference hosted by Reis.
“Overwhelmingly and in all parts of the country, buyers are preferring to rent now as a result of which effective rent growth is expected to keep going up. The overall slowdown and situation in the slowing labor market will negatively affect apartments and in some markets, the condo shadow market will compete with the apartment sector with more units coming online,” he said. As a result, asset prices for apartment units have been falling from their peak period to the first quarter of 2008, by 13.3 percent.
Chandan also talked about the ongoing housing crisis, resulting financial troubles, low consumer confidence levels and slowing labor market and then went on to outline how this will affect commercial real estate. He said there will be greater regulatory oversight, more significant intervention in the housing market as is already happening and tighter credit conditions in the housing market.
CLICK HERE to view full article
COLLECTING LOST REVENUE
Owners and Managers Partnering with
Collection Firms to Recover Lost Revenue
Increasing Profitability and Productivity for Owners and Managers
Owners and managers of multifamily housing properties are increasingly partnering with collection firms specialized in the intricacies of the industry to collect lost revenue. The outsourcing of this function to experts in the industry allows owners and managers to focus on their core competencies while also more efficiently retrieving valuable funds.
Property owners and managers with uncollected rent face diminished revenue of one to three percent annually, which can significantly impact the profitability of multifamily property. This issue often goes overlooked because on the surface it may not seem significant. However, an owner with only 100 units with rent at $800 per month loses nearly $2,400 (at three percent) in a year. When an owner wants to grow his or her business and increase profits by two to four percent annually, a revenue loss of three percent requires an additional five to seven percent in additional revenue to net the original growth goal.
How Big Is The Problem Of Uncollected Rent?
Owners who do nothing to collect past-due rent are leaving money on the table and in turn losing out on additional revenue. Default renters can cost everyone money. While many believe an improving economy will ease this significant issue, recent numbers reveal an alarming trend. For the first time in our nation’s history, Americans’ consumer debt has topped the $2 trillion mark, and billions of dollars are still uncollected, many of which include rent payments. (Source: Federal Reserve Statistics).
Adding to the already difficult issue of increasing consumer debt is the fight against time a majority of owners face. Research shows the longer a debt goes unpaid, the less likely a property owner or manager will be able to collect it. (Source: Collection Agencies Services) Specialized firms who are committed to focusing their time on only the issue of debt collection increase the likelihood of retrieving a portion of the debt, if not the entire amount. With the additional revenue received from successful debt collection, property owners can increase their property value but more importantly their bottom line.
Why Is Multi-Family Debt So Hard To Collect?
An experienced firm specializing in the complexities of multifamily debt will achieve the highest success for owners with uncollected rent. Multifamily debt is very distinct and complex. Debt associated with the multifamily industry is among the most difficult to recover for a variety of reasons:
Resident debtors tend to be more transient; they move and change jobs more often and rarely leave forwarding addresses or phone numbers, so locating them is often the most difficult aspect of the collection process.
Debtors are not homeowners, so there are no easily attachable assets.
A majority of multi-housing debts are disputed; debtors often claim the co-resident is responsible, or that the charges are excessive or arbitrary—usually due to a lack of understanding of the lease agreement. Medical or credit card debts, on the other hand, have minimal dispute rates and are therefore more collectible.
The rent payment is the last thing to go unpaid, because more is at stake (losing shelter). When debtors stop paying for their shelter, they are usually in extreme financial circumstances and are less likely to have the capacity to pay, even if they are willing.
A collection firm must possess the expertise and experience to handle intricate issues surrounding multifamily accounts. Also, proper training is crucial when dealing with this type of debtor, especially if the account has aged. A professionally trained collector becomes efficient at developing excellent problem solving and effective communication skills with which to handle multifaceted accounts. Professionally trained collection representatives must exhibit tact, persistence and an understanding of people’s motivations, which in turn will produce more dollars collected for owners.
If necessary, professional collection firms can take a debtor to court, however this is used only as a last resort. In such a transaction-rich industry, accessing excellent legal advice is an absolute prerequisite for success. Owners who use the services of a specialized collection firm are shielded from any exposure or negative effects of suits.
The Days Of ‘Dialing For Dollars’ Are Long Gone
The modern collection firm uses a sophisticated array of technology, systems, specialized training, monitoring and reporting to deliver maximum results in the least amount of time. A professional firm will have an attorney and compliance officer on staff to ensure adherence to federal and state regulations designed to protect the consumer, like the Federal Trade Commission’s Fair Debt Collection Practices Act (FDCPA). According to ACA International, third-party collection services that use specialized phone systems, computer and software designed specifically for the collection industry, usually are more effective than creditors at collecting payment on delinquent accounts.
An experienced, specialized collection firm relieves property owners and managers of the overwhelming administrative work of debt collections while dramatically increasing profitability. A specialized collection firm should also provide detailed reporting systems designed to help owners and managers make better leasing decisions and assist them from the onset in reducing future bad debts.
When it comes to uncollected rent, an experienced collection firm can assist owners in retrieving as much revenue as possible from residents in default. Property owners who want to increase their efficiency while growing their bottom line will profit from a partnership with a professional collection firm specializing in the multifamily industry.
About the Author
Stephen Sobota is CEO of Hunter Warfield, Inc. and can be reached at ssobota@huntwar.com. Hunter Warfield, Inc., an incorporated affiliate of Pierce Hamilton & Stern, provides debt collection services to clients in a wide range of industries from multi-housing to funeral services to commercial business. Focused on superior customer service and advanced management practices, Hunter Warfield is committed to taking collections to a new level. Through innovative technology and flexibility, we are unmatched at providing comprehensive collection solutions tailored to meet each customer's evolving business needs. More information is available at www.HunterWarfield.com.
Collection Firms to Recover Lost Revenue
Increasing Profitability and Productivity for Owners and Managers
Owners and managers of multifamily housing properties are increasingly partnering with collection firms specialized in the intricacies of the industry to collect lost revenue. The outsourcing of this function to experts in the industry allows owners and managers to focus on their core competencies while also more efficiently retrieving valuable funds.
Property owners and managers with uncollected rent face diminished revenue of one to three percent annually, which can significantly impact the profitability of multifamily property. This issue often goes overlooked because on the surface it may not seem significant. However, an owner with only 100 units with rent at $800 per month loses nearly $2,400 (at three percent) in a year. When an owner wants to grow his or her business and increase profits by two to four percent annually, a revenue loss of three percent requires an additional five to seven percent in additional revenue to net the original growth goal.
How Big Is The Problem Of Uncollected Rent?
Owners who do nothing to collect past-due rent are leaving money on the table and in turn losing out on additional revenue. Default renters can cost everyone money. While many believe an improving economy will ease this significant issue, recent numbers reveal an alarming trend. For the first time in our nation’s history, Americans’ consumer debt has topped the $2 trillion mark, and billions of dollars are still uncollected, many of which include rent payments. (Source: Federal Reserve Statistics).
Adding to the already difficult issue of increasing consumer debt is the fight against time a majority of owners face. Research shows the longer a debt goes unpaid, the less likely a property owner or manager will be able to collect it. (Source: Collection Agencies Services) Specialized firms who are committed to focusing their time on only the issue of debt collection increase the likelihood of retrieving a portion of the debt, if not the entire amount. With the additional revenue received from successful debt collection, property owners can increase their property value but more importantly their bottom line.
Why Is Multi-Family Debt So Hard To Collect?
An experienced firm specializing in the complexities of multifamily debt will achieve the highest success for owners with uncollected rent. Multifamily debt is very distinct and complex. Debt associated with the multifamily industry is among the most difficult to recover for a variety of reasons:
Resident debtors tend to be more transient; they move and change jobs more often and rarely leave forwarding addresses or phone numbers, so locating them is often the most difficult aspect of the collection process.
Debtors are not homeowners, so there are no easily attachable assets.
A majority of multi-housing debts are disputed; debtors often claim the co-resident is responsible, or that the charges are excessive or arbitrary—usually due to a lack of understanding of the lease agreement. Medical or credit card debts, on the other hand, have minimal dispute rates and are therefore more collectible.
The rent payment is the last thing to go unpaid, because more is at stake (losing shelter). When debtors stop paying for their shelter, they are usually in extreme financial circumstances and are less likely to have the capacity to pay, even if they are willing.
A collection firm must possess the expertise and experience to handle intricate issues surrounding multifamily accounts. Also, proper training is crucial when dealing with this type of debtor, especially if the account has aged. A professionally trained collector becomes efficient at developing excellent problem solving and effective communication skills with which to handle multifaceted accounts. Professionally trained collection representatives must exhibit tact, persistence and an understanding of people’s motivations, which in turn will produce more dollars collected for owners.
If necessary, professional collection firms can take a debtor to court, however this is used only as a last resort. In such a transaction-rich industry, accessing excellent legal advice is an absolute prerequisite for success. Owners who use the services of a specialized collection firm are shielded from any exposure or negative effects of suits.
The Days Of ‘Dialing For Dollars’ Are Long Gone
The modern collection firm uses a sophisticated array of technology, systems, specialized training, monitoring and reporting to deliver maximum results in the least amount of time. A professional firm will have an attorney and compliance officer on staff to ensure adherence to federal and state regulations designed to protect the consumer, like the Federal Trade Commission’s Fair Debt Collection Practices Act (FDCPA). According to ACA International, third-party collection services that use specialized phone systems, computer and software designed specifically for the collection industry, usually are more effective than creditors at collecting payment on delinquent accounts.
An experienced, specialized collection firm relieves property owners and managers of the overwhelming administrative work of debt collections while dramatically increasing profitability. A specialized collection firm should also provide detailed reporting systems designed to help owners and managers make better leasing decisions and assist them from the onset in reducing future bad debts.
When it comes to uncollected rent, an experienced collection firm can assist owners in retrieving as much revenue as possible from residents in default. Property owners who want to increase their efficiency while growing their bottom line will profit from a partnership with a professional collection firm specializing in the multifamily industry.
About the Author
Stephen Sobota is CEO of Hunter Warfield, Inc. and can be reached at ssobota@huntwar.com. Hunter Warfield, Inc., an incorporated affiliate of Pierce Hamilton & Stern, provides debt collection services to clients in a wide range of industries from multi-housing to funeral services to commercial business. Focused on superior customer service and advanced management practices, Hunter Warfield is committed to taking collections to a new level. Through innovative technology and flexibility, we are unmatched at providing comprehensive collection solutions tailored to meet each customer's evolving business needs. More information is available at www.HunterWarfield.com.
Thursday, July 10, 2008
Top U.S. Housing Markets For Investment
By Matt Woolsey, taken from Forbes
Rahul Reddy, a dentist from Perth, Australia, has been investing in commercial properties in Western Australia for the last two years. Now, with the Australian dollar growing in strength and the American housing market strained, he's got his eye on residential and commercial properties in Florida and California, areas he believes will recover over the long term.
He's not alone. Encouraged by a weak dollar and a belief in the resiliency of the U.S. economy, individuals like Reddy, along with institutional investors such as pension funds and private equity groups, are seeking investment properties and development opportunities in the United States.
Their markets of choice include New York City, Los Angeles, Washington, D.C., Seattle and San Francisco.
"The U.S. is good for speculative higher-risk investments from our perspective because the strong Australian dollar will enable us to gain hold of properties at prices we will probably not see for a long time," says Reddy. "The U.S. is an economic powerhouse that I think will recover, and if the exchange rate goes back to figures from a few years ago, that will benefit us."
Key word there: Risk. With every passing month, a few pieces of conventional wisdom fall by the wayside. The July news that Manhattan sales prices dipped by 3.1%, according to New York appraisal firm Miller Samuel, pierced the logic that Manhattan holds unique status as a bulletproof market.
Still, international cash is flowing to cities from coast-to-coast as international buyers see plenty of opportunities.
CLICK HERE to view full article
Rahul Reddy, a dentist from Perth, Australia, has been investing in commercial properties in Western Australia for the last two years. Now, with the Australian dollar growing in strength and the American housing market strained, he's got his eye on residential and commercial properties in Florida and California, areas he believes will recover over the long term.
He's not alone. Encouraged by a weak dollar and a belief in the resiliency of the U.S. economy, individuals like Reddy, along with institutional investors such as pension funds and private equity groups, are seeking investment properties and development opportunities in the United States.
Their markets of choice include New York City, Los Angeles, Washington, D.C., Seattle and San Francisco.
"The U.S. is good for speculative higher-risk investments from our perspective because the strong Australian dollar will enable us to gain hold of properties at prices we will probably not see for a long time," says Reddy. "The U.S. is an economic powerhouse that I think will recover, and if the exchange rate goes back to figures from a few years ago, that will benefit us."
Key word there: Risk. With every passing month, a few pieces of conventional wisdom fall by the wayside. The July news that Manhattan sales prices dipped by 3.1%, according to New York appraisal firm Miller Samuel, pierced the logic that Manhattan holds unique status as a bulletproof market.
Still, international cash is flowing to cities from coast-to-coast as international buyers see plenty of opportunities.
CLICK HERE to view full article
Wednesday, July 9, 2008
Apartment Management Magazines goes digital with new “Virtual Magazine”
By Jordan Smith
Are you tired of waiting for your magazine? Tired of waiting 5 days for the United States Postal Service to reach your front door? Tired of missing an issue because it got delivered to some other place?
Well…all that is a thing of the past. The publishing industry has been revolutionized. Are you ready for a digital magazine that will be sent to you the day it is sent to the printer?
Apartment News Publications Inc. is pleased to announce that Apartment Management Magazines will be releasing an interactive, digital upgrade to our online magazine. Since the launch of our website, www.aptmags.com, we have offered only a PDF format of our online magazine. While it allowed many readers to access it on their computer, we were not happy with it and knew we could offer better to our readers. That is why we are launching our new digital magazine in conjunction with this issue. Everyone in our office is excited at the launch of our digital magazine, and we are eager to experience firsthand the digital future of our magazine, and its impacts upon the apartment industry.
Apartment Management readers will now be able to open a fully functional virtual magazine that will offer hot links to our clients, 3D page turning abilities, captivating videos, and in the future, the ability to be downloaded the publication straight to your phone. Continually I am frustrated at the rate of speed that our PDF version downloads, but with the new virtual magazine, it will load five times faster, and it will take no time at all to switch between the different zones. And it will be easier than ever to read our magazine online, because all six of our zones will be placed in one link on our home page. In addition, you will now be able to sign up to have the new digital magazine sent to your email on the day the magazine is shipped, and from there you can pass along the link to your friends.
We know that many people love to have their magazine in front of their hands, and that is why we will always continue to deliver our magazines to your doorstep for those who prefer it that way. Yet we also know many of you rather have it online, and reduce paper waste and emissions from delivery. And now we can add upon our 90,000 circulation, continuing to reach every apartment owner/manager with the preferred apartment management publication that “has saved my butt over and over again when I needed to find the right help with my apartments. I wish you guys were nationwide, because I could use your magazine with my apartments across the county (anonymous apartment owner).”
EXCITING FEATURES OF APARTMENT MANAGEMENT’S VIRTUAL MAGAZINE:
• 3D Flip Animation: Flip through the pages with cool 3D animation, or easily turn pages with the user friendly tool bar.
• Hot Links: With a click of a button jump to our client’s webpage or quickly jump to the articles that you want to read.
• Navigation Tools: Zoom in and out, adjust resolution size, send to your friends, view the table of contents, and much more.
To receive in your email box the digital version of Apartment Management every 1st of the month, sign up for it online at our website, www.aptmags.com, or send an email to js@aptmags.com saying you want to join the mailing list.
Are you tired of waiting for your magazine? Tired of waiting 5 days for the United States Postal Service to reach your front door? Tired of missing an issue because it got delivered to some other place?
Well…all that is a thing of the past. The publishing industry has been revolutionized. Are you ready for a digital magazine that will be sent to you the day it is sent to the printer?
Apartment News Publications Inc. is pleased to announce that Apartment Management Magazines will be releasing an interactive, digital upgrade to our online magazine. Since the launch of our website, www.aptmags.com, we have offered only a PDF format of our online magazine. While it allowed many readers to access it on their computer, we were not happy with it and knew we could offer better to our readers. That is why we are launching our new digital magazine in conjunction with this issue. Everyone in our office is excited at the launch of our digital magazine, and we are eager to experience firsthand the digital future of our magazine, and its impacts upon the apartment industry.
Apartment Management readers will now be able to open a fully functional virtual magazine that will offer hot links to our clients, 3D page turning abilities, captivating videos, and in the future, the ability to be downloaded the publication straight to your phone. Continually I am frustrated at the rate of speed that our PDF version downloads, but with the new virtual magazine, it will load five times faster, and it will take no time at all to switch between the different zones. And it will be easier than ever to read our magazine online, because all six of our zones will be placed in one link on our home page. In addition, you will now be able to sign up to have the new digital magazine sent to your email on the day the magazine is shipped, and from there you can pass along the link to your friends.
We know that many people love to have their magazine in front of their hands, and that is why we will always continue to deliver our magazines to your doorstep for those who prefer it that way. Yet we also know many of you rather have it online, and reduce paper waste and emissions from delivery. And now we can add upon our 90,000 circulation, continuing to reach every apartment owner/manager with the preferred apartment management publication that “has saved my butt over and over again when I needed to find the right help with my apartments. I wish you guys were nationwide, because I could use your magazine with my apartments across the county (anonymous apartment owner).”
EXCITING FEATURES OF APARTMENT MANAGEMENT’S VIRTUAL MAGAZINE:
• 3D Flip Animation: Flip through the pages with cool 3D animation, or easily turn pages with the user friendly tool bar.
• Hot Links: With a click of a button jump to our client’s webpage or quickly jump to the articles that you want to read.
• Navigation Tools: Zoom in and out, adjust resolution size, send to your friends, view the table of contents, and much more.
To receive in your email box the digital version of Apartment Management every 1st of the month, sign up for it online at our website, www.aptmags.com, or send an email to js@aptmags.com saying you want to join the mailing list.
Multifamily Boasts Solid Fundamentals in Weak Economy, Industry Experts Say
Source: MULTIFAMILY EXECUTIVE MAGAZINE
By Chris Wood
Key players in the multifamily industry offered insight on the industry's strengths and challenges in the next few years at the Multifamily Trends Conference portion of the Pacific Coast Builders Conference, held in San Francisco this week.
Putting a finger on the industry pulse, conference chairman and Houston-based Camden Property Trust CEO Ric Campo noted that "multifamily is a great place to be" in his opening address. "Underlying fundamentals are good, and as a result of foreclosures on the single-family side, we are seeing an increase in the renter pool from 30.9 [percent] to 32.2 percent. That's 1.5 million new renters looking for an apartment," Campo explained.
Among a litany of positive industry fundamentals, Campo did recognize a void in the construction and asset transaction arenas. He also conceded that broader economic issues could impact multifamily operators in the coming 12 to 18 months, particularly among unprepared players. But overall, Campo urged the conference to turn their focus away from the "woe is me" mentality infecting American industry today.
"Some of the forecasting at NMHC indicates that by 2011 we might even be facing rental shortages," Campo said. "The next several years are going to be a time of great opportunity but in a market in which there is no place to hide. You will take part in the value creation of the industry, or you will get run over by it."
CLICK HERE to read full article
By Chris Wood
Key players in the multifamily industry offered insight on the industry's strengths and challenges in the next few years at the Multifamily Trends Conference portion of the Pacific Coast Builders Conference, held in San Francisco this week.
Putting a finger on the industry pulse, conference chairman and Houston-based Camden Property Trust CEO Ric Campo noted that "multifamily is a great place to be" in his opening address. "Underlying fundamentals are good, and as a result of foreclosures on the single-family side, we are seeing an increase in the renter pool from 30.9 [percent] to 32.2 percent. That's 1.5 million new renters looking for an apartment," Campo explained.
Among a litany of positive industry fundamentals, Campo did recognize a void in the construction and asset transaction arenas. He also conceded that broader economic issues could impact multifamily operators in the coming 12 to 18 months, particularly among unprepared players. But overall, Campo urged the conference to turn their focus away from the "woe is me" mentality infecting American industry today.
"Some of the forecasting at NMHC indicates that by 2011 we might even be facing rental shortages," Campo said. "The next several years are going to be a time of great opportunity but in a market in which there is no place to hide. You will take part in the value creation of the industry, or you will get run over by it."
CLICK HERE to read full article
Monday, July 7, 2008
Investor says only one road to foreclosure profit
by Matt Padilla, Register Reporter and Blogger
I quizzed Lee about the mortgage market, his business, and his prediction for a housing rebound. I have a feeling this interview will appeal more to housing bears than bulls.
Q. Foreclosures in Orange County have broken all the records set in the housing slump of the early 1990s. When is this bloodbath going to end?
A. I’m projecting that the market will start stabilizing in four to five years from now – 2012-2013. That’s not to say home prices will be back to their peak, which could take up to eight years. I base this opinion on proprietary information Foreclosure Trackers has at its disposal. Banks turn to Foreclosure Trackers as the first line of defense because we are defaulted mortgage experts and buyers. Banks send their portfolios to us for evaluation every week before anyone else in the nation. Our company is on the “inside track” with the banks and often times receives information first before the “outside” track – such as the government, title companies, investment firms, lawyers, real estate firms, and even competitor foreclosure sites.
Q. With so many foreclosures, how is an investor supposed to make money buying a property in some stage of foreclosure? As the housing bears like to say, isn’t buying a foreclosure now akin to catching a falling knife?
A. Precisely. There are really five main strategies for investing in foreclosures. But four of the five rely on equity, which doesn’t really exist in today’s market. An equity purchase, foreclosure auction, short sale or REO purchase can all be profitable, wise investment strategies – just not in today’s market. There is only one strategy that makes sense in this market and that’s defaulted and performing mortgage (notes) investing.
At Foreclosure Trackers free seminars, we teach investors how to “buy the loan, not the home” and “work out, not kick out” strategies for defaulted mortgages and note investing. As I said, there’s no equity in properties today. By buying the loan at a substantial discount, we create equity and we are able to turn a profit on the property while helping Americans to save their homes.
This is an example of how it works: a bank may hold a note for a defaulted 1st mortgage in the amount of $800,000. The Broker Price Opinion may state the value of the property is $600,000. This property is over-encumbered or upside down. Foreclosure Trackers buys the note for $325,000. We then deploy our “work out, not kick out” strategy of working with the homeowner and reduce the principal balance to $480,000. The homeowner gets a principal reduction of $320,000, and is able to handle their mortgage payments going forward.
We’re doing our best to get the word out so the movement will start to make a real difference, both to those looking to earn great profits and those who want to help save America one home at a time.
CLICK HERE to view full article
I quizzed Lee about the mortgage market, his business, and his prediction for a housing rebound. I have a feeling this interview will appeal more to housing bears than bulls.
Q. Foreclosures in Orange County have broken all the records set in the housing slump of the early 1990s. When is this bloodbath going to end?
A. I’m projecting that the market will start stabilizing in four to five years from now – 2012-2013. That’s not to say home prices will be back to their peak, which could take up to eight years. I base this opinion on proprietary information Foreclosure Trackers has at its disposal. Banks turn to Foreclosure Trackers as the first line of defense because we are defaulted mortgage experts and buyers. Banks send their portfolios to us for evaluation every week before anyone else in the nation. Our company is on the “inside track” with the banks and often times receives information first before the “outside” track – such as the government, title companies, investment firms, lawyers, real estate firms, and even competitor foreclosure sites.
Q. With so many foreclosures, how is an investor supposed to make money buying a property in some stage of foreclosure? As the housing bears like to say, isn’t buying a foreclosure now akin to catching a falling knife?
A. Precisely. There are really five main strategies for investing in foreclosures. But four of the five rely on equity, which doesn’t really exist in today’s market. An equity purchase, foreclosure auction, short sale or REO purchase can all be profitable, wise investment strategies – just not in today’s market. There is only one strategy that makes sense in this market and that’s defaulted and performing mortgage (notes) investing.
At Foreclosure Trackers free seminars, we teach investors how to “buy the loan, not the home” and “work out, not kick out” strategies for defaulted mortgages and note investing. As I said, there’s no equity in properties today. By buying the loan at a substantial discount, we create equity and we are able to turn a profit on the property while helping Americans to save their homes.
This is an example of how it works: a bank may hold a note for a defaulted 1st mortgage in the amount of $800,000. The Broker Price Opinion may state the value of the property is $600,000. This property is over-encumbered or upside down. Foreclosure Trackers buys the note for $325,000. We then deploy our “work out, not kick out” strategy of working with the homeowner and reduce the principal balance to $480,000. The homeowner gets a principal reduction of $320,000, and is able to handle their mortgage payments going forward.
We’re doing our best to get the word out so the movement will start to make a real difference, both to those looking to earn great profits and those who want to help save America one home at a time.
CLICK HERE to view full article
Wednesday, July 2, 2008
Apartment Building Security
By Robert Levitt
We are our "brothers keepers". If we don't look out for others, who will look out for us? This is especially true when it comes to crime, whether it be potential assaults or property crimes (theft or vandalism). Know who your neighbors are and they should know you. Not only does it make for a better community, but it is also better security to know who should be on the premises.
Each of us can do our bit to prevent crime before it happens by being alert and following the following suggestions throughout your building. Learn these tips and make them part of your everyday habits and teach them to your children.
CRIME PREVENTION IS EVERYONE'S RESPONSIBILITY
Building Entry
Suspicious or unknown people trying to get into the building should be referred to the building superintendent, management or security. If you do not want to talk to them, then let the building superintendent, management or security know about these people immediately.
NEVER allow strangers to enter the building as you are leaving or entering any apartment building. Be aware of anybody hanging around the door who looks disinterested but makes a dash to hold open the door after it has been unlocked. Make sure all outer doors are kept locked at all times.
DO NOT buzz anyone you don't know into the building. Criminals have been known to randomly buzz people's apartments saying it is a pizza delivery and another tenant is not answering so can you please let them in.
List only your first initial along with your last name in the lobby tenant directory.
Do not let canvassers into your building. They do not have the right to be in the building unless there are there for government elections, or for organizing tenants into a tenants' association, where under the applicable laws, these people do have a right to be in the building.
Doors
If your apartment doors do not have a "peephole", have one added.
Also, criminals, or people you just don't want to bother you, can use the peephole in reverse. They can look in from the outside to see if the light coming through is changing and (if the quality of the image is good enough even if it is very small,) if it appears something is walking across the room, to indicate someone is in the apartment even if you are not answering. The solution to this is very simple. Take a small flap of leather, plastic or other opaque material, and affix it on the inside of your door above the peephole with a small short screw or even a thumbtack so that it covers the peephole. I used a piece of a new plastic watchstrap that I replaced on a friends watch for the job. That way nobody on the outside will ever see any light coming through it; it will always be dark. When there is somebody knocking at your door and you want to look out, wait until your face is close to the door (to block the light) then rotate the flap out of the way to look out, and when you are finished before moving away from the door, rotate the flap back; All the person on the outside will see is darkness through the peephole and will not know you just checked out that they were there.
Ensure that a new lock has been installed when your tenant moves into an apartment so that a former tenant can not gain entry.
Replace the entry lock from the common hallway into your apartment if it is one where the keyhole is in the center of the doorknob. These can be easily defeated. Replace them with deadbolt locks (preferable with minimum one-inch/25mm long bolts). Deadbolt locks are ones with rectangular bolts that go into the doorframe when locked.
"Jimmy plates" are a scam. These are pieces of metal which fraud artists claim will prevent criminals from sticking in a credit card between your door and frame to enter your apartment. This cannot be done to a rectangular deadbolt. These "installers" are the criminals. They often want to charge you $10 to $20 for each installation. (Think about it. If they can get 200 tenants in a building to pay them $10 each for installing 10 cents worth of useless metal, they can make almost $2000 off of just one building.) Jimmy plates are useless.
Legitimate locksmiths can do things to improve the security of your doors. When installing improved locks, they can securely install metal sheeting that wraps around the front, side and back of the door, with a hole where the lock goes through. These plates are meant to reinforce wooden doors around the lock. If you have a metal frame for your door it is unlikely you need anything to improve it. If you have a wooden door frame, a locksmith can examine it to make sure it is solid and tight fitting, and if not, they can remove the wood molding to add extra wood inside the frame, and then attach the strike plate (the metal plate added to wooden door frames where the dead bolt goes through when locked) with extra long screws (2.5 inch/6cm,) before putting back the moldings. Of course the locksmith may change the lock or add a second one with a higher security lock.
If you lose your keys, you should replace your lock.
You may want to install an alarm system in your apartment.
Windows and sliding doors
You may like to keep your windows and sliding door open. Criminals also like you to do this, especially if you are in a basement, first floor or a second floor apartment.
You can limit how much your windows (for ones that slide sideways,) and sliding doors open, to an amount less than a person can fit through, by putting a piece of broomstick or other object of similar size, cut to the right length, into the sliding track. For older upwardly sliding windows in wooden frames, you can drive a large nail into the frame at a level above the window to limit its travel to just enough of a crack to let in the air, then remove the nail and then push it back into the hole that remains (you don't want this to be permanent in case of a fire where you may need to get out of the window yourself).
Elevators
Look to see who is in the elevator before entering.
DO NOT enter the elevator if you do not feel comfortable; Wait for the next one.
When in the elevator, stand beside the control panel and know where the emergency alarm button is.
If a suspicious person enters the elevator, exit before the door closes.
Parking garages
If your underground parking garage is too dark, contact your municipal (city) building inspector, as many cities have building standards as to the minimum brightness of underground garages.
ALWAYS be aware of your surroundings.
If there are suspicious characters in the garage that arouse your concern, go back. If you are entering the garage from the apartment, go back quickly into the building and lock the door behind you, and if you are coming into the garage with your car drive your vehicle out of the garage. In both cases let the superintendent, building management or security know about it immediately.
Do not loiter in the garage. When going to your car, have your keys ready in your hand with the correct key next to your index finger, which will enable you to enter your vehicle quickly, plus keys can be used as a weapon to poke an attacker in the face with to defend yourself if necessary. When leaving your car, do the same.
Always check the inside of your vehicle through the car window before entering.
Always leave your automobile locked, and remove any valuables.
The Telephone
Tell you children not to let callers know if they are home alone, unless they are the ones making a call and it is to the Police, Fire Department or 911.
Don't have a message on your telephone answering machine that lets callers know no one is at home, that there is only one person living there, or that you are on holidays. Instead say that "we are "presently not available to come to the phone"; That way a caller will not know that you live alone or that you are out, only that you and others may be busy with something else but may be there. If you are going away on holidays, you will have to let friends and family know that you are away, so they do not keep calling the answering machine.
Going on vacation
Inform a trustworthy neighbor of when you are leaving and when you will be back. Have them pick up any items such as junk mail left outside of your door or in your mailbox, so there will be no visible sign left for criminals to know you are away.
Cancel all deliveries for that period; Thing like the newspaper.
Use timers to turn on and off lights and/or radios at various times to disguise your absence.
DO NOT leave a note to inform people that you are not home.
Crimes
IF YOU SEE A CRIME BEING COMMITTED, IMMEDIATELY CALL THE POLICE!
If you see one or more strangers removing items out of a neighbor's apartment without the neighbor being present CALL 911.
When you arrive home, if you believe a crime may have occurred, do not enter. The criminal(s) may still be in the apartment. Use a neighbor’s telephone and call the police.
If a crime has occurred, also use a cell phone or a neighbor's telephone to call the police. DO NOT touch anything or clean up until the police have inspected the apartment or vehicle for evidence.
Write down the descriptions of any suspicious people and the license number of any suspicious vehicles.
You should also keep a list of all your valuables in case a crime ever does occur.
We are our "brothers keepers". If we don't look out for others, who will look out for us? This is especially true when it comes to crime, whether it be potential assaults or property crimes (theft or vandalism). Know who your neighbors are and they should know you. Not only does it make for a better community, but it is also better security to know who should be on the premises.
Each of us can do our bit to prevent crime before it happens by being alert and following the following suggestions throughout your building. Learn these tips and make them part of your everyday habits and teach them to your children.
CRIME PREVENTION IS EVERYONE'S RESPONSIBILITY
Building Entry
Suspicious or unknown people trying to get into the building should be referred to the building superintendent, management or security. If you do not want to talk to them, then let the building superintendent, management or security know about these people immediately.
NEVER allow strangers to enter the building as you are leaving or entering any apartment building. Be aware of anybody hanging around the door who looks disinterested but makes a dash to hold open the door after it has been unlocked. Make sure all outer doors are kept locked at all times.
DO NOT buzz anyone you don't know into the building. Criminals have been known to randomly buzz people's apartments saying it is a pizza delivery and another tenant is not answering so can you please let them in.
List only your first initial along with your last name in the lobby tenant directory.
Do not let canvassers into your building. They do not have the right to be in the building unless there are there for government elections, or for organizing tenants into a tenants' association, where under the applicable laws, these people do have a right to be in the building.
Doors
If your apartment doors do not have a "peephole", have one added.
Also, criminals, or people you just don't want to bother you, can use the peephole in reverse. They can look in from the outside to see if the light coming through is changing and (if the quality of the image is good enough even if it is very small,) if it appears something is walking across the room, to indicate someone is in the apartment even if you are not answering. The solution to this is very simple. Take a small flap of leather, plastic or other opaque material, and affix it on the inside of your door above the peephole with a small short screw or even a thumbtack so that it covers the peephole. I used a piece of a new plastic watchstrap that I replaced on a friends watch for the job. That way nobody on the outside will ever see any light coming through it; it will always be dark. When there is somebody knocking at your door and you want to look out, wait until your face is close to the door (to block the light) then rotate the flap out of the way to look out, and when you are finished before moving away from the door, rotate the flap back; All the person on the outside will see is darkness through the peephole and will not know you just checked out that they were there.
Ensure that a new lock has been installed when your tenant moves into an apartment so that a former tenant can not gain entry.
Replace the entry lock from the common hallway into your apartment if it is one where the keyhole is in the center of the doorknob. These can be easily defeated. Replace them with deadbolt locks (preferable with minimum one-inch/25mm long bolts). Deadbolt locks are ones with rectangular bolts that go into the doorframe when locked.
"Jimmy plates" are a scam. These are pieces of metal which fraud artists claim will prevent criminals from sticking in a credit card between your door and frame to enter your apartment. This cannot be done to a rectangular deadbolt. These "installers" are the criminals. They often want to charge you $10 to $20 for each installation. (Think about it. If they can get 200 tenants in a building to pay them $10 each for installing 10 cents worth of useless metal, they can make almost $2000 off of just one building.) Jimmy plates are useless.
Legitimate locksmiths can do things to improve the security of your doors. When installing improved locks, they can securely install metal sheeting that wraps around the front, side and back of the door, with a hole where the lock goes through. These plates are meant to reinforce wooden doors around the lock. If you have a metal frame for your door it is unlikely you need anything to improve it. If you have a wooden door frame, a locksmith can examine it to make sure it is solid and tight fitting, and if not, they can remove the wood molding to add extra wood inside the frame, and then attach the strike plate (the metal plate added to wooden door frames where the dead bolt goes through when locked) with extra long screws (2.5 inch/6cm,) before putting back the moldings. Of course the locksmith may change the lock or add a second one with a higher security lock.
If you lose your keys, you should replace your lock.
You may want to install an alarm system in your apartment.
Windows and sliding doors
You may like to keep your windows and sliding door open. Criminals also like you to do this, especially if you are in a basement, first floor or a second floor apartment.
You can limit how much your windows (for ones that slide sideways,) and sliding doors open, to an amount less than a person can fit through, by putting a piece of broomstick or other object of similar size, cut to the right length, into the sliding track. For older upwardly sliding windows in wooden frames, you can drive a large nail into the frame at a level above the window to limit its travel to just enough of a crack to let in the air, then remove the nail and then push it back into the hole that remains (you don't want this to be permanent in case of a fire where you may need to get out of the window yourself).
Elevators
Look to see who is in the elevator before entering.
DO NOT enter the elevator if you do not feel comfortable; Wait for the next one.
When in the elevator, stand beside the control panel and know where the emergency alarm button is.
If a suspicious person enters the elevator, exit before the door closes.
Parking garages
If your underground parking garage is too dark, contact your municipal (city) building inspector, as many cities have building standards as to the minimum brightness of underground garages.
ALWAYS be aware of your surroundings.
If there are suspicious characters in the garage that arouse your concern, go back. If you are entering the garage from the apartment, go back quickly into the building and lock the door behind you, and if you are coming into the garage with your car drive your vehicle out of the garage. In both cases let the superintendent, building management or security know about it immediately.
Do not loiter in the garage. When going to your car, have your keys ready in your hand with the correct key next to your index finger, which will enable you to enter your vehicle quickly, plus keys can be used as a weapon to poke an attacker in the face with to defend yourself if necessary. When leaving your car, do the same.
Always check the inside of your vehicle through the car window before entering.
Always leave your automobile locked, and remove any valuables.
The Telephone
Tell you children not to let callers know if they are home alone, unless they are the ones making a call and it is to the Police, Fire Department or 911.
Don't have a message on your telephone answering machine that lets callers know no one is at home, that there is only one person living there, or that you are on holidays. Instead say that "we are "presently not available to come to the phone"; That way a caller will not know that you live alone or that you are out, only that you and others may be busy with something else but may be there. If you are going away on holidays, you will have to let friends and family know that you are away, so they do not keep calling the answering machine.
Going on vacation
Inform a trustworthy neighbor of when you are leaving and when you will be back. Have them pick up any items such as junk mail left outside of your door or in your mailbox, so there will be no visible sign left for criminals to know you are away.
Cancel all deliveries for that period; Thing like the newspaper.
Use timers to turn on and off lights and/or radios at various times to disguise your absence.
DO NOT leave a note to inform people that you are not home.
Crimes
IF YOU SEE A CRIME BEING COMMITTED, IMMEDIATELY CALL THE POLICE!
If you see one or more strangers removing items out of a neighbor's apartment without the neighbor being present CALL 911.
When you arrive home, if you believe a crime may have occurred, do not enter. The criminal(s) may still be in the apartment. Use a neighbor’s telephone and call the police.
If a crime has occurred, also use a cell phone or a neighbor's telephone to call the police. DO NOT touch anything or clean up until the police have inspected the apartment or vehicle for evidence.
Write down the descriptions of any suspicious people and the license number of any suspicious vehicles.
You should also keep a list of all your valuables in case a crime ever does occur.
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