Originally Posted by Tyler McCracken on www.askthelandlord.com on September 20, 2009
It’s a Sunday afternoon and our Panther’s have just begun the game against the Atlanta Falcons… Their looking good on the first drive which is a pleasant surprise given all the games (including preseason) to date.
Just like a game (and a team) of football…., juggling the World of Real Estate as an Investor is a minefield these days requiring anticipation, action, planning, and intuition (to name a few) to not only survive but thrive during this time of uncertainty.
I’ve found myself feeling better about the landscape of real estate this last week… Yet, I’m reminded that we’re headed into the slow season (at least for us merchandisers that sell short-term retail properties), the $8,000 Tax Credit is due to expire on 11/30/2009, and the Treasury is planning to reduce the purchasing of Freddie/Fannie backed loans starting in October -thus increasing the odds of home loan rate increases of up to a good 1%….
So what is it I’m doing and thus recommending?
I have no 100% certainty in direction. Also, remember that any advice is not necessarily gospel as all real estate is local and we all have different balance sheets, cash flows, and portfolio’s (whether it holds cash, mutual funds, stocks/bonds, and real estate)…. I’m always flabbergasted by ‘guru’s’ generic cheerleader responses with no idea if the advice actually pertains to the specific reader. Scary Stuff Huh? I’m reminded of this as I’m two weeks into a facebook page and a bit perplexed by guru postings -I’ll leave it at that.
I am particularly targeting rehab-to-retail homes in the $125k to $225k (retail) pricing range in select neighborhoods that are attracting entry level creative loafer buyers. Neighborhoods were one feels if any appreciation is to occur -that it will occur there. Presently, I’ve got two under contract to sell (knock on wood) and one rehab just beginning. Folks who know me know that I preach targeting neighborhoods that will appreciate above the city (Charlotte, NC) average appreciation rates. Remember some will go down, some sideways, and some up…. Don’t you want to be in the top appreciating places???
I’m also seeing a big market for FINANCING -sense we all know the banks (and even us hard money lenders) are being extremely selective beyond a point at times…. This financing can be in the form of lending others money to buy/rehab/rent property (both short and/or long term), buying property with owner financing, and/or selling property with owner financing. I’ve always been concerned about locking my money up long term when it comes to lending money. Recently, I’ve sold two properties with owner carry. One was cheap $26k were we were able to keep the PITI payment under $330/month, have a 17 year amortization (aka: wealth builder for the buyer), and a 5 year balloon (inflation protection for the seller)…. the other was a duplex for $65k with an interest only payment which provides better cash flow for the Buyer, removes vacancy, maintenance, and tenant variables from the seller … This is a duplex that at some point in time will suddenly pop to a $90k to $110K valuation. I predict this will occur when bank financing improves for the investor market. Somewhere out 3-7 years.
My Rental’s are performing well given the market. I’ve always maintained a very attractive rental rate for the rental (good bang for the buck)…., in an effort to “Slow the Turn” as I call it with tenant turnover. Per-fect How to “Slow the Turn” and you will unlock the 3rd magical key of wealth creation with rentals (long term holdings)…. What are the other two keys one will hear me discuss? Compounding and the icing on the cake (not to be taken for granted nor computed in your purchase analysis of a property): Appreciation.
I think today (and certainly tomorrow) is the time to be out there buying rentals. Find financing and don’t overbuy for your mix of cash-flow and balance sheet structure…. Remember to ignore sellers that tout TOP DOLLAR RENTAL RATES FOR SECTION 8 Build your investment analysis based on a middle (or even lower) of road average of rental rates for the area.
So there’s my two cents for the day…. hopefully my success is not dependent on the panther’s ability to execute against the Falcons or the entire season for that matter….
Real Estate Investing really doesn’t have an secret formula. The basic requirements are Time, Skill, and Money. One just has to properly access what they realistically bring to the table and build a system of creating cash flow (to live on) from short term merchandising solutions and creating wealth from long term investments.