If you read the news or watch the tube, its time to crawl back under the covers!  Hardly!

The news could not be better for wise real estate investors. Even “house values wet blanket” Dr. Bob Shiller is warning against over-reaction to this data.

Dr. Bob to the rescue?
Shiller (of the astutely marketed S&P Fiserv Case/Shiller MacroMarkets index fame) is telling people not to read too much into the data

“Let’s not overreact to these latest sales numbers,” Shiller, co-founder of the S&P/Case-Shiller Home Price Index, told Bloomberg. “July is an anomalous month.”

But last month’s survey of forecasters by his MacroMarkets firm showed they expect prices to be flat for the rest of the year. “They could (even) be going up a couple percent a year,” Shiller said.

“Dire forecasts, while they’re possible and I’m sometimes in that camp, aren’t the consensus.”

Now is OUR time!
Read between the lines. Every real estate story has a silver lining. This is the whipsaw reaction to the end of an attempt at market stimulation through tax incentives. They have stopped and the market abruptly reverts to normal behavior, not a crash.

Competition from first or move up home buyers with tax credits has gone away, many who opened escrows could not close and transactional vendors and builders are getting jittery just reading these headlines.

Warren Buffett’s over quoted “greed versus fear, versus fear versus greed” investing motivation applies now as fair weather investors are on the sidelines.

Most real investors have not seen markets like this in their lifetimes and will probably not see these again based on standard population and demand trends.

Rental investors, who buy on fundamentals, should be comfortable knowing value of that investment will improve, after it has paid for itself, generated positive cash flow, tax deductions and provided a hedge against inflation. If domestic investors do not believe this, there are plenty of foreign buyers that do.

Learn more about these foreign and our domestic market opportunities at Personal Real Estate Investor Magazine’s Investor Provider Leadership Summit – September 17th at The Royal Palms. We will introduce and help vendors and clients sell more in foreign and domestic (& SDIRA) markets.  Email Andrew.waite@nexzuspub.com for more information.

Affordability due to lack of home buyers and general market softness has continued to make desirable cash flowing properties in well located markets accessible to investors and they have bought extensively.  Notice the most dynamic markets in the run up through 2007 (per sample below)  now trend to oversold.

Fewer home buyers have been able to qualify for owner occupied loans and fewer loans have be processed due to the banks being unable to deal with the origination volume, short sale requests, modification and REO disposition loads. They are essentially drinking from a fire hose using the same “tin cup” they went to The Feds with, and as a result cannot immediately meet new or existing loan servicing demands.

The silver lining in this for the economy is that the fear of a deluge of REOs hitting the market in a short period of time is unlikely as it would trash values. This would not help the banks, sellers or Realtors©.

Fear subdues price appreciation which is good for investors who are out buying en masse. This should keep investment grade properties available for at least the next two quarters, however well sited rental properties in cash flow ranges in good markets are getting harder and harder to find as inventories in these great price ranges ($50K to $200K)  and great locations are all most depleted. This was not in the Fed plan.  Surprise: their national solution ignores local market dynamics.

The other unintended consequences of this current Federal government largesse and push to retrofit residential real estate for energy efficiency, is that the low hanging beneficiaries of these grants, incentives and rebates are real estate investors as they can recapture capital and monetize these strategies to quite unimagined, yet legitimate ends.

This inventory data and our knowledge of How to Get Maximum Performance from Your Investment Properties indicate we are in a great market and maybe a golden age for investors who know what they are doing.

Below are some high level market statistics for property value trends and inventory levels in major metropolitan areas across the country. You can follow the link in the bottom of the table to your local MLS inventory trends.

For more information on how to find and leverage an inexpensive by high return retrofit strategy, call NEXZUS at 602-241-0800. We have realized significant CAPX and CAPX recovery, OPX appraisal and rental premium improvements many of which are undiscovered by investors.

Article Courtesy of:
Andrew Waite,
Publisher
NEXZUS Publishing Group / Personal Real Estate Investor Magazine

Get your subscription to Americas best selling real estate investing magazine

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Late Wednesday June 30th the senate approved the measure just hours ahead of the original June 30th deadline, and only one day after House of Representatives approval of the measure.

On Friday July 2nd President Barack Obama signed off on HR 5623, otherwise known as “The Homebuyer Assistance and Improvement Act of 2010”. This extends of the expiration date for the federal home buyer tax credit from June 30th 2010 an extra 3 months to September 30th 2010.The legislation will create a seamless extension even though the bill was signed into law a few days after the original expiration date.

This bill doesn’t help anyone currently shopping for a home. Buyers must have signed a contract by April 30 to qualify for the tax break, now first-time homebuyers will have until Sept. 30 to close on their purchases and receive an $8,000 tax credit.

Qualified existing homeowners (purchasing a replacement primary residence) also have until Sept. 30 to close on new homes and receive a tax credit of up to $6,500.

As many as 180,000 people with pending contracts breathe a sigh of relief as the tax credit extension rushes through in the final hours. The National Association of Realtors (NAR) lobbied for the extension – citing a large influx of buyers trying to take advantage of the tax credit had overwhelmed mortgage lenders trying to process loans in time, and also to compensate for complicated short sale transactions which can sometimes take months to complete.

$8,000 First-time Home Buyer Tax Credit Summary

• A first-time home buyer is someone who has not owned a principal residence during the three-year period prior to the purchase.
• Qualifying primary residences include: single-family homes, condos, townhomes, and co-ops
• The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The tax credit applies only to homes priced at $800,000 or less.
• The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by September 30, 2010 will qualify.
• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
• For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit Summary

• To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
• The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
• Qualifying primary residences include: single-family homes, condos, townhomes, and co-ops
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
• The tax credit applies only to homes priced at $800,000 or less.
• The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by September 30, 2010.
• Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

But what most people don’t know, however, is that you can have a house in your IRA. Or even an apartment building…land…a condo. It’s all possible – you just have to think outside the brokerage account.

Real estate is what’s referred to as a non-correlated asset. In other words, its performance isn’t dictated by the performance of the equity and fixed income markets. Thus, it’s a valuable diversifier for your investment portfolio and can act to offset losses should the stock and bond markets go haywire.

Using real estate in your IRA has been allowed by the IRS since the 70s, so why don’t more people know about it (and why isn’t your stock broker telling you about it?)? Well, it’s because pre-packaged solutions provided by wirehouses, online brokerages and financial advisors are easy to sell and cost little to maintain. Having a real estate or self-directed IRA that can invest in real estate actually takes some education and a knowledge of what you’re buying. And – here’s the kicker – your financial advisor doesn’t make a commission on that self-directed IRA you’re going to open because he can’t open one for you. That’s the most common reason you haven’t heard about it.

Another great library of resources for every level of investor can be found at IraPad.com. All of their resources are free, so just sign up and open the oyster to your financial future online. While real estate in your IRA isn’t for everyone, learning something new never hurt!

Locate luxury real estate bargains with ease

When searching for investment property, it’s good to know where your markets of choice stand. Are prices rising? Falling? Are there areas you should consider (but haven’t for some reason)? We thought Forbes.com hit the nail on the head with their Interactive Housing Map. Most of our blog readers and site visitors are on the hunt for real estate bargains across the country. This map lets you search by zip code (awesome!) and see if your zip code of choice made the top 500 most expensive zip codes. It will then let you know the specs on the market (median home price, income, percent price decrease, inventory levels).

If you’re a primary home buyer looking for a luxury home or perhaps a real estate investor looking to pick up a bargain in a high-priced area, Forbes.com’s interactive map can help you start your search. If you find an area you like, check and see what’s available in the InvestorLoft.com Prop Scout investment property search engine and then grab your Realtor – and grab those bargains!

Is it time to look for investment property beyond your own backyard?

The Wall Street Journal reported that July showed a 9.6% rise in new home sales, sealing the deal on a fourth month of a faster pace in the housing industry.

Is it cause for panic?

Have we missed the boat if we haven’t yet bought?

We don’t think so.

While business may be picking up across the residential real estate sector, there are plenty of deals to be had throughout the U.S. You just have to be willing to do the math and think beyond county or state lines.

If your own backyard is on the upswing and prices are picking up pace, why not consider shopping outside your local market? If there’s a rental property in a prime location with low vacancy rates (throw in turnkey to boot), does it make sense to keep dollars that could be working for you at bay because you can’t do a drive-by on your investment on a Saturday morning? For the do-it-yourself landlord, yes. Managing property yourself beyond state lines is, without a doubt, a task. But if you’re going to hire a property manager and prefer to leave the day-to-day to someone else, what does it really matter where you make your investment?

If you’re going to shop beyond your backyard for rental property or other investment property, here are some things to take into consideration:

• Property Management: for rental holdings beyond your backyard, it’s imperative. Why burden family with the task when you can keep the Thanksgiving table a friendly place to be by outsourcing to the pros?
• Vacancy Rates: do your research (and a property management firm can help greatly). Don’t get stuck with a great price on a property that will be vacant for 3 to 4 months out of the year.
• Know the Neighborhood: is it prone to floods? Hurricanes? Blizzards? What’s the average rent rate in the area for similar properties.
• Extra Expenses: don’t forget to ask about things like property taxes and HOAs.

Use InvestorLoft’s PropScout Investment Property Search Engine to begin the search beyond your backyard. What’s available in Fresno? Virginia Beach? Albuquerque? Las Vegas? Take a wider search for a spin and see what you might be missing.

Real estate investment terms - today's topic

Cash flow…cap rate…cash on cash return…

It’s enough to blow your mind, isn’t it?

We’ve put together this primer for our readers from the most common questions our Customer Service Team comes across. They work with our Investor members to define key real estate terms, help them navigate our site and find articles in our Real Estate Investing Articles library day in, day out. So today, we’re focusing on three key terms that real estate investors need to know: Cash Flow, Cap Rate and Cash on Cash Return.

Are you subscribed to our blog? Don’t miss out on our blog posts – add us to your reader or subscribe via email. Just look at the top right of your screen right now and choose the option that suits you best!

CASH FLOW

Annual Net Operating Income is also commonly referred to as Cash Flow. This represents the annual income or loss the investment property actually generates after collecting a year’s worth of rent and paying the annual expenses associated with owning and operating the property. Cash Flow is calculated by subtracting the Annual Total Operating Expenses from the Annual Gross Rental Income.

So, the formula is:

Annual Net Operating Income = Annual Gross Rental Income – Annual Total Operating Expenses

Read InvestorLoft’s expanded explanation of Cash Flow.

CAP RATE

Cap Rate is a component of return on investment for an investment property as it relates to the Purchase Price and based on the amount of Annual Net Operating Income the property will yield (not including mortgage payments or considering income tax) in proportion to the purchase price of the property.

Cap Rate is calculated by taking the Annual Net Operating Income (or Cash Flow) of the investment property and dividing it by the Purchase Price.

So, the Cap Rate formula is:

Cap Rate = Annual Net Operating Income (not including mortgage payments)/Purchase Price

Read InvestorLoft’s expanded explanation of Cap Rate.

CASH ON CASH RETURN

The Cash on Cash Return of a property is often times referred to as a property’s yield. Cash on Cash Return is a way of evaluating the return on investment of an investment property in relation to your out-of-pocket expense, based on the amount of Annual Net Operating Income the property will yield (not considering income tax) in proportion to your Down Payment and Repair Cost. The Cash on Cash Return formula is calculated by taking the Annual Net Operating Income of an investment property divided by the amount of your Down Payment and immediate Repair Cost.

So, the Cash on Cash Return formula is:

Cash on Cash Return = Annual Net Operating Income/(Down Payment + Repair Cost)

Read InvestorLoft’s expanded explanation of Cash on Cash Return.

How long are you willing to wait for a tenant?

Your rental home is sitting vacant and you’re left paying the tab on the mortgage and everything else that comes along. Sure, you expected a month or two of vacancy every year, but it’s still empty! Whether houses surrounding yours are in the same boat or getting snapped-up off Craigslist like $20 bicycles, there are certain steps you can take to drastically increase your property views and lower the likelihood of longer than necessary vacancy periods.

Photos. Blurry doesn’t cut it. And if you don’t have photos on your listing, that’s even worse. Photos are the difference between lookers and renters. Take the time to get some great photos of your rental property. Big backyard for dogs? Take a picture. Hardwood floors? Take a picture. New appliances? Take a picture!

Incentives. If your rental property has been vacant more than 45 days, it’s likely you’re at the threshold of your estimated vacancy rate. It’s time to get creative, and that’s where incentives come in. What are you willing to do in order to get a tenant in place? One month free rent, utilities paid for first month, pick up the water bill, free lawn maintenance, new ceiling fans, a brand-new garage door opener, or option to renew at 2^nd year for same rate all make enticing offers for prospective tenants.

Be a Craigslist Snoop. If you’re a self-managing landlord or find that your property management company is missing the boat with securing tenants for your rental property, start snooping on your own. Visit Craigslist and enter your zip code in the rentals section and see what your neighboring homes/apartments/condos/duplexes have that you don’t. You can also see how you compare to your neighboring rentals and whether you’ve got some work to do to be competitive or if yours really is the nicest property on the block. There’s nothing wrong with being nosey!

Allen Klosowski (K2 Photo Studio), Josh Mishell (Flying Dog Brewery), Erika Napoletano (InvestorLoft.com), Janie Gianotsos (Food Bank), Josh Clauss (Tuggl.com), and Rich Chirco (Food Bank) - photo by Scott Lawan

Some people ask: what can you really say in 140 characters? The answer might surprise you.

At InvestorLoft, we prefer to ask what we feel is a better question:

What can you DO with 140 characters?

InvestorLoft has been actively involved in the Twitter online community since November of 2008 (you can follow our feed and join the conversation here). It’s here that we connect with other real estate industry professionals, real estate investors and members of our local Denver community and beyond.  Being a Denver-based business, there’s no lack of enthusiasm we have for this city we call home and we’re always looking for a way to give back.

Last night, InvestorLoft was proud to be a part of the largest live gathering of Twitter users in Denver to-date by participating in the monthly Denver Tweetup. A live gathering of “virtual people,” the event saw over 300 local business owners, entrepreneurs and other users of Twitter come out to socialize in full force. Last night was special, however: the event was working to raise funds for the Food Bank of the Rockies. Flying Dog Brewery generously donated the refreshments for the event while another local Denver business, Tuggl.com, worked with the Food Bank to arrange the donations. Eventgoers generously donated $1261.50, which translated to 5046 meals that the Food Bank of the Rockies can now provide to Coloradans in need.

And it was all done through Twitter. The people who attended last night’s event are to be thanked, alongside all of the event volunteers, Flying Dog Brewery and Tuggl.com. If it weren’t for the power of Twitter and social media, InvestorLoft and our co-organizers wouldn’t have been able to get this event organized — we were given 5046 great reasons to keep using Twitter last night! Our Director of Communications, Erika Napoletano, has been an integral part of the planning process for the Denver Tweetup events since their inception in December 2008. From that first monthly event until August’s, they’ve seen attendance steadily increase from 30 guests to last night’s 300. That is the power of Twitter.

If you’re a real estate industry professional using Twitter, ask yourself: what can I DO with 140 characters? As we said, the answer might surprise you. Sometimes it’s not all about your business.

Sometimes it’s about the community in which you DO business.

Watch CBS 4 Denver’s coverage of the event HERE!

We thank @mistymontano and @CBS4Denver for covering the event on the 10pm news last night as well as Kendra Wiig (@polyhazard) for her great write-up on Examiner.com. We’re delighted to have partnered with the Food Bank of the Rockies and glad for the generous donations from our attendees. Additional thanks to Tuggl.com and Josh Clauss for coordinating the charitable aspect, Flying Dog Brewery for their generous donation of libations, venue and marketing support by Josh Mishell, and Allen Klosowski for working with our Director of Communications month after month to consistently create great events for the Denver Twitter community.

Receive buyer leads from InvestorLoft in your market

Realtors – you’ve worked hard and long to be a local expert in your market. You know sales trends, great neighborhoods, ones to avoid and the ins and outs of making offers on short sales. Wouldn’t it be great if you could share that knowledge and expertise with InvestorLoft’s investor buyers?

You can!

If you are a Realtor who meets the following criteria, you are eligible to be a Local Market Expert for InvestorLoft and receive leads from unrepresented buyer members shopping in your area!

Criteria our experienced Success Team Members must meet to join our Lead Network:

• Must have at least three (3) years experience as a real estate professional
• Must have handled a minimum of five (5) investor transactions
• Must have a clean ethical professional record with no ethics complaints against your professional licensure.

Benefits of Success Team Membership:

• More Leads, Less Legwork: receive leads from buyers who do not have representation in your market. Our buyers look to you to guide them through a real estate investment purchase as an expert in your local market.
• Month-to-Month Contracts: start receiving buyer leads for as little as $9 per month (market pricing varies depending on number of listings and local population, one-time setup fee applies)
• Design Your Own Territory: reserve one or several counties in your local market – pay the setup fee only once!