The shadow market is coming out of the shadows, and the numbers are staggering. "But you should know that if you have been following my blog"
According to a report released yesterday by LPS (Lender Processing Services), “foreclosure inventory levels [stand] at 30 times monthly foreclosure sales volume.” As a result of this massive backlog, real estate analysts expect more downward pressure on U.S. home values as most of these homes are likely to reenter the market as REO properties rather than being sold in another more profitable manner[1].
The statistics on the foreclosure backlog are also staggering, with LPS reporting that the average U.S. loan currently in foreclosure has been delinquent for 537 days, and 30 percent of loans in foreclosure have not made payments in more than two years.
Thanks to slower processing times on foreclosures, it is unlikely that this backlog will disperse any time soon. In fact, although total U.S. loan delinquency has fallen nearly two percentage points over last year and foreclosure starts are down 14 percent from last year, the actual foreclosure rate is up as banks struggle to keep their books in order and intact[2]. With the “non-current inventory” logging in at nearly 7 million, the backlog is likely here to stay.
Many analysts have been predicting that 2011 will be the beginning of a recovery for many sectors of the real estate market, though most agree that the residential market has a long way to go. With this foreclosure backlog, however, do you think that home prices are likely to start a recovery by 2012?
If you do you must be on the "head stuck in the sand" train with the rest of the realtors. "LOL"
"With all the turmoil and unknown in the markets, investors today may be searching for a safe-haven. U.S. real estate wouldn't exactly sit at the top of the list for most, given the still uncertain state of the housing and credit markets, but there is one sector that seems to have fundamentals and sentiment on its side: Single Family Homes and Apartment Rentals.
We're in Boston, MA today for day two of the Spring Realty Check:
Opportunity Knocks.
Boston is home to Avalon Bay, one of the largest SFH (single family home) and apartment REITs in the nation. *Note: "This is until those reading this start working with me for minimum returns of 10% to investors in the fund. Interested? We are launching and looking for the right partners. Partners make 50% profits in the company and investors in the fund see 10% monthly returns."
Avalon Bays revenues were up 8% year over and shares are up 34% from a year ago. It's the upside to the downturn in housing. Many people who lost their homes to foreclosure have been forced to the rental market, others who are unable to get a mortgage are doing the same, and still others who would have headed toward home ownership have been scared away from the market by still falling prices. In turn, apartment vacancies are down, rents are up and REITs are reaping the rewards.
We interviewed a young couple in Boston, fiancées, and I think their insights are indicative of so many around the country. 'A lot of people are scared to buy just because if they have to move or things change, you lose money on the house and you might not be able to sell it. In my mind it's just easier and more safe to rent.' 'I think more and more people are going to go away from buying and start renting more just because it's convenient. It's a no brainer to rent, especially when you're young and you want to live in the city.'
The story appears to be the same in most cities around the country. Even though affordability is very high, renting just seems like the safer bet for many on the fence.
The big question of course is whether this is a temporary phenomenon or not?
One important fundamental of note: There is very little multi-family supply, as new construction essentially ground to a halt during the housing crash. The endless supply of REO SFH is sitting there vacant, waiting to be bought, brought back to market condition and utilized as long term rentals.
For those of you looking to be part of the new venture. We are looking for one (1) capital partner.
Capital Partner requirement: $200k Investment (these funds will be used for the opening of company branded Real Estate office and the purchase and rennovation of the first three model homes). Offices and homes are projected to generate profits within 60 days. Projected profits based on one time 200k cash injection over 15 year period is 3.2 million in cash and 40k monthly revenue. *Note: these projections are ultra conservative, and do not include any profits generated from the real estate office, Sales of the planned REIT or franchise of the business model to other states.
If you are interested, please contact us in private for full business model and to discuss working and capital relationship.
#1 What Investors should know about Inventory currently out there.
#2 What Realtor and Broker groups should know about the rest of us "that including the government" catching on to what you have been doing...
So onto this week's information:
#1 Only 30% of foreclosures on market
RealtyTrac Senior Vice President Rick Sharga said major banks currently hold roughly 1 million REO, or homes repossessed through foreclosure, but only 30% have actually made it onto the market. According to its year-end report, foreclosure filings reached a new high in 2010 and should climb even higher this year, possibly surpassing 4 million filings. And that's not counting the more than 5 million delinquent loans that have yet to enter the initial stages of the foreclosure process, Sharga said.
The major kink in the housing market's recovery, and for the macro economy overall, is the work left to be done on homes currently in the foreclosure process, those about to enter it and the amount of repossessed homes the banks must shed. Striking a proper balance on how to manage this shadow inventory of foreclosures is vital for the banks to show a healthy balance sheet while not dumping too many distressed properties onto the market, further dragging down home prices and values.
A recent study from Morgan Stanley showed the shadow inventory, those properties facing imminent default, evolving from mostly subprime and Alt-A loans to containing more prime loans as elevated unemployment levels have pushed more homeowners behind on their mortgage. Analysts said that some 8 million repossessions would need to be liquidated over the next five years before the market stabilizes. Adding to the problem are recent issues the banks are having processing the paperwork. In October, the banks had to hold up foreclosures to refile affidavits signed improperly in many states, pushing more than 250,000 foreclosure cases into 2011.
Reports recently showed that the problem may have spread to the notices of default as well. And in the 23 states where lenders must foreclose on a homeowner through the court system, backlogs of cases have formed month-long delays.
This just reinforces the business model I follow, and should encourage more to act!
#2 FBI "Bid Rigging / REO Realtor Failures To Submit Offers" Investigations Stir Up San Fran.. and are gearing up for nationwide
The recent FBI investigations into California bid rigging taking place at courthouse auctions and accusations that REO Realtors are not submitting investor offers to banks in California are having repercussions throughout the United States. Investors and bird dogs alike desire up-to-date information related to the ongoing investigations with specific data on how to identify or avoid potential problems when Buying at Auction or dealing with Bank REO Realtors.
Bid Rigging Explained
For those that haven't yet heard the news, the FBI is investigating real estate speculators and Real Estate REO Agents that have been "rigging bids" in the San Francisco Bay Area and elsewhere throughout the nation. Bid rigging is considered a federal violation of the Sherman Antitrust Act and subject to 10 years in prison and up to $1 million dollar fine if convicted. The current investigation has come about due to claims that small groups of industry insiders are collaborating to fix prices by refusing to bid against one another. The case was supported by a probe into the affairs of a Stockton real estate agent that plead guilty to bid rigging last April; since that time the FBI has expanded their probe and is now issuing nationwide alerts while encouraging anyone with knowledge about anti-competitive practices at foreclosure auctions / or when submitting offers on individual properties to call their published tip line.
Bottom Line?
Bird dogs and investors must understand the proper way to compete at court house auctions...And also there rights when submitting offers to REO Real Estate Agents.
Just ask yourself as a investor how many times you have placed a bid on a property "only to hear that it was rejected" to find out six months later it is either still for sale / or sold for less.
If you are submitting offers but are not receiving a letter of refusal direct from the bank on "Letterhead", there is a good possibility your offer was not submitted or the agent is allowing you to find great properties and then the agent places bids for his/her investment group.
Do not allow this practice to continue.
Know your rights and start making complaints direct to the FBI
*Note: I will make this statement before you read this, the information contained below is 100% legitimate, and I have no political opinion one way or the other. "Frankly I look forward to making some money building low income subdivisions for them"
SO THIS IS WHAT OBAMA AND THE CHINESE WHERE UP TO, SEND THIS TO EVERYONE ON YOUR LIST, WRITE LETTERS TO THE EDITOR AND GET THE WORD OUT!
This is an urgent message! Read this and spread the word! Subject: Foreign Trade Zones.
This is unbelievable at first, but you will soon realize that there are several motives for the global communists to physically weave our United States territory together with communist China. Read On! Here’s what is going on!
Each and every one of our state governors has approved and allocated a certain amount of acres of their U.S. state land to be inhabited by Chinese communists –communists straight from China! They are to set up little towns and live here, supposedly for the purpose of producing Chinese products for sale in the U.S.A. The land the states are giving them for their little towns will be considered “foreign territory”!!! We are told that the laws of the state (in which these Chinese communists dwell) will apply to the communist Foreign Trade Zone (FTZ).
Comment: If so, why are they allowed in here!??! Isn’t the whole set up unlawful??? There are 257 of these little communist towns to be built all over the United States.
Go to this website and see the list of the states, and how many FTZ’s are to be erected in each and every state! Our nation is being peppered all over with these communist closed towns called “zones”! This insane brainstorm by Washington, D.C. officials was just recently discovered by alert citizens in the State of Idaho, where an FTZ is being built there, just south of Boise, Idaho, possibly 30,000 acres of Idaho is going to be used for that FTZ. Check this site quickly before it is removed:
When you get to this website, be prepared by having enough paper to print 40 pages, listing all the FTZ’s to be built over the whole United States!
257 of these FTZ’s!
It is absolute insanity!! How gullible are we???
The excuse given for creating communist towns all over our nation is that these Chinese people will produce products for sale in the United States, and the FTZ will eliminate overseas shipping costs of the products they create! A bizarre excuse!!!
Can’t we manufacture our own products anymore with American workers? How foolish are we to allow this???
Remember the hard-learned lesson taught to gullible people back in ancient times, when the Trojan Horse was built and they pulled it past their protective gates??? Do we Americans look THAT STUPID to the Chinese and to our Washington,D.C. leaders???
It will not mean jobs for Americans. All the help will be Chinese! Besides, it is to be classed as “foreign territory”, remember! You won’t know what is really going on inside the enclave. Is there any danger for Americans to allow this?
What do you think?!!!
It is a known fact that China has been preparing for war against the United States! Many guns are pointed at us. Why should these FTZ’s be allowed??? What is the real reason??
Some people are wondering if the American land in these FTZ’s is being given as collateral for the huge debt we owe to China? Some people are asking: “Does China own us and is our land collateral in case we don’t pay the debt?” China is allowing American businesses to get established in China as FTZ’s. Americans must build the structures in China, and they must employ all Chinese people to do the work in what is built there. After a short amount of years, the Americans must vacate, leave the buildings and let the Chinese keep the technology and the active operation as on-going. What this amounts to is transferring American technology and management to communist China.
FTZ’s are also known as SEZ’s (Special Economic Zones) Please relay this information to all your friends. Someone has to answer for this on state and federal levels! What a set-up for sabotage, espionage, and a study on how to take over the whole United States in a war! Because the newspapers and other media are controlled, they will not be reporting on this unless there is a great public outcry. Remember when being a communist was a punishable crime in the U.S.A. My, how we have changed! "Jesus they have tried to bury me for less"
Complete reversal. Best to take this information to local public officials as well as all your contacts. Please do not delay spreading this information. Check with Idaho Eagle Forum also for updates http://www.eagleforum.org/
"It's coming, no question. [Yesterday's] report from RealtyTrac serves as a warning to big banks, Fannie, Freddie and local communities; The foreclosure glut is coming, and they'd better be ready to get rid of that glut in a big way. 2010 saw a record number of bank repossessions, over a million, even with a big drop in volume toward the end of the year, thanks to the robo-signing scandal and ensuing foreclosure freezes. 'Early indications in January were that this robo-signing related delay will be over by the end of first quarter if not sooner,' says RealtyTrac's Rick Sharga.
'I think we're going to see a significant spike in foreclosure activity early in 2011, and that will contribute in part to 2011 being a record year.' Sharga estimates as many as a quarter of a million foreclosures that should have happened in 2010 will now be pushed into the 2011 numbers, and added to an already huge supply of bank owned properties.
The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively.
While REO sales make up about one third of all sales in the current market, there is an estimated 3 year supply *NOTE: This does not count shadow inventory. There are obviously many incentives to buy REO's, number one being the price discount, as well as some other programs offered by the government; but there are a lot more downsides. Just today I read an article in the Wall Street Journal of witches in Salem being hired to remove the negative spirits from foreclosed homes. Other similar burgeoning businesses include Feng Shui experts, etc.
I WAS ASKED HOW QUICKLY WE CAN ESTIMATE SELLING A RENOVATED HOME?
HousingWire today reports on a study by Field Asset Services that finds rehabbed REOs spend five fewer months on the market, 69 days compared to 222 days. Many investors buy foreclosures and do the rehab themselves, but for regular home buyers, clearly having the home renovated, with no sign of the preceding trouble, is a huge added value.
Through its Neighborhood stabilization Program, the Department of Housing and Urban Development has provided $7 billion in grants to local governments and nonprofits; that money can be used to rehab foreclosed properties, or, to bulldoze them. I also know there have been many discussions brewing within the government and at the banks with hedge funds looking to buy up bulk foreclosures. So far no big deals we know of, but they're coming for sure. The government may even be considering incentives to get more investors to buy foreclosures, which I blogged about over six months ago. As the numbers mount, the GSE's and the banks will have to put more resources into unloading these properties, especially as new Spring organic housing supply comes on the market. If they choose to slash prices even more, the dip in overall home prices may fall deeper than expected."
But before I do that, I just want to take a minute to disclaim that there are multiple formulas you can use effectively.
And honestly? It’s probably best if you figure out your own to fit your investment model or partner with someone like myself that really knows what they are doing.
The very first thing you should do before buying a rental property is visit other rental properties in your area to determine what the competition typically charges for rent. This is also great for one uping your investor competition, If your properties have better fit and feel they will rent before any of the others. Note: Dress down and do not drive your luxury vehicle when viewing the properties.
"To do this, I’ll usually pose as a tenant looking for a new place to live and take a few tours of different homes." Then, I’ll check back periodically to see how long it took for the home to be rented.
For example, if I find a 3 bedroom home for rent for $1400 a month and it took 2 months for the landlord to get it rented, I will assume the rent is slightly higher than it should be.
After all, a 2 month vacancy can kill your profits for the year. I prefer to keep my rent low enough that I can re-rent it in 2 weeks. One month, tops.
OK, so you’ve done the footwork and found that you can rent a 3 bedroom house with air conditioning and a dishwasher (Remember to keep your amenities comparable to other properties in your area!) for around $1200 a month.
You will need to plan your budget per month to cover:
1. The mortgage (Pay Cash or Partner with fund that can if at all possible)
*** Remember: I buy and Renovate homes to brand new for around $65k / so cash partners collect straight profits from day one of rented unit, not to mention a boatload of equity.
2. Your taxes
3. Your insurance
4. Maintenance costs (How much I put aside for maintenance every month depends on the age of the property. For example, if the property is fairly new and won’t need any serious repairs for a few years, I’ll only put aside $30 per month. If it’s an old property, maybe I’ll decide on $70. But no matter what, put aside something every month. After all, eventually you’ll need to replace the roof, the furnace, etc, someday and you don’t want the cost of that coming out of your profits. Also, it’s good to have some extra money put aside in case you end up with a problem tenant who trashes the place. On average, I put aside $50 per month per unit.)
5. Utilities, if you elect to pay them. (I usually don’t elect to pay the utilities)
6. Vacancy (I generally plan on a 1-2 month vacancy per Home, per year. If I luck out and no one moves out that year or if the empty home gets rented quicker, I consider it gravy.)
7. Your profit
As far as profit goes, I minimally need to make $800 per unit in straight profit. So if it’s a single family property, I would have to be able to pay all my bills and still pocket $800 a month. With a duplex, I’ve got to make $1600 a month right off the bat. A four unit apartment building would have to generate $2400 a month for me. And so on and so forth.
This might not seem like a lot of money at first… (that's me being sarcastic)especially when you consider the time and effort it will take you to find the right home, renovate it completely and then rent it.
You’ll rack up minor expenses simply by placing ads in the newspaper, placing signs in the yard and on corners around the neighborhood or just using gas to head to the home periodically to show it to potential tenants.
Service Calls / Property Management: Also, you’ll have to answer service calls (sometimes in the middle of the night) should something break, lawn upkeep, shoveling snow. A lot of people consider these things and ultimately decide owning rental property isn’t for them. ** Again This is why you want a partner like me that has the management company internally and in place.
Nevertheless, here are the other things you need to make sure you remember:
1. Tax write offs. I do not factor in how much I get back in taxes into my monthly profit. I consider it all gravy. Still, it’s nothing to sneeze at. *Also keep mind that any repairs you make to the property can be written off as well. "So I will scream this for the cheap seats, just in case you are not getting the point of making sure I am your partner, or you invest in my properties... We own my homes for an average of 65K, we get to write off an average of $50k per house the first year just in renovations!"
2. As the years go buy, you will eventually be able to charge more and more for rent. However, your monthly expenses will generally remain the same. The longer you own a property, the more your profit will increase.
3. At the end of the day, you own a property that generates a steady cash flow. Not only that, but it will have likely increased in value substantially. Hello, easy retirement fund!
4. $800 per unit is what I want to make minimally. Generally, I end up making more.
So back to our single family property that will generate a rent of $800 a month….
For the sake of easy math, let’s just decide to leave the utilities up to our tenant. In my area, taxes and insurance on a single family property will run around $180 per month. We’ll say the property is in great condition (just renovated), so we’ll only be putting aside $30 per month for maintenance costs. A one month vacancy per year will cost us about $100 a month. That gives us a total of $310 for expenses. Add on the $800 a month profit and we’re looking at $1110.
Also consider that single family homes usually generate the least amount of profit. Duplexes and apartment buildings will get you more cash for your buck. However, single family homes are easier to get rid of should you decide the money you’re making isn’t worth it. It’s much harder to dump an apartment building.
I recommend beginning investors start off buying a single family home for their first investment property "preferably one of my properties or system". If, for no other reason, than to ‘try out’ being a landlord.
To be a successful landlord you’ve got to be a good judge of character and have a low tolerance for bullshit. "This is why I prefer you buy my properties and use my management company"
For example, if you’re the type to always give people a break, you may just end up with tenants who don’t pay rent for months at a time. You’ve got to be willing to be the bad guy. You’ll have tenants who will call you up with all sorts of sob stories about sick children and lost jobs and you’ve got to be able to say, “Too bad. I still need the rent.” If your personality is such that you’re unable to be a real prick when the situation requires, then you’ll find this out when you’ve only got a small, easy to sell building that can be dumped fairly quickly.
Of course, if you find that you have no problems whatsoever being an asshole from time to time, you can always start looking at duplexes and apartment buildings then. Once you’ve perfected your personal system, you can start making some really tremendous cash flow providing something that everyone will always need " A roof over there head".
I am the Director of Investor Relations for one of Southern California’s leading participants in the dynamic world of rehabbing and reselling foreclosed properties. We are presently seeking interested parties to partner with us to purchase, rehab and resell our ever-expanding pool of homes.
We are rehabbing and reselling foreclosed properties profitably throughout the United States. We are currently raising money for our newest fund which is focused on distressed residential properties.
Our process is very simple: we believe in taking a low risk, high turnover approach. Under this, we do not seek high returns from individual properties, but rather consistent returns from multiple properties. We are constantly purchasing homes to return to best-of-market quality, and typically complete the purchase/repair/disposition cycle in about 90-120 days. We would be happy to discuss our approach or send you additional information or a prospectus. Please contact me if you are interested at mn.equityproject@gmail.com
Average investment is $60k per home all inclusive, *financing is available for the right partners. (*650 minimum fico, verifiable income and assets, minimum 10 homes)
Six Reasons Our Homes Will Make You Rich
1. Inflation - Past, Present & Future. The historic rate of inflation is roughly 3 percent but double digit inflation has taken place during periods of economic volatility and expansionary monetary practices such as those embraced by the current administration. Experts ten to believe we may encounter inflation in the 8 or even 10 percent rate within the next three to five years leading to high rates of nominal returns among all physical assets including real estate.
2. Demographic Demands - Immigration, escalating birth rates among minority populations and longer lifespan for elderly citizens all adds up to a rapidly expanding number of people seeking shelter and basic homes.
3. Declining Inventory - The media makes much ado about excess inventory but savvy REO sale investors will also notice the simultaneous reporting of a 'shortage' of affordable housing. Can both situations be true?
Yes. While the absolute number of housing units available may currently exceed demand, the actual number of affordable and desirable units is much more restrictive. For example, pier construction, energy efficiency, zoning regulations and other mandates often result in a lack of affordability even if the primary mortgage is acceptable. As units become functionally obsolete, the demand for safe, convenient, inexpensive homes will grow.
4. Leverage - Real estate benefits the small investor via the use of leverage; few other investments have the advantage of leverage combined with physical assets and alternative sources of income; it's a winning combination that provides maximum flexibility and minimal personal risk when properly structured.
5. Taxing Tribulations - Budget shortfalls and aggressive social support obligations are stressing federal and state budgets to the maximum. Earned income taxes, estate taxes and even a newly proposed VAT tax are likely to take a big bite out of average taxes for middle class Americans. Shifting from higher taxed earned income to lower taxed Capital Gains is a quick way to reduce the overall tax burden by 10 to 15 percent.
6. Short vs. Long Term Strategy. The age old adage to "buy and hold" stocks, bonds or even real estate for the long haul has come under increased scrutiny in the wake of fiscal irresponsibility, irregular reporting habits and unreliable regulatory agencies. The new trend is to take profits when they are available, maximize cash flow and focus on short term gains rather than the promise of long term appreciation. REO and Short sales provide exceptional ROI without the long term risk.
Average example of standard Property:
Purchased / renovated / rented: 50-60% LTV CMV
Sold to Investor "Rented" (average 120-180 days): 70 – 80% LTV CMV
If property portfolio average home is rented out at $1200 per month.
