Such A ( Scary) Deal!

A customer looking for a starting investment property emailed me. She had seen a company bulletin for sale by owner real estate investment opportunity.  Here's an edited version of the ad.


Town North of Boston - Cash Flowing Investment Condo – Renovated in Feb 2011. Rented at $1,250 per month. Great tenants. After property tax and condo fee, nets approx $xx,xxx per year. For sale, cash only, for 105k. That means cap rate of over 10%. Great deal for a self-direct IRA.


2 bedroom, 1.5 baths. So I looked up the address. the Seller had bought a foreclosure 1 year before for $75,000 in a 4 unit building with one owner occupant. No Fannie Mae approval in a building where there is a majority of renters. No mortgage possible. So you buy the condo for cash, and then you have a place you can't sell.


Condo's where there are a majority of renters have all kinds of bad things happen: landlords who don't pay their condo fees leads to poor maintenance leads to tenants who violate rules and regulations ..... A real downward spiral for the condominium complex.


And, you can make any investment work if there is no mortgage. The return on investment calculations are meaningless. Of course the return on investment looks good when there is no mortgage.

Bouncing Along the Bottom.

The Greater Boston residential market appears to have hit bottom, once again demonstrating Boston’s strong place among leading real estate markets in the United States. Pundits cite all kinds of fancy reasons for Boston’s place in the upper tier of real estate markets, but the best answer in real estate is always jobs. And Eastern Massachusetts generates jobs. The universities / high tech / bio med engine keeps Massachusetts among the highest percentage of employed in the nation. And the first indicator is often the rental market. New hires need a place to stay. So the rental market price is up 19% from the last twelve-month period in a recent report I did for one customer.

With the slowest recovery since the Great Depression, we will follow the bouncing ball along the bottom for a while maybe to the end of the decade (definitely see Northeastern’s Housing Report Card below). But the market will trend up hesitantly barring any further disruptions to the macro-economy.

Since September I have done a number of analyses for the residential market. As part of the analyses, I use statistics from the multiple listing service going back to the height of value in the single-family market, 2005.

In the table below, Massachusetts, Needham, Sharon are following the same trends, up since 2010. Quincy is the laggard in the group (Quincy has plenty of company statewide), but the rate of price decline has slowed in Quincy. Sharon and Needham are doing better.  Although very different in average price range, Sharon and Needham share the common element of well-respected school systems.

Single Family House Prices
	Massachusetts	Needham	Sharon	Quincy
2005	-	-	-	-
2006	-0.92%	-4.86%	-4.14%	-4.60%
2007	-0.36%	-3.50%	-4.87%	-3.44%
2008	-10.21%	5.02%	-9.53%	-8.64%
2009	-9.01%	-2.82%	2.32%	-2.61%
2010	5.61%	4.21%	3.40%	-1.46%
Nov2010-Oct 2011	4.70%	3.48%	1.12%	-2.63%
Jan2011-Oct.2011	0.15%	1.97%	1.37%	-1.00%
2005-2011	13.33%	3.93%	-13.56%	-27.34%

These statistics compare an entire year to the year before. So, we are not comparing a September 2011 with Hurricane Irene with September 2010. Each town and city is different, and each market segment is different. Different style homes, age, and size homes respond within the micro-market of your individual towns and cities differently from the larger statewide economy.

I want to again cite The Greater Boston Housing Report Card 2011 Housing’s Role in the Ongoing Economic Crisis from the Kitty and Michael Dukakis Center for Urban and Regional Policy Northeastern University released a short time ago. The Housing Report Card is the best report on real estate in Massachusetts for sure and bears careful reading. I was pleased to see that the report confirms my opinions and probably expresses the facts better and with more detail than I do.

 Housing’s Role in the Ongoing Economic Crisis is the title of the 2011 report from the Kitty & Michael Dukakis Center for Urban and Regional Policy at Northeastern University. This report is accurate and responsible. If you really want to understand the Boston Housing Market, take a look at this.

If you really want to understand the current market, this report is obviously spot on and worth the read. Remember,  each town, city, and neighborhood can not be generalized from this report. Remember that there are differences for the style of housing: colonials vs. ranches; multi-families vs condominiums within each town, city, and neighborhood.

Good reading for a snow storm. More about local prices during the storm.

Best Way to Study for Exams

Good common sense.

I have told people studying for the salesperson and broker exams to take test exams and study what you can't answer. If you can answer the question, you don't need to study it more. And these recommendations would apply to exams like SAT, grad school, insurance, securities.

http://online.wsj.com/article/SB10001424052970204644504576653004073453880.html?mod=WSJ_LifeStyle_LeadStoryNA

New Refinancing Package Announced today.

This is the link for a WSJ article on the refinance program being announced today. You have to be current with your mortgage payments and your mortgage can not be more that 125% of the value of the house. That might be a tough nut to crack for many home owners. There are communities right here in beautiful Massachusetts where the value of homes has decline as much as 50% since 1995. So, getting some of the people out of hot water may be difficult. This may not do a lot to help the housing mess.

http://online.wsj.com/article/SB10001424052970204346104576638931114550132.html

Will Foreigners Get Visa's if They Buy Property

There are programs for foreigners who establish substantial businesses in the United States. This program would evidently give foreign buyers visa's. Foreign buyers may own property in the United States already. Here is the article from the Wall Street Journal.

http://online.wsj.com/article/SB10001424052970203752604576641421449460968.html?mod=WSJ_hp_mostpop_read

Competing with Cash Buyers for Fix-Ups

Boston.com carried the article linked below a couple of weeks ago that continues to resonate. http://www.boston.com/realestate/news/articles/2011/10/02/real_estate_becoming_a_cash_economy/

Cash buyers for foreclosures and short sales are beating out offers from buyers who make offers contingent upon mortgages with 3.5% to 30% down.The properties are in the lower price ranges with lots of potential for increased equity with some sweat equity or cheap labor. Besides the cash deal, banks see  other advantages to the a cash offer. Cash buyers often waive a home inspection, can close in 2 weeks and there is no bank appraisal. The cash buyers offer less than the buyer looking for a mortgage and still get the cash offer accepted. 

Why don't banks and short sellers choose the buyer with the mortgage? The mortgage deal can fall apart close to the closing due to the mortgage appraisal process. So the mortgage approval process can take a property off the market for a long time and fail to get the property off the bank's books. Then a variety of physical house problems may not pass Fannie Mae appraisal standards: exterior paint, roof repair, a heating system or hot water heater, bath room repairs, holes in the wall ..... . Coming at the end of the buying process, sellers (banks and owner) are unwilling to spend money on appraisal repairs and the purchase falls apart for the buyer looking for a mortgage. Fannie Mae which is guaranteeing almost 100% of the mortgages these days, have lots of good reasons to want the work done before the buyer closesBuyers often use their financial cushion to purchase. With no cushion, there would not be money to make the repairs.

I've got two alternatives for buyers who need a mortgage looking at fix-ups. 

 (1) The buyer should prepare for a 203K loan with their loan officer. Many banks will take the 203K loan that sets aside money for the necessary repairs as part of the buying process so that the bank or seller does not have to do last minute repairs. The buyer has an additional $1000 to pay out for a 203K consultant who works up the necessary work plan and looks over work completed by a licensed contractor. The banks will agree to the 203K mortgage. (2) The buyer can get approval with a hard money lender (high interest, interest only loans) to become a virtual cash buyer. The high money lender will hold the mortgage short term for 3 months or so while doing the repairs. When the house is ready, the buyer goes for a conventional mortgage. The buyer can offer less because they now are making a cash offer. The money the buyer saves on the purchase can be applied to the interest only payments with the hard money lender.

Any questions, feel free to contact me.

Rally Pigeon

The Saint Louis Cardinals have a rally squirrel. The Boston Red Sox should have a Rally Pigeon. I can see the cap already. Matching T?

Big Money Gets into Landlord Game (WSJ) .... good or bad?

Well, I am not surprised that even hedge funds are buying foreclosures, and am aware that some investment managers have tried this in the Boston market. Single families have proven to be very risky in the past and requires a heavy side of property management. The property management is critical and will grow in expense when you are managing discrete single family properties.  You don't want the maintenance crew driving hours between work orders. I see the property management costs eating into the ROI. Investing in multi-family / apartment funds is definitely better. 

Be very careful with funds that invest in multi-family and single family investments. Look carefully at the fund and where (part of the country, city, region) the fund is investing. Make sure the investment group has a real track record in real estate and a firm handle on property management. If it sounds too good to be true, it probably is.

Big Money Gets Into Landlord Game from the Wall Street Journal

Real Estate Professionals: New Inman Real Estate Social Media Launch

Sign up for the new Inman real estate launch about social media for real estate professionals.
http://inmanlaunch.com/g8xlo

Solve the economic crisis?

News from the land of American't: Many of us think the wrong people got rewarded in the big bank fix. The idea to lower borrower's mortgage amounts to the value of the house has been floating around since the beginning of the debacle. John McCain endorsed the idea (without much fanfare) in the last presidential election. The idea was floated by two former White House economists (sorry, don't remember who) on the conservative and liberal side of the debate in a joint Wall Street Journal article in 2009. It is too late in the public opinion cycle to ram this kind of expensive program through.
Bank of America is evidently rewarding exemplary borrowers with pay downs on their mortgage so that the mortgage is close to the actual value of the house. From the point of view of the bank, why not reward the borrowers who can actually afford to repay their loans? Of course, Bank of America just agreed to pay $5Billion for their sins and the sins of Countrywide mortgage loans (who Bank of America "rescued") that they did sin by giving out those loans.

The HAMP (Home Affordable Refinance Program) program and others are there to help people in trouble, but the loan amount is not lowered to the valuation in the housing assistance programs. No indeed, in the HAMP program you still owe the original amount of the loan.

If the government, treasury, politicians, and banks had agreed to write down mortgages instead of rescuing the banks or in conjunction with the rescue, we would not be dwelling in the land of American't. 

Bank of America Writing Down Mortgage Loans

Class A Office Sub-Let 15 Minutes to Boston 692-1344 SF

Three Flavors: 4, 7, or 10 People. Everything Included

Multi-Family Investment Property in Eastern Massachusetts

Here is a real estate search for multi-family (investment) properties in Eastern Massachusetts:

On My Website: Multi-Family/Investment
On Facebook: Multi-Family/Investment Property Eastern, Massachusetts

Luxury Waterfront / Oceanfront Homes Eastern Massachusetts and Boston

Here is a real estate search for luxury waterfront and oceanfront homes in Eastern Massachusetts:

On Facebook: Luxury Waterfront & Oceanfront Homes in Eastern Massachusetts & Boston
On My Website: Luxury Waterfron & Oceanfront Homes in Eastern Massachusetts & Boston

Luxury Condominiums Eastern Massachusetts Including Boston

Here is a real estate search for luxury condominiums in Eastern Massachusetts and Boston.

On Facebook: Facebook Page for Luxury Condominiums
On my website: stephenmarcusrealty.com

Luxury Homes Eastern, Massachusetts

Single family home search over $800,000 in Eastern Massachusetts including Boston.

Available on my Facebook Page: Luxury Homes Eastern Massachusetts
Available on my website: Luxury Homes in Eastern Massachusetts

Wall Street Journal Reflects Local Residential Real Estate Market

Here are four related articles from the Wall Street Journal  and Boston Globe that reflect what the residential market is doing in the Boston metro area.  The Boston metro market may be bouyed by job formation.  Residential agents see that in a busy rental market.

The Feds just shortened job benefits because Massachusetts went below 8% unemployment: http://www.boston.com/business/articles/2011/06/21/extra_jobless_aid_is_cut_in_mass/

Homes Listed and Lingering: http://blogs.wsj.com/developments/2011/06/16/more-homes-listed-and-lingering-data-show/

Behind the numbers. A nice analysis of the Homes Listed and Lingering: http://blogs.wsj.com/developments/2011/06/21/behind-the-numbers-drop-in-home-resales/


Has Your Housing Market Hit Bottom: http://online.wsj.com/article/SB10001424052702303657404576363143130774406.html?mod=WSJ_RealEstate_LeftTopNews

The Media Finally Catches Up to Reality Real Estate

http://blogs.wsj.com/developments/2011/06/16/more-homes-listed-and-lingering-data-show/

Well, the media has finally caught up to what's goin' on.  So much myth, so little real information. The information in this article rings true to the local market with prices in a a continued downturn. If someone tells you their market is going up challenge them to prove what they are saying. While there is the exception here and there mostly we are goin' down baby!  Massachusetts continues to get some job growth. Job growth fuels rentals first and purchases later. The question locally is, "Will job growth be enough to lift the real estate market."

Top 10 United States Residential Markets

While Boston is not listed as one of the top 15 real estate investment markets in the United States, CNN money lists Boston as a potential rebound residential market. http://www.linkedin.com/news?actionBar=&articleID=548966620&ids=0MdzoUdzoOdPkIc38SdzoVe3gRb3wUdPkPc34TdiMUcjoRdjwUe3gIcz4RcjAPcPsR&aag=true&freq=weekly&trk=eml-tod-b-ttle-44

Best Real Estate Investment Markets in the United States

A report in Inman news suggests the top 15 United States cities for real estate investment. Their suggestions seem to be based solely on population growth. http://www.inman.com/reports/10-markets-invest/index.html 


What about job growth? A strength in the Boston market.