“Mom & Pops” Dominate Real Estate Investing

According to a recent special report form CoreLogic, home purchasing by investors has reached its highest level in nearly 20 years.  Their report, Investor Home Buying, took a deep-dive into investor’s homebuying activity all across the nation.  Among their findings was the fact that the increase in activity wasn’t from the big institutional buyers, but rather from smaller investors “mom-n-pops” who are just getting into the game – perhaps like many of you reading this post! They also suggest real estate investors are meeting the needs of the entry-level market.  Indeed….

“…investors appear to be focusing in the starter-home tier, giving first-time homebuyers a run for their money while also chasing homes in markets with relatively high rents…”

 

Click here to read the full report at CoreLogic.

Click here to read the story at Keeping Current Matters.

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Zillow Improves Zestimate’s Accuracy

We’ve had several posts about Zillow’s Zestimates over the years so this latest development piqued our curiosity.   However, a recent episode of Real Estate News for Investors reports that Zillow unveiled a new version of its Zestimate home valuation tool that’s supposed to be much more accurate than previous versions.  In fact they claim that the error rate is now less than 2% thanks to the ideas it collected in its recent million dollar contest to make the platform smarter.

“Among the improvements that Zillow made to the Zestimate is the use artificial intelligence to analyze photos and automatically determine the value of upgrades. It does this with a type of machine learning called “neural networks” combined with “computer vision.” …”

 

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Airbnb Fights Back Against Ban in New Jersey

Short-term rental king Airbnb is fighting back against a New Jersey suburb of New York City over a recent ordinance severely limiting the ability rent out units.  According to the Hudson Reporter, Jersey City, NJ adopted in ordinance in June that city officials say doesn’t ban short-term rentals, but imposes regulations and restrictions on they say is “an out-of-control” rental market that has allegedly created a shortage in long-term rentals and has caused long-term rental rates to rise.  Indeed, Airbnb has deployed canvassers to collect 10k voter signatures to put the issues before voters this November.  Stay tuned.

“Local governments are tasked with representing the needs of their constituents and bettering their communities…When they fail to do so, constituents want the chance to be heard. That is exactly the situation here in Jersey City, where lawmakers hastily passed an ordinance that will jeopardize the livelihoods of thousands of Jersey City residents.”  Airbnb said in a statement.

Click here to read the full story at the Hudson Reporter.

 

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Trump Wants to Eliminate Barriers to Affordable Housing Development

The removal of bureaucratic obstacles is the target of a new initiative recently launched by the Trump Administration.  In late June, the President signed an order creating the White House Council on Eliminating Barriers to Affordable Housing Development, which includes members from eight federal agencies.  A recent article in the Wall Street Journal (reposted on Realtor.com) says the council’s mission is to explore using federal programs to push local governments to soften or eliminate rules that block housing construction, which they point out is an issue that has stymied officials at all levels of government for many years.

Interestingly, a study released the same week by Harvard University’s Joint Center for Housing Studies found that the U.S. built about 260k fewer homes in 2018 than it needed to keep up with population growth and an aging housing stock.  In addition, the National Association of Home Builders’ said their analysis found that regulations account for nearly 25% of the price of building a single-family home and more than 30 percent of the cost of a typical multifamily development.  Indeed…

“Local zoning and land-use regulations have swelled since the 1970s and cannot be eliminated in one stroke of a pen by the federal government. Expensive U.S. cities and suburbs in California and the Northeast have long been difficult places to build. But housing shortages have grown widespread in recent years, extending from Grand Rapids, Mich., to Austin, Texas.  (WSJ.com)

Click here to read the full story at Realtor.com

Click here to read the full story at the Wall Street Journal.

Click here to read a news release from the White House.

Click here to read the NAHB’s statement

 

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Buying with Private Money

Buying with Private Money

Pete Youngs, aka “Mr. Rehab”

By Pete Youngs

When buying a property, sometimes it is better to use other people’s money (OPM) rather than your own. This is actually how a lot of successful investors got their start.  There are several different ways to do this, however the two most common are Hard Money Loans or Private Money Loans.

When using a hard money lender, you may have to pay points up front to get the loan, then a percentage rate of interest only payments until the property is sold or the term of the loan has been met. A typical example of this would be as follows. Using round figures, let’s say you borrowed $100,000 at 5 points and 13% interest for 1 year. You would have paid $5000 up front (5 points) and then 13% interest only payments until it’s paid off. Normally there isn’t pre-payment penalty for an early payoff. Also, the lender will typically only loan 65 to 70% of the Loan to Value (LTV) of the property to insure the money in case the loan defaults. The lender will loan based on the after repair value (ARV).

Private money loans are also based on about 65 to 70% of the properties ARV and, unless specified, will otherwise go for 12 months or less. These loans in my opinion are easier to get because more people can do private money than are in the business of hard money. Both hard and private money will secure a lien on the subject property to guarantee payment. While I said private money might be easier, let me share my opinion and clarify why.

Hard money lenders are “in the business” of loaning money and do it as a major income stream, and therefore charge points. A private money lender may do this less frequently and commonly charges a flat interest rate without points.  Private money can be a person loaning money from a self-directed IRA or 401k and do it for a tax-free or tax-differed return on their investment.

Private money lenders might use a flat rate as well, commonly being about 10% interest only.  This can build wealth quickly and at much higher dollar amounts than just your annual allowance.  If someone is making ½ to 1% interest on their money, then the opportunity to make 10% and being secured with a property is a very appealing prospect.  Private money may also come from other sources such as friends, relatives and business acquaintances.  The rules for using self-directed IRA and 401k funds are stricter, so be sure to do your due diligence and discuss these restrictions with your plan’s custodian before taking any action.

As far as information on using a hard money lender, my suggestion is to join your local real estate investment association (also known as a REIA).  They are the best source for new and seasoned investors alike and offer education as well as reliable contacts for hard money loans, mortgages, insurance, buyers, sellers, contractors and basically everything an investor on any level would need.

When choosing a REIA, I suggest that you find one that is a member of the National Real Estate Investors Association (National Reia). They are a nationwide governing body (a trade association) of investment clubs from all over the country. They make sure that all member groups meet strict ethical and moral standards – which in turn means that you are dealing with the best investor associations out there. I have been a personal supporter and member for over 20 years and attend their annual winter cruises (an vacation with an education…what a blast!) as well as the mid-year conferences to share new ideas and such.

They also provide benefits and discounts such nationwide groups as Home Depot, Office Depot/Office Max and many more.  Please visit NationalReia.org for more information.

Here are a few, but not all, of the requirements that need to be met to be considered for hard or private money loans nationwide:

Prospectus For Private Money Loans

  1. You MUST have the property under contract before applying! Otherwise there is no deal for prospective lenders to consider.
  2. The terms of the contract must be clearly stated in the offer. This includes purchase price and a specific closing date. Ex. 30 Days
  3. The after repair value (ARV) must be documented to show profit. This includes comparable sales and days on market till sold.
  4. If using a real estate agent, include listing document for details. Lender will need to know who pays commission affecting profit.
  5. All lenders require that renovation estimates be submitted. Profit potential cannot be determined without fix up costs.
  6. Our lender’s limit is 65% to 70% of the after repair value of house and is secured by placing a lien on subject property as collateral.
  7. The interest rate they receive is 10% interest only paid monthly. Unless specified otherwise, principal to be repaid in 12 months.
  8. The money used to purchase the property is sent to the seller. This is done to insure the money gets to the seller securing deal.

The basic guidelines above will give borrowers an idea of what they need before expecting to be considered for private money.

A common misconception is they hear “we loan money for deals” and immediately think it’s any deal.  You can’t just contact a realtor and say Hey send me some deals, I have a money lender.  First, we will but rarely fund properties listed with realtors. We buy wholesale deals not RETAIL. We focus on “fix and flip” deals so we get our money back quick and re loan it.

Always remember THE DEAL IS BASED ON THE INFO YOU PROVIDED before asking for a loan. The more you provide the better your chances.

Pete Youngs also known as “Mr. Rehab,” is a national speaker on rehabbing homes for up to 50% off.  He does seminars and bus trips promoting his new training system called SWAT (Simple Ways And Techniques).  He is contractor/investor of over 25 years.   Click here to visit his website, PeteYoungs.com.

 

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American Suburbs Swell as a New Generations Escape the City

America’s suburbs are experiencing growing pains from a large flow of new residents, which is straining schools, traffic and other resources.  A recent story in  the Wall Street Journal (reposted on Realtor.com) highlights these struggles as well focusing on area outside of Raleigh, NC where this phenomenon is taking place.  We also had a recent post here featuring an interview with the article’s author.

“In the early 2010s, after the financial crisis walloped the housing market, average growth rates in cities with populations greater than 250,000 outpaced the suburbs. But over the past five years, the average annual growth in America’s big cities has slowed by 40%, to 0.69%, according to census estimates.”

“The suburban areas surrounding the 50 largest metropolitan areas make up 79% of the population of those areas, according to a 2016 study by the Urban Land Institute’s Terwilliger Center for Housing.”

Click here to read the full story at Realtor.com.

Click here to read the full story at the Wall Street Journal.

“Watch Millennials are Moving to the Suburbs” – CNBC interview.

 

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Investors Buying More of the Housing Market Than Ever Before

A recent article by the Wall Street Journal (reposted on Realtor.com) points out that the investor share of home purchases has climbed to an all-time high, indicating that rising home prices have not hurt demand for turning them into SFRs or flipping.  Citing data from CoreLogic, they said 11% were purchased by big private-equity firms, real-estate speculators and others that buy properties.  However, when it comes to the bottom third price range, investors purchased one in five homes –  which is up 5 percentage points from the 20-year average of less than 15%.

“These are the homes that first-time home buyers would logically be buying,” said Ralph McLaughlin, deputy chief economist at CoreLogic.

Click here to read the full story on Realtor.com.

Click here to read the story at the Wall Street Journal.

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Housing Market Vacancy Rates

BY  ON JUNE 27, 2019

We recently posted about how strong leasing activity has pushed apartment occupancy levels not seen in nearly 20 years.  Now we have additional data coming from the Mortgage Bankers Association showing that the vacancy rate for single-family owner-occupied homes fell to 1.2% in Q1  – the lowest level since 1995.

“There has been a great deal of attention paid lately to the mismatch between the supply of, and demand for, housing in the United States. According to Census statistics, the U.S. added 1.5 million households during 2018 but built fewer than 1.2 million new housing units. The result is a tightening inventory – not just of homes for sale, but of homes available to occupy.”

Click here to read the full report at the Mortgage Bankers Association.

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Annual Home Price Gains Continue to Fall

BY  ON JUNE 27, 2019

According to the latest S&P CoreLogic Case-Shiller Indices, covering all nine U.S. census divisions, the rate of home price increases reported a 3.5% annual gain in April, down from 3.7% in March.  Their 10-City Composite annual increase came in at 2.3% and the 20-City Composite posted a 2.5% year-over-year gain.  The S&P CoreLogic Case-Shiller Home Price Indices are one of the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions.

Click here to read the full report at S&P Dow Jones Indices.

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New Single-Family Home Sales Down 7.8%

BY  ON JUNE 26, 2019

The U.S. Government is reporting that sales of new single-family houses in May, 2019 were at a seasonally adjusted annual rate of 626k, which is 7.8% lower than April’s revised figure.  The median sales price of new houses sold in April 2019 was $308k and the average sales price was $377,200.  There was an estimated 333k new houses for sale at the end of April representing a 6.4 months supply at the current sales rate.

Click here to read the full report at the U.S. Census Bureau.

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