FED Cut Positive for Market

Posted: Sep 25, 2007

The Federal Reserve's cut of 50 basis points last week will prove to be the first of a series of rate cuts in my opinion. With each cut the consumer (as well as corporate America) will gain a positive sense of their own economic future. Over a period of months this will begin spilling back into the housing market and we will all see clear signs of a real estate turnaround.

Having waited ¾ of 2007 to cut rates has put the real estate recovery out further than what was expected by many. Now that the cuts are underway we will see consumer confidence firm up slowly, with the housing market the final frontier of that renewed confidence. Since this is the most likely course that the economy and housing market will take, now is the most opportune time to add to your real estate holdings.

Once the media begins covering a few of the positive things in life (i.e. a series of rate cuts that slows the foreclosure rate, governmental loan programs, lenders working with home owners/investors to adjust their mortgage notes, inventories falling as buyers enter the market), then sellers, builders and developers will become more resistant to offering the deals they are willing to offer today.

Many sellers are outright nervous today, dumping property out of fear. On top of this, lenders are also nervous today and willing to short sales and take losses simply to thin inventory and cut losses! Buyers that are buying today are the ones getting the buys of a lifetime.

This is not rocket science. Real estate buys today are incredible. If you believe in the benefits of owning real estate, then adding to your portfolio, or beginning with your first investment, is something that should be a top priority for you.

Foreclosures & Short Sales: Great Buys?

Locating good buys is fairly easy today since most sellers have a certain degree of motivation. Finding great buys however, is a bit more challenging and takes more homework.

Foreclosures oftentimes can become great buys, but not always. Sometimes they are terrible buys. Just because a property is a "foreclosure" does not mean you are getting a good buy, let alone a great one.

There are a variety of "points of entry" when buying a foreclosure property, including but not limited to Sheriff Sale, redemption period, or as a REO from the lender directly or through a broker.

In some cases, the buyer/investor cannot inspect the property and in most cases these foreclosed properties must be purchased "as-is". Each of these components adds risk to the transaction. Oftentimes the previous owner (the one who lost the property to foreclosure) neglected the property. Costs to bring a property up to a suitable condition for the rental market can quickly escalate if you purchase one of these neglected homes. And unless you bought such a property at a substantial reduction in price to offset the needed improvements, you'll have paid too much and will not have positioned yourself properly going in. With foreclosures you are not always in a position to "know" this up front, so experience is key.

Short Sale investing is another excellent means of purchasing real estate today at a discount. Short sales by definition take place with the lender's approval and willingness to accept less than what is owed them. Short sales takes place prior to and in lieu of a foreclosure. Just as with foreclosures, not all short sales are great buys, let alone a good buy at all.

Short sales can be quite challenging in many respects based on a variety of factors. When an offer is submitted on a short sale "candidate" there is no guarantee that it will be accepted. If it is accepted, it is "subject to" a number of additional factors including but not limited to, proof of the seller's inability to bring funds to the closing table, first mortgage holder's willingness to short the sale, the 2nd mortgage holder's (if applicable) willingness to the accept little or nothing in the transaction (the same holding true for any additional lien holders). The process is cumbersome at best. The time frame for response from the lender(s) can be extended numerous times and in the end may end up with no success.

Experience is Key

Effectively buying a foreclosure, a short sale or simply a piece of real estate in general can be enhanced by working with an experienced professional.

I have had the privilege of contributing to two brand new products that are being released on Foreclosures and Short Sales. In August I was one of four real estate agents from around the country selected to record a CD series on "Short Sale Investing". This product will be released next month in October 2007 through Star Power Systems, a Howard Brinton company out of Boulder, CO.

Additionally, I was selected as a contributor to a newly released book this past month called, "Foreclosure Investing for DUMMIES". The author, Ralph Roberts and I have been friends for years. He is a superstar real estate agent from Warren, Michigan who has made it to the cover of Time Magazine (good luck Ralph with the GM workers strike). This book is outstanding and a must read for those who are serious about foreclosure and short sale investing.

What to Buy?

Minnesota

Great buys in Minnesota are available! Both Foreclosure property and Short Sale property, as well as highly motivated seller property can be purchased today at great values.

Seasonal purchasing of real estate in Minnesota is especially key. Buying in fall or early winter has always provided the better buys and has made for the most advantageous time to add to your portfolio. Why so? Several reasons:

Sellers this time of year are motivated (especially this year), most having had their home for sale for some time
Buyers can close before the "dead" of winter and get a tenant into the property easier than in January or February
Buyers who close prior to the end of the calendar year will receive a full 12 out of 12 months' tax benefits for the following year (2008), thereby maximizing the annual tax benefit of owning a particular piece of property
Interest rates are historically low (currently in the mid 6's to low 7's)

Another factor evident in the market now is the shortage of available rental property. Personally, I have had my Minnesota rentals full all year. Any tenant that moved out was quickly replaced with a new one. I am 100% FULL. I get calls nearly every week from renters looking for a rental and I am not even advertising! And rents are rising!

In fact, rents are forecasted to increase 5% nationally over the next year according to a report released last week. As we have been saying for months, rents will rise due to the foreclosures and tighter lending guidelines. Buying now while property is on sale and getting your renters lined up is brilliant investing - period!

Later this week we will be releasing by separate email information on our new INVESTOR PROGRAM for the Twin Cities. You don't want to miss this. Serious investors will be given the opportunity to have our expertise work for them here in the Twin Cities to locate the great buys. Watch for details!

Florida

Excellent buys continue to present themselves in a variety of Florida locations. Florida is one of the top 5 states on the national foreclosure list. California, Nevada, Ohio, Michigan are also on this list. California clearly dominates the number of foreclosures, dwarfing all other states.

To purchase a foreclosure or short sale in Florida requires our referring you to a Florida agent located in the destination city that you have interest in. Such a purchase could be solely for investment purposes, or for obtaining a 2nd home for yourself; one that you'd like to rent out while you're away, or until you opt to use it full time in the future.

Developers and builders have given America2Florida.com incredible buying opportunities in a variety of locations as well. This approach to investing in Florida real estate is typically smoother and can be handled quite easily from a distance. Management for properties in developments is in place or can easily be arranged for you. The locations we offer are beautiful and many locations can also be used for your own vacationing!

We continue to sell Florida property to investors from all over the U.S., as well as from locations outside the U.S. Prices and incentives are spectacular and many builders and developers are more flexible than ever to customize the transaction to the buyer / investor! Let us know what works for you - the investor!

I know how frustrating it has been for many Florida investors who bought over the past couple years and have seen values in certain projects decline. This is a result of many unforeseen factors. It is this dip in the market that creates the substantial buying opportunity today.

Feeling that real estate is doomed and prices will never go up again is simply that, a "feeling". It is not a "fact". Prices are down now and will go up again relatively soon as market conditions adjust. We are on the right track now with the FED finally lowering rates. We expect more adjustments in those rates and with them a firmer and positive real estate market!

How to Buy in Florida?

Simply contact our office at (952) 431-3900. Jonathon or I will be happy to review information on any of our Florida projects. It is quite easy to purchase in Florida from anywhere in the U.S. See offerings at: www.America2Florida.com.

How to Buy in Minnesota?

Watch for the details of our new Investor Program to be released later this week. The objective of this program is to efficiently and effectively locate "great" buys for local investors. We are very excited to work with all of you who have expressed an interest in finding the local deals!

Conclusion

Buyers are beginning to come out again, as evidenced by the full room at our September Real Estate Investing Seminar. Look at the fundamentals - they are all in place and point to now being a great time to buy investment/rental real estate! Looking back, this is where the money will be made in real estate!