The great thing about being in real estate is that it always changes, keeps you interested and forces you to adapt to the ever changing market. At the same time, these exact things are what keeps many people from becoming real estate investors. Each year you should look back at the previous year’s performance and take note of what made you the most profit. Once the most profitable part of your business is identified, it is time to figure out if the market is going to permit that part of the business to perform the same for one more year.

Last year, 2014, was an amazing year for anyone in real estate. Agents, wholesaler, investors, bird dogs, etc. were all making a killing. Agents listed a home and it was immediately in “highest and best.” Wholesalers were selling properties as high as 90% LTV. Investors were able to sell any renovation project they listed even if the workmanship was not the best. Our workmanship surpassed most competitors and caused our homes to sell in single digit days on market. I refused to get involved in all the hype and stuck to my criteria. In the end, there were many very successful investors. My partners and I bought, fixed, and sold more properties this year than previous years. In 2015 we will continue to buy, fix and sell. Not because it worked in 2014 but because in December 2014 our housing inventory reached a record low 2.5 month supply. As long as our market housing inventory stays low, buying, fixing and selling should be a revenue stream in your real estate business. According to the National Association of Realtors, “the national inventory of single-family homes is 5.1 months of supply.” This inventory level still justifies flipping homes in most markets. Once the market you are in reaches a constant 6 month supply or higher you may want to start looking into holding/renting in the near future. Read More→

Almost every real estate investor who buys short sales or pre-foreclosures has heard this story a hundred times. A homeowner requests a loan modification from the bank, the bank grants a “temporary” modification, payments were made and accepted, then bank changes its mind and forecloses on the homeowner for not making the full, original mortgage payment. It has been happening every day since the economic crisis began, leading millions of homeowners into foreclosure. This was business as usual for years, until a recent appellate court ruling that modification offers are in fact enforceable contracts that must be honored by the banks.

In this case, Wells Fargo offered a temporary modification to a homeowner. The offer was accepted, and the trial payments were all made and accepted. Wells Fargo then disavowed the modification settlement under the claim that it lacked consideration. Wells Fargo then went ahead with the foreclosure. The trial court ruled that Wells Fargo was correct by saying that there was no consideration. The appellate court reversed that ruling, declaring that there was more than enough consideration. This ruling has led to hundreds of cases in which trial and appellate courts have enforced the modification agreements ignored by banks. Read More→

Rents are on the rise in most markets today. This is a great way to increase overall revenue and value of our deals. In this article I want to discuss the reality of raising rents and increasing values of our multifamily properties.

As I stated rents are naturally on the rise but raising rents is not always as easy as it may seem. “The rents are below market” seems to be the mantra of realtors today. I can’t remember the last time I looked at a property that the agent didn’t tell me that I could raise the rents and make a lot more cash flow. I agree in a lot of cases the rents could have been raised but rarely can it be done for free.

On average rents can be raised by 1-3% per year without any upgrades needing to be done. This is what we call the “annoyance raise”. When analyzing a deal and considering a rent raise as a “value add” component we need to look at several factors and ask one very important question, “why are the rents currently low?”. In most cases I don’t find that the current owner hates money and just won’t raise the rents because they just love the tenants so much. Your agent may want you to believe that something like this may be the case and you can just magically raise rents but it usually doesn’t work that way. Read More→

Ask any Realtor how he or she prices houses, and you will hear a version of the following statement: “Well, I look at the comparable sales and then I …”

The same answer would include potential buyers, lenders, brokers and even appraisers. The data within REIAComps has consistently shown investors how to determine both solid acquisition value and after repair value for residential real estate.

Now, in the defense of Realtors, using comparable sales (“comps”) to price listings is what they were taught. Find the (3)“closest”comparable sales, make some adjustments for the differing features and use this analysis to arrive at an asking price for the home.

Truly, Appraisers typically use the same technique, as do most county assessor offices. Free broker and agent lead generation web sites like Trulia and Zillow apply similar inputs to their valuation algorithms. The comparable sales method has been in use for the measure of my career, and I am approaching 20 years in the valuation business.

A comp flatly, is a closed sale sharing as much similarity as possible with the home being valued. A good comp will be a recent sale of a similar type of property from within (or nearby) the subject property’s neighborhood. In theory, the more similar the comparable sale, the more power it has. The base logic behind using comps to price goes something like this —if House A sold for $X, House B sold for $Y and House C sold for $Z, then your house should sell for some adjusted average of the three. The catch is, the comps used are the most appropriate ones available.

But, we have to ask, is this really accurate? Read More→