Now this may seem obvious and believe me it is!
You have no idea the transformation a house can go through with just a little paint. And you won't believe the amount of people that are turned off by a bad paint job.
Usually, if your home is going on the market, I wouldn't recommend any drastic colors - stick with neutrals, but don't be afraid to try color. Don't paint the home all white. I wouldn't recommend white as a color to any seller unless they think an investor would buy the property to rent it out.
But then again, the reason I have luck with our rentals is precisely because we make a concerted effort to make the place look like a permanent residence for someone. There's curb appeal, flowers, landscaping and so on. It isn't just whitewashed and put on the market.
With paint, you can actually create a place people want to live in. You can change the character of a house with paint. It's the easiest and cheapest way to transform a house.
Oh, and should you paint before you put your house on the market? Absolutely.
Tuesday, July 31, 2007
Sunday, July 29, 2007
I had promised last week there were more revealing numbers to be found. Well, they're here. I've always maintained that there is a lot of information out there, but really it's only information that touches you the most personally that counts.
Warren Buffett doesn't care that the market's going down if he's secure in his own investments. And that's really the message I've been trying to get to people that write in with bad news every week.
I wish you would take it to heart.
Here are some numbers to make you happy.
With a little research, I found out that one my rental properties was bought in 1977 for $25,000. The same family held it for 28 years or so until we bought it in 2005 for $258,000. Today it is worth $260,000. Yes, not much appreciation in the past few years, but overall for the last 30 years, it has appreciated on an average at 8% a year. (On the total price, NOT the money invested. That's an important difference to remember!)
Surely, that's kept way ahead of inflation.
Here's another example: my husband bought his first home (from HUD) in 2000 for $55,000. Today it is worth $230,000 and is rented out. The total price appreciation on that home since 1995 (that's as far back as county records will go for that house) is 11% - and we're not even figuring how much the return is on the amount invested by my husband ($5000 - again, a very important difference.)
Hey, just trying to be conservative here and pointing out to the fact that I'm being conservative.
Sure, there are maintenance costs and other repairs to be made but there's also the various tax benefits that offset our income to this day.
The fact remains that real estate is a solid investment any way you look at it. And market downturns like the one we're having today is when you should be looking to buy.
Saturday, July 28, 2007
Scene: a typical day. The phone rings. It's another inquiry about my listing at 7710 25th Avenue in Sacramento. And I have to say, "Well, it is still available - technically. But we have a full price offer - multiple, really."
"You know it's a short sale."
That is really when I know if the person on the other end of the line is a Realtor. So what the heck is a short sale anyway?
Simply put, a short sale is the sale of a property where the sellers owe more on the house than the amount the house will sell for in the open market. The lenders in most cases would rather take a "short payment" than foreclose on the property because, well, something is better than nothing and there are added costs in a foreclosure for the lender.
As such, anytime a property goes on the market as a short sale, it requires the lender's approval after an offer is received. Until the lender approves the sale (the seller's lender, not the buyer's) in writing, the listing is considered "active." All timelines, including inspections, begin with the lender's approval.
There are approximately 1700 short sales in Sacramento County on the market and most of them are below market. However, a short sale can be a lengthy process, both for buyer and the seller.
If you're a seller thinking about selling your home as a short sale, consult your CPA. You might just get a 1099 for the amount of forgiven debt, since the lender considers it income. Discuss all consequences with your accountant before you go through with it.
If you're a buyer looking for a short sale in particular, you should ask yourself why. There are plenty of good deals out there on the market right now without you needing to get involved in a short sale or bank owned property. Which is not to say that I would discourage anyone from buying such a house. Just make sure they really are good deals.
And oh, get a home inspection.
Wednesday, July 25, 2007
If you are one of the lucky few to own one of those 1940s or 1950s Sacramento ranch or cottage style homes, you probably have hardwood floors throughout your house. Most people have never looked underneath the carpet to know. I urge you to do so. One home I owned had sticky vinyl squares pasted on top of the beautiful hardwood. Many cleaning agent fumes later, all the vinyl was taken off to reveal hardwood.
Any easy way to know if you have hardwood throughout the house is to look into the closet. If the closets have hardwood - usually not covered by carpet - chances are the entire house has hardwood floors.
The pictures are from one of my rental units and are not retouched. Look at the difference!
The hard part of this is getting all the furniture out, but it's so worth it. Get the floors refinished. You can do this yourself, but it's much easier to pay someone to do it and refinishing floors doesn't cost an exorbitant amount. I recently had about 700 square feet of flooring refinished for $1700.
If you are considering putting your home on the market and have hardwood floors, it is absolutely imperative you get them refinished. Buyers love walking into a home with gleaming floors when you open the main door.
As I like to call it, it creates the "wow" factor of a home and gives a fantastic first impression.
Tuesday, July 24, 2007
No frills here and no graphs. Here they are. I'm only giving you the raw data. Do with it what you will. No opinion and no bias.
For Sacramento county, from the Metrolist MLS as of this morning, these are the numbers I gathered:
Total number of homes for sale as of today: 11414
Total number of vacant homes for sale: 369 (3.2% of total homes for sale)
Total number of short sales for sale: 1779 (15.6% of total homes for sale)
Total number of foreclosures/bank owned homes for sale: 1581 (13.9% of total homes for sale)
Total closed sales in June: 1063
Total sales pending in June: 543
Total closed sales in July so far: 518
Total pending in July so far: 870
There is more fun with numbers to be had here and I'm waiting on some new data that might just surprise you. Stay tuned.
Monday, July 23, 2007
If you are reading any statistics anywhere and hoping to see them for what they really are, you must pick up a copy of How to Lie with Statistics by Darrell Huff and if you read nothing else in the book, read Chapter Five.
The picture shows the two ways a graph can be shown (and created) for maximum impact. The two graphs show essentially the same information, so graph #2 isn't "lying" per se, just reorganizing truth. I'm seeing large instances of this kind of "lying" going on everywhere real estate is being talked about.
Look, no one is arguing that inventory is up, short sales and foreclosures abound and sales are down. What I have trouble with is how this information is being used to make you think the sky is falling when it's not.
Don't let the statistics and scary graphs out there force you into inaction. Pick up the book. I guarantee you'll think differently when you see numbers and graphs.
Sunday, July 22, 2007
With all this talk about the housing market going up or down, I find a lot of people don't pay attention to factors they can control about the price their home can command. The market is beyond the control of homeowners, but the condition of their home is.
Get the front and back professionally landscaped. At the very least, add a sprinkler system. If your home is not going on the market any time soon, you may have time to watch the grass grow back. This is especially important in the Sacramento heat, where infrequent watering will kill the lawn in less time than you can say "Scotts Weed and Feed." Use a timer!
Here are before and after pictures of one of my rentals as it looked when I purchased it and when it was rented out. (Yes, the healthier lawn is when we were through with it, not the other way around.)
Friday, July 20, 2007
Surprising, huh? That's what I thought too. But as I hear from my clients, there are quite a few properties that are going into foreclosure and some of these properties are rentals! Sometimes the tenants don't even know the house they are living in is being sold or auctioned on the court steps.
If you are tenant being foreclosed upon - or know someone who is, here are some things to do:
1. This is something that is very much in advance. If you have people slowing as they drive by the home, something is obviously up. And I don't mean the occasional person looking for an address. I mean, if people are driving up and stopping and then driving away after looking at your house, something is wrong. I would call the landlord and let them know. Just in case.
2. If the landlord says that nothing's up but you find out somehow, call the mortgage company immediately. It isn't that hard to find out who the mortgage company is. Just find a local Realtor and have them look up the tax records. Then call the mortgage company and let them know you live at the place that will be going into foreclosure.
3. Obviously, all of this may or may not amount to something. Keep paying your rent, but start looking for another place immediately. Chances are an investor will buy the house at the foreclosure, but they may or may not want you in there, especially if you've been enjoying rent that is lower than other homes in the neighborhood.
As soon as you hear anything about a foreclosure on the property you're living in, first call your landlord and second start house hunting. By the way, don't forget to check in with me. You might just be able to afford a home to buy, not just rent!
Wednesday, July 18, 2007
Last evening I went condo shopping with a new client to Timberlake on Fulton Avenue, Sacramento. This client wants to buy a rental property close to where she lives, so she can rent it out and have the rent cover the mortgage and other costs. I have to admit I had never been to the gated complex of Timberlake before and was quite impressed.
Here are condos that are surrounded by well maintained pools, and running water gardens, little bridges to get around the complex, fountains and so on. In other words you don't once feel like you are in the middle of the city of Sacramento. One bedroom condos range from $135,000 - $165,000. Association dues are around $250 a month.
While I was there, another such complex came to mind. Crosswoods in Citrus Heights. Crosswoods, also built around the same time, in the late 1970s, while not a gated complex like Timberlake has a greenbelt, jogging trails and definitely classifies as a world in itself, again in the middle of Sacramento but you would never feel it once you're inside. Prices for 2 bedrooms are between $250,000 - $300,000 with association dues at $265 a month.
I have been known to say I am not too fond of condos as investment properties. The reason for that dislike is that condos usually stay a little longer on the market than single family homes and mainly because some associations have rules about how many units in an association have to be owner-occupied and those rules are adhered to pretty strictly. I just don't like the idea of a homeowner's association for an investment property because in my experience it creates a lot more red tape than I can handle.
That being said, these condos are worth looking into. When the number of condos on the market dwindle, people gravitate toward the "Timberlakes" and the "Crosswoods." They definitely have an aura about them!
Tuesday, July 17, 2007
Yes, "Dollar Homes" are available is the answer.
But no, you can't buy them as an investor.
However, before you go hang your head and feel like the world is against you and you will never make it as an investor, it's worth visiting the HUD website. They frequently have sales of houses that have been foreclosed. Preference is given to owner-occupied homes but investors are allowed to bid as well and especially if the homes do not sell to owner-occupied buyers.
Listings are updated frequently and you can see them all at the HUD website. All properties also include a "Property Condition Report."
Also through HUD's Good Neighbor Next Door Programs you may be eligible to buy a home at a discount of 50% off list price.
Go to the website. It's worth a look!
Monday, July 16, 2007
If you have just bought a home in Sacramento, CA and are absolutely terrified of what's going to happen in the future, take heart.
And while you're at it, take a look at these projections just released by the Sacramento Bee in their recent article about California's population.
Notice that by 2050 the California Department of Finance believes the population around Sacramento county will increase by at least 50 - 99%
All those people will need somewhere to live.
Now you see why I'm so optimistic about the future of real estate in Sacramento?
It's happening and I'm not a liar. Here's proof!
Okay, not be snarky or anything.
These are my new clients that just bought a home in Sacramento. They moved here from Florida and have the cutest accent.
It was such a pleasure working with them because they weren't the least bit jaded about the real estate market. They realized they were getting a good deal and jumped on it with no hesitation. The market analysis confirmed their happiness. Of course, it helped that they had done their own research online and knew the style and neighborhood of the home they were looking in.
They actually made an excellent purchase because of the following:
- they bought in a slow market
- they had done a lot (I mean A LOT) of research beforehand
- this one is the most important: the market analysis showed that homes in their neighborhood in a half-mile radius sold for anywhere between $30,000 more than they paid for their home to $200,000 more than they paid. Which means that every dollar they invest into the home will have more potential returns than say a neighborhood with a ceiling of say, $20,000 under all comps.
This is an excerpt from one of their emails:
"Thank you for all of your help and patience with this property and me! Thanks again. You are a wonderful agent."
Well, won the clients over.... now for you bloggers! :)
Sunday, July 15, 2007
Here's the question on every beginner real estate investor's mind: "They say the market's slow right now, they say it's a good time to buy investment property, but... I know nothing about being a landlord. How do I start?"
For one thing, ignore the horror stories. You know, the people that don't have rentals or had them and quit landlording. Those broken plumbing stories? Turn a deaf ear to them. What? You haven't heard any? Ooops! Just ignore the last few lines then.
What follows are the five most important things you need to do to become a great landlord. This is absolutely the right time to buy investment property because the negative cashflow (rent minus mortgage payments and maintenance) is likely to be lower than in a hot market. If this number is zero or a positive one, you my friend have hit upon an excellent rental. It would however still be wise to do some research into the past real estate trends of the neighborhood or the city you live in.
Oh, another thing to remember: a bad sales real estate market is an excellent rental real estate market. If you have picked a neighborhood with record foreclosures, good for you (provided it's not headed downhill in general or has a certain reputation for unsavory things) because the people who have had their homes foreclosed will probably want to rent for a while and your house might be one they consider.
So without further ado, let's go over the five most important things a landlord needs to do:
1. The rental must be in good condition. Everything must work - the air, heat, gas, and all appliances. If it is broken, fix it. The place must be freshly painted inside and out or appear freshly painted. The fences must be up.
2. Plan on about 3 - 4 weeks of advertising to get a tenant. In my experience a rental ad in a newspaper doesn't help as much as a sign in front of the home and just simple word-of-mouth. Go talk to the neighbors, knock on a few doors, leave flyers around the neighborhood.
3. When you do get inquiries, show the home first, then ask questions. You might decide the credit score or income of the people that inquire doesn't match what you're looking for, but always ask the questions later. And ask them on an application. There is no substitute for a credit check and employment verification. And have the applicants pay for the credit check.
4. Get a security deposit and don't let the tenants use it in lieu of the last month's rent. If you think they might, get a first month's rent, last month's rent and security deposit.
5. This is the ugly one. Get ready to do lots and lots of paperwork and keep track of all income and expenses. Change your homeowner's insurance to landlord's insurance and file everything.
This should get you started! Good luck in building your real estate empire!
As all my clients know by now, this post by me caused a huge amount of responses, mostly hateful. There's a large number of people out there in cyberworld that hate Realtors. There's also a large number of people that hate real estate investors. Unfortunately for me, I fall into both those categories and get attacked rather frequently.
However, recently I came across some pretty nasty stuff that called into question my honesty and integrity as an Realtor. I will not give the blogger the pleasure of a link but here are some direct quotes:
"Does this mean all real estate agents lie to get a listing or make a sale? Enough of them do to get them all lumped into the same group [my post] That is exactly what I meant. She either knows precious little about what she is talking about or she hides her knowledge well."
Oh wait. It gets better. Here's another one:
"She doesn’t understand the market forces driving the foreclosures right now and if people rely on her to help them figure out which home is a good investment for them, they might have a lot of reason to worry about the safety, security and wisdom of their ‘investment’."
Obviously, this person had a bone to pick because he didn't bother reading my responses to all the comments or even to read anything else on my blog that would have proven otherwise. But then again, he also thinks David Lereah, Chief Economist of the National Association of Realtors, is a liar and "doesn't have a clue."
One wonders, if this person is a real estate investor, doesn't it help his agenda to tell you that Realtors are liars? After all, the lesser Realtors there are out there protecting your interests, the easier it is for him to buy YOUR home dirt cheap.
But don't worry about me. David Lereah, Robert Kiyosaki, A.D. Kessler, Donald Trump, Robert G. Allen - all real estate investors have been criticized and their integrity called into question. I figure I'm in pretty good company.
Thursday, July 12, 2007
I haven't written anything about Casey Serin yet but have been visiting his blog pretty regularly. I came across this story when I was still at Re/Max and the office manager forwarded it by email to everyone.
At first read, I kept thinking, wow, what a disaster. On the second read, I just wanted him to stop, just stop and think for a while. Stop buying homes, stop being so manic. Strategize. Think. Sit still.
Real estate investors (yes, in MY experience) do a lot of thinking and a lot less running around than most people think.
At this point, I had him written off as a fool who will soon part from his money. Then, he appeared on the Suze Orman show. And I was pretty impressed with the breadth of his knowledge, even though it didn't save him from racking up $2.2 million in foreclosures. Maybe the knowledge was in retrospect.
Well, if you can't make a grand mess in your early 20s, when can you?!
Today, I get an email from Casey's mailing list saying he's shutting down the blog and the book and getting a job. And I'm a little saddened. It seems on the surface that he's been broken by the critics. And I sure hope not. As Robert Kiyosaki says in this video to Casey, Only successful people have critics.
Personally, I think people criticize because 1. Someone else's success makes them think about why they're not successful themselves and this means introspection and admitting one's own mistakes or 2. Seeing someone else's mistakes that justify their own inability to perform. This leads them to feel justified in their own dead-end lives and see no hope.
But this is besides the point. I started this post because I wanted to talk about leverage and what an important tool it is, not to be taken lightly. Investors love leverage but it must be handled carefully and with a lot of patience.
It is with leverage that I think Casey really failed and is failing again.
His real estate was bought with leverage that he didn't learn to respect. His website was leverage that he can't handle. His book, yes, even his critics were opportunties for leverage he doesn't seem to understand how to use. He seems to think in terms of a job or investing and most people seem to be able to do both successfully. In fact, a job is necessary to provide cashflow in the first 5 - 10 years of real estate investing.
Casey says he will probably be back in two years. I hope he is. He has learned much that can help him for a lifetime of investing. This is "The Dip." If he lets the critics break him now, he is finished. If not, he might just be a force to be reckoned with in about ten years.
I hope for his sake that it is the latter.
Wednesday, July 11, 2007
I've always maintained that I am a real estate investor first and a Realtor second. This might come as a shock to some people, but I think it's almost impossible to sell something if you don't have a passion for it. And if you have a passion for it, well, you're going to buy it yourself.
I can't tell you how many times I've told my buyers I would buy the house they were previewing. And I would. But I don't compete with my buyers. There's too much of a conflict of interest there. But if I see a good deal, I tell them. If it's a bad one, I tell them that too. I would hate to cut some real estate investor's career short by selling them a bad deal.
So, today I spent my morning at Borders looking for good investment books. I noticed this interesting dichotomy (and perhaps it's just Borders, but I think it is really a commentary on our investing psyche): the real estate section was inundated with "fix and flip" books and the personal money section was inundated with "be careful - save, save, save, skip a latte, etc."
See the deep valley in between that almost no one wants to talk about? What about more sophisticated investment techniques? How about seller financing? What about buying discounted mortgages? Options?
Is fix and flip all we're left with besides reading about million dollar deals? Is this all people buy in book stores- the choice is between Donald Trump and Suze Orman? If that is true, it means that television and print media has a lot more control on what people believe than I previously thought. And that's downright scary.
And, in a way, it explains the anger that just came boiling out of everyone reading a few days ago. Watch the news and tear down bloggers. Why? Because you can't talk back to the news? Or because it comes out of 52 inch screens and you accept it as reality?
If this post bothers you out there, good. Let it be an inspiration to learn more and do your own research the next time.
Tuesday, July 10, 2007
Okay, thank you all for your comments on the previous post.
I understand real estate is an issue that gets very passionate responses from everyone - on both sides of the argument. I, for one, will never - repeat never - favor the stock market over real estate.
This blog is my opinion, from what I have read, and what I have experienced.
It is meant as an educational tool and does not supplement your own research.
It is a starting point, for the un-jaded, if you will.
And I AM willing to put my money where my mouth is.
Let's just agree to disagree, shall we?
Sunday, July 8, 2007
Sure, let's just not see real estate as an investment that you can live on in your later years through a reverse mortgage.
Let's forget about the fact that real estate forces people into saving.
Let's ignore all the information out there that suggests people really are happier mowing lawns because the lawns are their own.
Let's forget all about the American Dream.
Let's turn a blind eye to the reality that most millionaires either made their millions in real estate or hold their millions in real estate.
Let's not hedge against inflation.
Let's feel uneasy about the safety of our own real estate investments only because 2 - 3 people out of 100 have had their homes forclosed.
Let's just let fear run the real estate market, shall we?
Suits me. If you want to rent my houses for 30 years, I might just let you!
Saturday, July 7, 2007
... and other sad truths about Sacramento I'm beginning to realize. Oh, who am I kidding? I LOVE this market and anyone else who thinks otherwise must either be lying or... I don't know... a seller!
While browsing for properties today and getting frustrated with all the 999s we Realtors try to attract attention to our listings with (yeah right, does anyone ever get a $1.00 check from a title company after buying a $150,000 home? I'd love to see that!) I saw several listings that are fantastic deals even though they are short sales.
As a rule, I don't get too excited by short sales because it seems like the parties involved just don't have enough control on the transaction. However, there are certain lenders out there that we know are out of the business and are liquidating everything they own. Hit upon such a short sale and you might just have not just a bargain but a pretty quick sale. There's no red tape when there's no lender!
So, here we go again... I have no money to invest but I'm in love with about three properties right now. And I'm showing them to my clients tomorrow. Well, if I don't get them, I'd rather be involved in the most fantastic deal of the year than watch by the sidelines.
Wednesday, July 4, 2007
Old news, but one to be reminded of - This article told of property taxes falling and I was hoping I would be one of the lucky few... and sure enough got a letter in the mail the next day that said my taxes had fallen by about $400 thanks to Proposition 13 (1978) which limits real estate taxes to 1% of the transfer price or market value, whichever is lower.
This is a huge benefit to homebuyers today. If you buy cheap, there's not just the fact that your monthly payments will be low and you will actually have the opportunity to buy low and sell high, it also means that your property taxes (one of the factors in your mortgage payment) will be lower!
Tuesday, July 3, 2007
The 95841 are is just that - off Highway 80 and on Madison Avenue to Sacramento homebuyers. I wish it had another name. But in the midst of this week's home buying frenzy, I met some pretty wonderful people looking for a home in that area. Here's what was so surprising to me about them:
- They have a very good sense of what they wanted although at first it seemed vague. They have nailed down the style of the home and are razor sharp in that aspect. Most buyers do not know what they want. The good ones do!
- They have never lived in Sacramento and yet have identified an area that is fairly stable in value with low rates of crime. I was doing the "Elk Grove is safer" chant and then came home to realize the 95841 is far safer than 95624 according to the crime stats at the Sacramento Bee. Point 2 for my clients.
- They are not afraid of investing in real estate. They instinctively know that this is the right time and they are in the right place.
It's not funny any more, Sacramento renters! You're living in the last affordable metropolis in California. And after everyone else from everywhere else that sees the value in Sacramento has bought a piece of it, you're going to be upset that you weren't warned.