The Lowdown, Dirty Truth About Buying a House at Auction

Buying a house at auction is an “adventure,” says Nedalee Thomas, a homeowner in Orange County, CA—and she should know. Thomas, a former Realtor®, purchased her three-bedroom HUD home through a stressful, fast-paced auction process.

“My prayer was, and had been for many years, that I would get a home at a discount,” she says. And so she did: The auction process netted her a dream place well under market price. She paid about $250,000 for the property—an astonishing deal, especially considering nearby homes go for nearly double.

In the four years since she bought it, the home’s value has increased by $200,000. “I never expected that,” Thomas says.

Looking to score a sweet deal of your own? Auction homes provide a number of benefits, but the process seems designed for a specific, adventurous kind of person. Here’s what to know going in:

You should buy a house at auction if you’re…

… patient and brave. While Thomas would buy her home through an auction again “in a hot second, absolutely,” the process was undeniably long and arduous.

One of the biggest differences between buying a home at auction and the traditional route? You don’t get to go inside the home before submitting an offer.

Before she put in her bid, Thomas looked at the exterior and peeked through the windows. The next day—after submitting an offer—she returned for a thorough walk-through.

“It was trashed on the inside,” Thomas says. “They had taken the shower heads, the light fixtures, and the fronts of the cabinets. The kitchen window had been painted lavender.”

But Thomas likes a challenge, so she kept moving forward.

The bidding process can be interesting

Once she submitted her bid for $251,551.51 (a highly specific number chosen partly because it was a hair over $250,000 and set her apart), she had to wait three days for an answer.

“I thought nobody would outbid this crazy number,” Thomas says. Still, they did—but then one by one, the higher bidders either dropped out or were disqualified. Soon, the house was hers.

Some home auctions involve in-person bidding, where you can view the property and compete directly against other potential buyers. But buying as is means you might end up with a bad roof and a useless basement. Plus, investors flock to these listings, offering high, all-cash bids. Even if you’re bold, you might have to unleash your inner gambler to win the home.

You should never buy a house at auction if you…

… have a very specific vision regarding what your future home should look, feel, and smell like. If you have some very particular, intractable ideas about what you want and need, skip the auction.

Picky buyers might find themselves stranded in a sea of not-quite-right listings. You have to be willing to accept that you might not get the four-bedroom ranch of your dreams. The kitchen probably won’t have an open layout. You might have to prepare for wood paneling.

Thomas had only three requirements: “I wanted a home at a discount, I did not want to fight for it, and it should have a view,” she says. “I got all three of these things.”

No, Thomas didn’t get quite everything she asked for. Her auction home is located on a lake, but a previous owner had installed a bedroom closet that blocked what should be a stunning view.

“I joked that the closet had a lake view,” she says. To fix it, she changed the home’s layout to make room for a window.

Make sure to do plenty of research on the market

Any time you’re buying a home, you need to do your homework. But those rules are twice as important when you’re buying a house at auction—especially if you’re attending a live auction, where excitement and emotion can cloud your judgment.

At the first auction Thomas attended, shortly after the housing crash, she decided the property wasn’t worth the cash.

“I absolutely guarantee you that the price they paid was more than it was worth,” she says. Two bidders went back and forth six times before settling on a price, and “the reason the other people weren’t bidding was because it started out too rich in the first place.”

Even if you’re not planning on attending an in-person auction, a thorough understanding of the market in the area you’d like to buy is essential. Even HUD auctions move quickly, and you’ll likely need to put a bid down on the spot.

“You need to look at comps,” Thomas says. (Comps are comparable sales, or similar houses recently sold in the same area.) “You need to be aware of what the value in the neighborhood is.”

You can use realtor.com’s Local search to understand what similar houses are worth.

Make sure to budget (time or money) for repairs

Remember Thomas’ missing shower heads, light fixtures, and cabinets? All of that needed to be repaired—and that comes at a price. She originally budgeted $35,000 to get her new home into shape, but she ultimately spent about $85,000 on rehab.

And cash isn’t the only precious resource spent in a renovation. Thomas spent nine months living in her office while construction crews worked on her new home.

Despite the long wait and huge expense of repairs, Thomas says buying her home at auction was a fabulous experience. But homeowners looking to follow her lead need to be prepared for the pitfalls—and having an adventurous spirit won’t hurt.

Source: Realtor.com, Jamie Wiebe
http://www.realtor.com/advice/buy/buying-a-house-at-auction/?iid=rdc_news_hp_carousel_theLatest

How to Begin Investing in Real Estate

The housing market is well on the mend, with prices steadily rising in much of the country. It may be a good time, then, to think about adding real estate to an investing portfolio.

True believers say there's nothing like owning a second, third or fourth property. Of course, true believers tend to be those who survived catastrophes like the housing meltdown about a decade ago. Ask those who were hammered and you get another view.

One thing is clear: for a beginner, real estate is a different game. The lessons you learned with stocks, bonds and mutual funds aren't much of a guide.

"The biggest thing someone should understand is that a real estate investment is more than an investment when compared to stocks and bonds. It should be viewed as a business," says Donovan Ryckis, financial advisor at J Donovan Financial in Florida. "It will require time, management and due diligence above and beyond most investments."

While that can be daunting, it has its upside, says Eric Workman, senior vice president of marketing at Chicago-based Renovo Financial, a lender to real estate investors. Unlike with stocks, you're not casting your lot with executives you've never met.

"As an investor, you have complete control over all of the decisions related to the property – level of finish, items replaced and or repaired, standards of tenant quality, rentals rates, etc.," Workman says.

Over the past year, single-family home prices have grown by 5.3 percent, while the stock market has been nearly flat, according to the Case-Shiller index of home prices. Studies have shown that, nationwide, homes appreciate at just over the inflation rate for the long term, and that stocks do better. But nationwide averages don't mean much to the investor looking for a property in one local market.

Also, most real estate investors hope to earn income from rents as well as profit from appreciation.

"Prices have risen for the past seven-plus years, and part of what has driven that growth is the (low) cost and availability of debt and equity," says David Becker, managing director of the equity division at Time Equities, a New York City-based real estate firm. "Interest rates remain at all-time lows, which is fueling certain asset classes like multi-family (buildings)."

Among real estate's appeals: it often marches to a different drummer. If your stocks are down, perhaps your real estate will be up. That's not always true, as homes and stocks plunged in tandem in the financial crisis, but it's true often enough for many advocates.

Real estate prices tend to be less volatile than stock prices, because homes, stores and offices cannot be bought and sold with the click of a mouse.

Because real estate can be used as collateral, it's cheaper to borrow to pay for real estate than for many other investments. And if you borrow, say, 80 percent of the purchase price, selling for 10 percent more than your purchase price means a 50 percent gain.

Buying a vacation property has an added bonus: using it yourself.

Still, there are drawbacks. That same leverage that turned a 20 percent down payment into a 50 percent gain can quickly turn into a loss if the market sours. The stability that looks so appealing when you buy can turn into a nightmare if you cannot quickly attract a buyer when you want to sell.

And the benefit of a small down payment may be offset by mortgage interest payments, taxes, and insurance and upkeep costs, while carrying costs are little or nothing for stocks, bonds and funds. The vacation "benefit" can get stale if you feel it's a waste of money to go somewhere else. On top of all that are the headaches of dealing with renters.

"Unforeseen events are always a risk when it comes to real estate investing," Becker says.

If interest rates rise, for example, prospective buyers won't have as much to spend, undercutting property values. "I do not see interest rates rising overnight, but a market can quickly be turned sideways by a major negative event," Becker says.

With those warnings in hand, here are a few options for a real estate investment.

Buy a vacation home. You get to use it yourself while hoping to make some money. Though rental income may not cover all your costs, especially at the beginning, you may profit from appreciation over the years.

"I would advise to start with vacation property rather than a fixer-upper," says Peter Anadranistakis, president of Caliber, The Wealth Development Company, in Scottsdale, Arizona. "Get a property in a dense neighborhood, close to cafes, museums, restaurants, attractions and public transportation."

[See: 8 Stocks to Buy For a Starter Portfolio.]

In addition to the costs mentioned above, you may have to pay a rental manager. In some markets, commissions gobble 25 percent of the rent. If the property is not near your main home, you'll probably have to pay a professional to deal with maintenance and repairs, even little things you would do yourself at home, such as squeaky hinges and blown light bulbs.

Vacation home markets can be especially volatile, with prices and rental income plunging in a weak economy when people shun luxuries.

Buy a full-time rental. Buying a home or condo for full-time renters means you are not limited to a vacation area like the beach, lake or mountains. You can get a property near where you live, cutting some of the maintenance costs. And you won't have to find a new renter every week or two, though you could lose plenty of sleep with a bad renter who's not going anywhere.

Flipping. Buying a home, fixing it up and quickly selling is reality-show staple, but most experts warn this is a risky way to get started in real estate. It takes a lot of knowledge, time and tolerance for setbacks, and it's very hard to make money without contributing sweat equity. If you're not handy and don't enjoy construction work, stay away.

"It is becoming harder to find deals to flip, as spreads (between purchase and sales prices) are becoming smaller with appreciation," says Than Merrill, CEO of FortuneBuilders, a San Diego-based training firm for real estate investors.

Invest in your own home. Remodeling, renovating and expanding can add value to the home you live in, and have an immediate payoff in enjoyment. If your home has serious need for improvement and is in a healthy market, this is probably the smartest real estate investment for a beginner nervous about being a landlord.

Be careful though, because most improvements do not add as much value as they cost, according to the annual surveys by Remodeler magazine. To make improvements pay financially, you need to choose carefully, not get carried away with personal preferences, and probably do a lot of the work yourself.

Buy real estate investment trusts. REITs are like mutual funds that own real estate instead of stocks or bonds, and they can be bought and sold in an instant. Though each REIT specializes in a certain type of property – strip malls, apartment buildings, office complexes and so on – REITs spread the risk among a number of properties and use professional management, says Wilson Magee, director of Franklin Global Real Estate and Infrastructure Securities.

"Investors can build a real estate portfolio that has geographic and sector diversification by investing in a few selected REITs," Magee says.

With a REIT, he says, you can buy into a big property you could never afford with a direct investment, and REIT management minimizes costs with economies of scale.

Whatever approach you take to real estate investing, most experts recommend dipping a toe rather than plunging in, so you'll survive if things go wrong or the hassles become intolerable.

Source: U.S. News & World Report, Jeff Brown
http://money.usnews.com/investing/articles/2016-05-17/how-to-begin-investing-in-real-estate

Forget about terrorist, the FBI uses hidden microphones to catch shady real estate investors

I, like many Americans have known for some time that the government is spying on the people by monitoring electronic communications such as email and what-not, but this is a whole new level. So apparently the FBI has set up hidden microphones in out door areas to listen on the conversations of terrorist? No. - real estate investors who might be bid rigging! Go figure. 



Hidden Microphones Exposed As Part of Government Surveillance Program In The Bay Area

OAKLAND (CBS SF) — Hidden microphones that are part of a clandestine government surveillance program that has been operating around the Bay Area has been exposed.

Imagine standing at a bus stop, talking to your friend and having your conversation recorded without you knowing.  It happens all the time, and the FBI doesn’t even need a warrant to do it.

Federal agents are planting microphones to secretly record conversations.

Jeff Harp, a KPIX 5 security analyst and former FBI special agent said, “They put microphones under rocks, they put microphones in trees, they plant microphones in equipment. I mean, there’s microphones that are planted in places that people don’t think about, because that’s the intent!”

FBI agents hid microphones inside light fixtures and at a bus stop outside the Oakland Courthouse without a warrant to record conversations, between March 2010 and January 2011.

Federal authorities are trying to prove real estate investors in San Mateo and Alameda counties are guilty of bid rigging and fraud and used these recordings as evidence.

Harp said, “An agent can’t just go out and grab a recording device and plant it somewhere without authorization from a supervisor or special agent in charge.”

The lawyer for one of the accused real estate investors who will ask the judge to throw out the recordings, told KPIX 5 News that, “Speaking in a public place does not mean that the individual has no reasonable expectation of privacy…private communication in a public place qualifies as a protected ‘oral communication’… and therefore may not be intercepted without judicial authorization.”

Harp says that if you’re going to conduct criminal activity, do it in the privacy of your own home. He says that was the original intention of the Fourth Amendment, but it’s up to the judge to interpret it.

Source: CBS SFBayArea, Jackie Ward
http://sanfrancisco.cbslocal.com/2016/05/13/hidden-microphones-exposed-as-part-of-government-surveillance-program-in-the-bay-area/

Chinese pour $110bn into US real estate, says study

This isn't the first time I've come across articles about Chinese buying properties in the US and posted to this blog, but here's another one for your reading pleasure folks. These Chinese investors are part of the reason why the Silicon Valley (as well as other areas) real estate market is so hot right now.



Chinese nationals have become the largest foreign buyers of US property after pouring billions into the market in search of safe offshore assets, according to a study.

A huge surge in Chinese buying of both residential and commercial real estate last year took their five-year investment total to more than $110bn, according to the study from the Asia Society and Rosen Consulting Group.

The sheer size of that total has helped the real estate market recover from the crash that began in 2006 and precipitated the 2008 economic crisis, they said.

Chinese investment in property has also helped to inflate prices in other developed countries, notably the UK and Australia in the wake of the dip in world stock markets in 2015.

And despite a slowdown due to Beijing’s subsequent clampdown on capital outflows, the figure for the second half of this decade is likely to double to $218bn, the study said.

“What makes China different and noteworthy is the combination of the high volume of investment (and) the breadth of its participation across all real estate categories,” including a “somewhat unique entry into residential purchases,” the study said.

The authors of the study said their numbers, based on public and real estate industry data, understate the total. They necessarily miss purchases made by front companies and trusts that do not identify the sources of the funds.

Big deals such as the Anbang insurance group’s $2bn purchase of the Waldorf Astoria hotel in New York last year and its failed $14bn offer for the Starwood group in March have made headlines. But the study said Chinese buying of US homes far outpaces its investment in commercial land and buildings.

Between 2010 and 2015, Chinese buyers put more than $17bn into US commercial real estate, with half of that spent last year alone. Unlike many countries, there are very few restrictions on what foreigners can buy in the US.

But during the same period at least $93bn went into US homes. And in the 12 months to March 2015, the latest period for which relatively comprehensive data could be gathered, home purchases totaled $28.5bn.

That took the Chinese past Canadians, who have long been the biggest foreign buyers of US residential real estate.

Geographically, Chinese buyers are concentrated in the most expensive markets: New York, Los Angeles, San Francisco and Seattle. Property in Chicago, Miami and Las Vegas is also popular.

That focus means they pay well above the average US home price: last year, Chinese buyers paid on average about $832,000 per home in the United States, compared with the average for all foreign purchases of $499,600.

The motivations are broad: some are buying second homes, some are buying as they move to the United States on EB-5 investor visas; some are investing for rental and resale.

Most of the money in US homes, the study noted, is private wealth, not corporate.

“This familiarity of utilizing real estate as an investment or wealth preservation tool is more prevalent in China and reflects the broader comfort of purchasing second homes in the United States by Chinese individuals and families,” the study noted.

Since last year, there has also been the motivation to get money outside China and into dollar assets amid worry about the continued fall in the yuan, which was devalued slightly against the US dollar in August.

The study says it expects a lot more commercial real estate buys in the United States by Chinese companies.

Last month, Chinese conglomerate HNA announced it would buy the 1,400-hotel group Carlson Hotels, owner of the Radisson brand.

“Anbang is not the only firm looking at these assets. Other Chinese entities were originally interested in acquiring Starwood in 2015 before Marriott reached an initial deal, including Jin Jiang Hotel Group, which had already acquired a European hotel chain in 2015, and CIC, the sovereign wealth fund,” the study said.

In Australia, the government recently blocked an attempt by Dakang Holdings to buy the Kidman farmland empire whose assets cover 1.3% of the Australian land mass.

Source: The Guardian, Agence France-Presse
https://www.theguardian.com/business/2016/may/16/chinese-pour-110bn-into-us-real-estate-says-study

How To Score A Great Deal On Real Estate

With many real estate markets rebounding or thriving, foreclosure rates way down, and short sales all but gone in most areas, can you still find a bargain when buying a home? Yes, but you'll have to be sneaky, creative, diligent, or all of the above.

Pay cash

You've got a couple hundred K lying around, right? It may sound ludicrous to some, but buying a house all cash is a growing trend, and one that can save you money upfront and down the line. Sellers may be more willing to negotiate on the home price for a cash purchase. A shorter home search and escrow period can save you money on carrying costs in your current home. And, obviously, not paying a mortgage can save you hundreds of thousands of dollars in interest.

Go to an auction

While foreclosures are down across the country, some homes still end up going through the process and then ending up available at auction. That means you can bid in person (or online if that option is available) in an attempt to get a bargain home. Take note that you'll probably be in competition with investors and home flippers, and many auctions require an all-cash payment, which makes them difficult to purchase for the average person. You'll also want to keep in mind that many auction homes are in poor condition - be sure to check them out before bidding so you don't end up with a money pit.



Buy in a developing neighborhood

If you're willing to compromise on location, you might be able to find a great deal. And, you might even get help with the purchase.

"Some towns offer transitional and developing neighborhood homes at very steep discounts," said Fortune Builders. "You may have to agree to live in the house for a certain number of years or agree to do a good amount of repairs, however this is definitely a program to search for in the area you're looking to buy.

Buy a fixer upper

Have a way with a hammer and a desire to make your place your own? Buy a project house. You'll save a ton of money and you'll be able to redo it in your style instead of living with someone else's.  Some loans might even help pay for your renovation as part of the home purchase.

Rent to own

Is your less-than-excellent credit and/or unsubstantial down payment making it difficult to get a good loan? Maybe you're having trouble competing with other buyers in a competitive market. Both of these scenarios could end up with you paying more than you want to. But you may be able to get a great deal and ease into the market with a rent-to-own or lease option arrangement.

"Whether the issue is a lack of down payment, a little too much debt, or a lingering ding on their credit report, sometimes buyers just have to wait while they work on their credit profile or save more money before they can buy a home," said Realtor.com. "In such a case, a rent-to-own or lease-to-own arrangement can sometimes be a solution."

The advantages of renting to own are the ability to lock in a purchase price from the beginning of the agreement, and saving toward a down payment - “During that time, the renters usually pay an above-market rent, with the excess rent credited toward a down payment when the contract ends,” said Realtor.com - and work on improving their credit so at the end of the term, they are able to qualify for a great rate.



Buy in the ‘burbs

People don't move to the suburbs because they want to be an hour and a half (each way) from work. It's a tradeoff for affordability, plus a crack at a family-friendly atmosphere and quality public schools.

For $500,000 ($499,990, to be exact), you could buy this brand-new home in the family friendly suburb of Santa Clarita. You'll have to deal with a long commute to…well, pretty much anywhere, but, in return, you'll have great space and a home designed just for you with all the features and finishes you want that no one has ever lived in. For the same money, you can buy this tiny condo a few blocks from the beach in Santa Monica. It's only 855 square feet and one bedroom, but think of all that time you'll save not being in the car!

That's the thing about location. It's give and take. While you might be able to find something in the location you really want for the money you have, it may not be what you want.

Source: RealtyTimes, Jaymi Naciri
http://realtytimes.com/consumeradvice/buyersadvice1/item/43798-20160414-how-to-score-a-great-deal-on-real-estate

6 Ways to Explain Low Inventory

Everywhere you turn, there's a new story about how the lack of homes on the market is driving up prices and driving buyers crazy. But what's the reason behind this trend?

There are a number of factors, according to a recent article at Real Estate Economy Watch. Make sure you understand the logic behind the market, so you can be the best advocate for your clients during these somewhat stressful times.

1.) Many home owners are still underwater. One of five homeowners with a mortgage still doesn’t have enough equity to sell. This isn't the same situation as we saw during the depths of the housing crisis, but it's still making its mark on inventory levels. Although rising prices may slowly reduce the number of home owners who owe more than their property is worth, Real Estate Economy Watch predicts that significant numbers will continue to be equity-challenged for several years to come, especially in Arizona, California, Florida, and Nevada.

2.) Boom buyers are still holding out. About 16 million families bought homes in the peak of the boom around a decade ago, and many are still waiting around to make a profit, even if they aren't underwater. Even if CoreLogic's prediction that the national median price will reach the peak of 2007 in the next year or so does come to fruition, Real Estate Economy Watch says many of these peak buyers will have to wait another five years or more before they realize much profit on their homes.

3.) The inventory shortage is squeezing move-ups. Owners who may be ready to move into a larger or more expensive home are often considered hidden drivers of the market. But right now, price instability and the lack of available homes is causing this group to hold off. But Real Estate Economy Watch says that stability is coming, despite the inflationary impact of market shortages, and predicts that this "vicious cycle" will ease.

4.) Investors aren't ready to sell single-family homes they're renting. They're making money from both rising rents and home price appreciation. And that's why Real Estate Economy Watch cautions against assuming they'll "sell their mini gold mines to homeowners anytime soon." The upside? At least some young prospective owners have access to a relatively affordable alternative to apartments, where they can start families while they wait for entry-level homes to come on the market.

5.) New-home construction is still very low. It may be tempting to blame this on the builders, but Real Estate Economy Watch points out that after the crash in 2007, thousands of smaller builders closed down, and many of those who survived did so by selling off their inventories of prime real estate earmarked for future construction. They predict that builders will make a dent in the higher-tier housing soon, but that they would help the inventory problem more if they concentrated on the lower-end demand.

6.) Baby boomers are running behind. Everything from later retirement ages, longer careers, better health, and loss of household wealth/equity during the Great Recession have contributed to a slower-than-expected timeline for this generation. But Real Estate Economy Watch predicts that this will change as many must convert their equity into cash while they can still enjoy it, and says others won't be able to afford the costs to retrofit current homes in order to age in place.

Source: Realtor Mag Onlin - Real Estate Economy Watch, Where Have All The Sellers Gone?
http://realtormag.realtor.org/daily-news/2016/03/23/6-ways-explain-low-inventory?om_rid=AAFmZk&om_mid=_BW8tT2B9MB5MZl&om_ntype=RMODaily
http://www.realestateeconomywatch.com/2016/03/where-have-all-the-sellers-gone/

Flippin' A House Isn't Easy: 7 Things To Consider Before You Take The Plunge

Turn on HGTV or any number of other channels almost anytime during the day or night and you're bound to find at least a couple of shows about flipping houses. Some provide a cautionary tale about overextending yourself financially or making other rookie flipping mistakes, but the vast majority end up with a profit of $30,000, $60,000, or $100,000+ in profit for a couple of months (or a couple of days, in the case of one new flipping show).

Enticing, right? If you're getting ready to plunk down cash for your own flip, here are a few things you need to think about.

1. Make sure you've got the money

Sounds obvious, but…do you really know the financial stakes involved? "The first expense is the property acquisition cost. While low/no money down financing claims abound, finding these deals from a legitimate vendor is easier said than done. Also, if you're financing the acquisition, that means you're paying interest," said Investopedia. "Every dollar spent on interest adds to the amount you will need to earn on the sale just to break even."

If you're planning to pay cash, you won't have to worry about interest, but you will have carrying costs including utilities, property taxes, and HOA fees where applicable.

Here are a few other options for buying property to flip, courtesy of Auction.com: "If you don't have enough cash to purchase a home, the next cheapest source is a home equity line of Credit (HELOC). These are low-interest, variable-rate lines of credit that are secured by either your primary residence or an investment property. Typically, the HELOC rate is set about 1–2% above the prime rate. You need to put the HELOC in place before you bid on any homes; then you can bid on the home as a ‘cash deal,' rather than as a ‘financing deal.' Many investors use hard money loans or other conventional mortgages to finance their flips. Because of the higher interest rates and points paid at closing, both will reduce your net profit considerably, and are not recommended for flips unless absolutely necessary."

2. Buy in the best location you can

"Expert house flippers can't stress this enough," said MoneyCrashers. "Find a home in a desirable neighborhood, or in a city where people want to live." And keep in mind the convenience factor—for the potential buyers, certainly, but also for you. "You will work on this house daily in the weeks and months to come. Do you really want to work all day, and then drive an hour to get home? Don't invest in a house too far away from where you live; you will spend more money on gas, and it will take longer to fix up the house."

3. Work with a realtor...or become one

Tying to maximize profit by selling a flip yourself rarely works out well if you don't know what you're doing. If you think trying to figure out if the wall you want to take down is load bearing is complicated, just try to figure out disclosures and conditions without going to real estate school. The money you spend on a Realtor commission can be well worth it for the ability to concentrate on other things and know the sale is in good hands.

Beyond getting the home sold, good real estate agents can be helpful in other important ways when it comes to flipping. "They can help you find great deals, get you comps, help you connect with lenders or contractors, and a lot more," said BiggerPockets. "Don't settle for an average agent though—find a great investor friendly agent."



4. Check the comps. And check them again

Speaking of comps…you can't make a smart decision on buying, fixing up, and flipping a house if you aren't aware of the prices in the neighborhood. And that might be easier said than done. In states like Texas, home sales are not reported and are not public record like they are in states like California. Do your research so you know what you're up against.

5. Make smart updates

Knowing where to spend your money is key to a successful flip. You don't want to leave key areas untouched but you also don't want to over-improve for the neighborhood. "Home improvements that increase the value of a home might include upgrading kitchen appliances, repainting the home's exteriors, installing additional closet storage space, upgrading the deck, and adding green energy technologies," said MoneyCrashers. "On the other hand, avoid home improvements that won't increase the selling price, like installing a pool, installing a whirlpool bath, or adding a sunroom to the house."

This is another good reason to use a Realtor who is a local expert: they'll be knowledgeable about specific updates that are important in your market.



6. Use good products

Scrimping on construction costs may seem like a good idea if it means your financial commitment is lower, but low-end materials might not get the home sold or fetch the sales price you want.

7. Work with good people

Everyone you work with has the ability to make your flip a success or derail it. Partner with those you can trust, and don't forget to make sure they're qualified for their role. A bargain basement subcontractor that does a shoddy job on your floors can end up costing you thousands when you have to have it redone by a professional.

On the flip side, "The real money in house flipping comes from sweat equity, said Investopedia. "If you're handy with a hammer, enjoy laying carpet, can hang drywall, roof a house and install a kitchen sink, you've got the skills to flip a house. On the other hand, if you've got to pay a professional to do all of this work, the odds of making a profit on your investment will be dramatically reduced."

Source: RealtyTimes, Jaymi Naciri
http://realtytimes.com/consumeradvice/buyersadvice1/item/43128-20160317-flippin-a-house-isnt-easy-7-things-to-consider-before-you-take-the-plunge?tmpl=component&print=1

Plans firm up for industrial-chic Railyard Place in San Jose

Eight months after acquiring a 10.6-acre site on the edge of downtown San Jose, Insight Realty Co.’s plans for what it’s calling Railyard Place are starting to come into focus.

The development firm turned in fleshed-out plans last week for a mixed-use project that would include a 230,000-square-foot office building and 476 apartment units, all wrapped in an industrial look — complete with faux smokestack — that executives say will attract corporate tech tenants and their workers.

“The office building almost looks like an old textile factory you’d see in Boston,” said Insight managing director Dennis Randall. “Those old factories used to have their own power plant, and the smokestack is reminiscent of that, to give it a true industrial vernacular. Then we’re basically building a SoHo-style neighborhood around it.”

The proposal would transform a site that has long sat fallow and largely cut off from the rest of downtown. It is located where Highway 87 crosses over Coleman Avenue, between a PG&E substation and the Union Pacific Railroad, and fronts the Guadalupe River Trail. To make the site developable, Insight will have to build a new bridge over the river to connect to Autumn Street, at a cost of at least $5 million, Randall said. “It’s an improvement for the entire area,” he said.

But a bigger challenge might be zoning rules. The land is currently zoned for commercial use only, and San Jose’s policy prohibits changing industrial sites to allow housing without a general plan amendment. Officials worried about the city’s low jobs-to-employed-resident ratio have for years resisted granting those, because of a fear that it could open the door to widespread conversions.

“It’s an interesting concept, but we have this hard line in the sand with the general plan,” said Michael Brilliot, a planning division manager for the city. “So everyone’s talking about it, saying, ‘What do we think.’”

Brilliot said the city isn't saying "no" to the concept at this point, just that more study is needed to figure out how it could work within the city's goals and policy framework. "One issue the city will have to grapple with is anytime you allow someone to convert a site, you have to ask, what are the unintended consequences," he said. "Why not there, there and there — and everyone will start lining up."

Randall says the concept for Railyard Place — with the housing — actually brings more jobs to the site than Insight would have to do under existing zoning, which would allow, for instance, a low-density industrial or R&D building. “We’re providing over 1,000 jobs on it,” he said. “I could build 135,000 square feet of industrial which would be 250 jobs.”

The residential, he said, is necessary to get the financing for the project as a whole — and is actually a big attraction point for tech office tenants.

“We have several tenants talking to us, and they love the residential being next door,” Randall said. “It helps them recruit talent. They might not live there forever, but it helps them get to know San Jose.”

The city’s jobs targets and policies regarding industrial lands are also being discussed in the context of the ongoing update of the Envision 2040 General Plan, which I’ve written about here. There is increasing consensus that San Jose’s job goal is probably too ambitious, but it’s unclear how a lower target could be reflected in land-use policies; and, in any event, the general plan update won’t address specific sites, such as Railyard Place.

While Randall said he supports job growth in San Jose, the hard prohibition on residential in certain contexts, especially so close to the core of downtown, “is small-town thinking. ... And the thinking has to change if we’re going to bring thousands and thousands of residents downtown,” he said.

Insight is proposing to build the project under a Planned Development permit, which allows zoning to be fine-tuned for the neighborhood and to support complex or unique projects. “With the PD Zoning, we are proposing exactly what we’re going to build,” Randall said. “It’s not an amorphous general plan amendment with a promise to build ‘something.’ It will give the city exactly an idea of what we want to build. We want it to be iron clad, and we want to build the office and the multifamily, and we think they’ll both go up together.”

Despite the uncertainty, Randall said he expects Insight could get approvals by October, “and we’re gearing up to break ground minutes after.” Lining up a capital source he said was no problem given the current economic environment.

Railyard Place is one of several developments with significant commercial components being proposed for the downtown area. Last week, Trammell Crow Co. showed off new pictures of its project near Diridon Station. More may be coming: Insight is working with the city of San Jose to acquire a development site next to The Tech Museum for a mixed-use tower. A group called SJSC Properties is also planning a two-tower office complex across from San Jose's City Hall.

Source: Silicon Valley Business Journal, Nathan Donato-Weinstein
http://www.bizjournals.com/sanjose/news/2016/03/09/plans-firm-up-for-industrial-chic-railyard-place.html

House Flipping: A Guide For Success

Flipping a house means buying a home with the intention of fixing it up and selling it within six months for a profit. Americans flipped 26,947 single-family homes in Q3 2014, accounting for 4 percent of all home sales in that period, according to real estate data firm Realtytrac. The average gross return for investors was $75,990 per home, up 2 percent from Q2.

Flipping houses can be profitable, particularly when home values are rising and interest rates remain at historically low levels. The Federal Housing Administration stopped enforcing anti-flipping regulations—which prohibited insuring any home for less than 90 days—in 2010. If you're looking to get into the home flipping business, follow these four guidelines for the best chance of success.

Build a Bankroll

Everything in life requires money, and house flipping is no exception. You could take out loans to buy properties, but then you are just creating debt in the hopes of making money. A smart house flipper who wants to profit immediately will often use his or her own money.

The best way to build a bankroll is by saving over time. Consider selling your own home if the proceeds will pay off the mortgage and leave you with enough to get started. Those currently receiving regular payments from a structured settlement or annuity can consider selling their future payments to a company like J.G. Wentworth for a lump sum of cash now. Make sacrifices like selling off an extra vehicle, disconnecting cable television and giving up the $5 lattes in the morning to pad your bankroll further.

Buy at Discount

You'll make the most money if you buy a house for less than its actual value at the time of purchase. The best way to do this is by seeking out motivated sellers. These are people who need to sell quickly to relocate for a job or simply need to make fast money.

Use your social media networks to generate referrals. Inform friends and followers that you are looking to buy properties. Knocking on doors in prime neighborhoods can also generate leads—target homes with "for sale" signs and distressed properties that appear neglected.

Location, Location

The total value of all homes in the U.S. was $27.5 trillion at the end of 2014, according to data compiled by Zillow. That represents a 6.7 percent increase from 2013 and the third consecutive year of positive gains. But certain markets are doing even better.

Miami, Atlanta, Houston, Orlando and Las Vegas experienced the largest gains for 2014, with each up at least 11.5 percent on the year. These markets offer the largest margin for error for those flipping homes, particularly with a major housing market correction being predicted by several economists for 2015. This is mostly due to the Federal Reserve ceasing its quantitative easing program and no longer artificially inflating the markets.

A good rule of thumb when buying in areas that experienced low or negative year-over-year home value change (i.e., Indianapolis and Phoenix) is to only purchase homes at 10 percent or more below current market value.

DIY Where Possible

You'll likely need to hire plumbers, electricians and other contractors to tackle major home improvements. But the more you do yourself, the higher your profits will be. You and a few friends can install new sinks and countertops and even shingle a roof. Youtube has hundreds of instructional videos that cover everything from replacing water heaters to installing shower faucets. Creative landscaping can increase the value of a property by 13 percent, according to a study by Virginia Tech University. The DIY Network has several ideas for easy landscaping projects that anybody with a little ambition can complete.

House flipping is a cyclical endeavor that is only profitable when economic conditions are positive. Now is a great time to get started.

Source: RealtyTimes
http://realtytimes.com/consumeradvice/buyersadvice1/item/42438-20160219-house-flipping-a-guide-for-success

Investors With Cash Edging Out First-Time Home Buyers

Many Realtors here in the Silicon Valley already know this to be true. Cash investor buyers are a significant part of this real estate market and are partly responsible for home prices being as high as they are. Case in point, just last week I made an offer for my buyer clients. They both work in the high tech field. They are both engineers with two kids and they made an offer with a 50% down payment, over asking and they still didn't get the home. They were outbid by an All Cash buyer.

The case in the same for many first time home buyers in this and other hot real estate markets. Many of these buyers are working, married couples with kids and are very well finally qualified with modest to high down payments but often times, if they are not ready for it, they get out bid by a cash buyer investor.

So if you are one of these first time home buyers looking to purchase your first property in this hot market what are you to do?

First off be pre-approved for a loan. That should go without saying and many agents, myself included, won't bother showing you a homes if you are not pre-approved with a lender.

Second, if you can afford it, is a good idea to come to the table with a higher down payment. In this market, 20% is really not enough. I hate to say it, but the reality is that in order to make your offer stronger, you have bring more money to the table. If you need to borrow money from your parents or cash-in some of your other investments such as stock options, then go ahead and do so.

Third, be prepared to pay as much as 3 to 5% over asking. You are going to be competing with other first time home buyers and the cash investors so to make an offer At or Below asking is not being realistic in this market and you kind of make yourself look silly. Not to mention that many agents will feel like you are wasting their time if you don't go at least a little over asking. Believe it or not, your agent knows this market better than you and they know what works and what does not for your market so their advice on how to offer on a property is usually correct.

Next, in order to make your offer stronger in the eyes of the seller, you might consider making other terms of the purchase contract more favorable for a seller such as a shorter escrow period or fewer days for the inspection contingency removal or none at all (be careful if you chose No inspection contingency. . . ). Of course course your Realtor should be able to realistically advise you on what is likely to work in this market and whether or not it makes sense for the property you are looking to buy.

Lastly, I often recommend that my buyers write a personal, heart-felt letters to the sellers. A hand written letter with a nice family photo with some pictures of the kids explaining why your family love the neighborhood and adore the house can go a long way with getting an offer accepted. The personal letter can be especially powerful if the sellers are a married couple that are longtime owners in the neighborhood and perhaps raiser their family there.



Investors With Cash Edging Out First-Time Home Buyers

During the housing bust, investors pounced on foreclosures and short sales—houses that sell for less than the amount owed on the mortgage—to use for cheap homes they could rent out or flip for a quick profit.

Now, those easy pickings are gone, but the investors are still swarming over local housing markets, offering all-cash deals and creating headaches for the first-time home buyers who compete with them.

Regan Austin, 25 years old, and her husband lost out on an Orlando, Fla., area home earlier this year to an all-cash buyer.

“It was very disappointing. We had our heart set on that home,” said Ms. Austin. She and her husband, who are first-time home buyers, are still looking. “We never thought of the concept of having a cash buyer come in and take that out from under you.”

During the housing bubble, investors, lured by easy mortgages, helped send home prices to record levels. In the crash that followed, investors appeared again, this time offering all-cash deals on thousands of bank-owned properties to sell or rent out.

Some economists and real-estate agents say the market is going through an uneasy transition. While the foreclosure starts rate is back down to where it was before the crisis, cash and investor buying in some cities remains far above historical levels. That creates difficulty for buyers of low-price homes because more buyers are competing for fewer properties.

In October, 25% of home sales nationwide were to investors, down from a 32% peak in 2012, according to real-estate data firm CoreLogic, but still 8 percentage points greater than in 2000, before the housing boom and bust.

Meanwhile, the supply of homes for sale dwindled to 1.79 million in December, according to the National Association of Realtors, enough to last 3.9 months at the current sales pace and well below the six months considered a normal market.

The problem has become acute for buyers focused on low-price properties. According to the NAR, between December 2014 and 2015 the number of homes for sale priced below $100,000 fell 11.1%, in part because of a decline in foreclosure sales.

“Home supply is diminishing but investor demand is not going away,” said NAR chief economist Lawrence Yun.

Many economists expect housing prices to cool over the coming year, and rather than try to flip homes for a profit, some investors say they are making a long-term bet on demand for rentals, which has boomed in many parts of the country. The U.S. Census Bureau last month said 7% of rental units were vacant in the fourth quarter, near the low for the last decade and down from the peak of 11.1% in 2009. The median asking rent was $850, up 11% in the past year.

Some housing advocates say they have mixed feelings about the strong investor demand.

“Low inventory is a problem and making sure first-time home buyers have a shot should be a priority. But on the other hand, we have a rental affordability crisis,” said Sarah Edelman, director of housing policy for the left-leaning Center for American Progress.

Investor Ken Weiner, a former financial-services executive who lives in Wantagh, N.Y., didn’t buy his first single-family rental property until November, but since then has closed with an investment partner on six homes and on another three on his own, including ones in South Carolina, Illinois and Georgia. He said he plans to close on at least another seven properties by mid-year.

Mr. Weiner, who is buying homes sight unseen through investor startup Home Union, said he thinks demand for rentals among millennials and others delaying homeownership will make investing in single-family homes a fixture of the market.

“I’m not counting on appreciation,” he said. “If that comes, that’s great. I’m looking for income.”

Some real-estate agents in cities that have seen their foreclosure crisis ease said investors have moved up from bank-owned properties and now are competing for traditional, low-price homes that normally would be fodder for first-time buyers.

Lisa C. Ford, secretary for the Orlando Regional Realtor Association, said buyers there can expect to compete against at least one cash offer for any home priced below $300,000.

In Orlando, 39% of sales in October were all-cash, according to the latest data available from CoreLogic, down 5.6 percentage points from a year earlier but 23 percentage points greater than in 2006. Miami and West Palm Beach, Fla., also have seen declines but about half of homes there still sell for cash.

Don Ganguly, CEO of investor startup Home Union, has recently expanded the company’s business to facilitate investor purchases in markets such as Columbia, S.C., and Huntsville, Ala., which some investors think could have strong rental demand despite little price appreciation recently. Some investors through the site are buying newly constructed homes directly from home builders, he said.

In some cities still suffering from foreclosures, such as Newark, N.J., and New Orleans, cash purchases climbed in the past year through October, according to CoreLogic. Of the 100 largest metro areas, nearly all in the year through October saw the all-cash share of purchases fall, but only 10 have fewer all-cash sales than in 2006.

Daniel Brown, an investor who lives outside Los Angeles, met with real-estate agents in Kansas City, Chicago, Cleveland, Detroit, Pittsburgh and other cities looking for investment opportunities. He bought his first U.S. home in January 2015, and said he now owns about 60 homes with 75 units.

“An average normal city goes through its ups and downs, but most people there need somewhere to live, and next year, they’ll still need somewhere to live,” said Mr. Brown.

Source: Realtor.com, Joe Light
http://www.realtor.com/news/trends/nvestors-with-cash-edging-out-first-time-home-buyers/?iid=rdc_news_hp_carousel_theLatest

Cities Plagued by Shrinking Inventory - and guess which one is #1. . . .

Low inventory means higher home prices and buyers competing with each other with multiple offers. It's a reality going on here for awhile in the silicon valley, which is why many agents prefer working with sellers and getting a listing (home for sale) rather than work with buyers. It's not that those agents refuse to work with a buyer because they will, it's just that when you're working with a buyer, it's harder in this market to get them into a home, which means no commission if they don't succeed. 

If you are a buyer looking to get into a home in this market, you must be very serious, pre-approved for a home loan and willing to listen to the advice of your Realtor if you want to stand a chance of getting into the home. Be prepared to compete with other buyers, some of whom will be making All Cash offers. Also be prepared to make an offer possibly well over the asking price (depending on the neighborhood, school districts and some other factors your Realtor will discuss with you). 

The article cites San Jose California as the #1 city with the lowest inventory. San Jose is the heart of the Silicon Valley, and the story is the pretty much the same for the surrounding cities here in the valley. The tech giants here in the valley, such as Google, Apple, Facebook and Intel, keep bringing in more and more workers thus putting strain on housing market. Evidence for this can be seen with low inventory and developers coming in and building mega apartment blocks and charging sky high rents.


Cities Plagued by Shrinking Inventory


More than 1.3 million – or 1.6 percent of the nation’s nearly 85 million residential properties – are vacant. That’s down 9.3 percent from the third quarter of 2015, according to RealtyTrac’s first quarter 2015 Residential Property Vacancy Analysis.

“With several notable exceptions, the challenge facing most U.S. real estate markets is not too many vacant homes but too few,” says Daren Blomquist, vice president at RealtyTrac. “The razor-thin vacancy rates in many markets are placing upward pressure on home prices and rents. While that may be good news for sellers and landlords, it is bad news for buyers and renters and could be bad news for all if prices and rents are inflated above tolerable affordability thresholds.”

RealtyTrac analyzed 147 metro areas with at least 100,000 residential properties and found that the following cities had the fewest number of vacant properties in the first quarter:

1. San Jose, California: 0.2%
2. Fort Collins, Colo: 0.2%
3. Manchester, N.H.: 0.3%
4. Provo, Utah: 0.3%
5. Lancaster, Pa.: 0.3%
6. San Francisco: 0.3%
7. Los Angeles: 0.4%
8. Boston: 0.5%
9. Denver: 0.5%
10. Washington, D.C.: 0.5%

Meanwhile, vacancies were highest in the first quarter in these cities:

1. Flint, Mich.: 7.5%
2. Detroit: 5.3%
3. Youngstown, Ohio: 4.4%
4. Beaumont-Port Arthur, Texas: 3.8%
5. Atlantic City, N.J.: 3.7%
6. Indianapolis: 3%
7. Tampa, Fla.: 2.9%
8. Miami: 2.8%
9. Cleveland: 2.8%
10. St. Louis, Mo.: 2.6%

Source: Realtor Magazine Online from RealtyTrac
http://realtormag.realtor.org/daily-news/2016/02/16/cities-plagued-shrinking-inventory?om_rid=AAFmZk&om_mid=_BWw4bMB9Ku34LR&om_ntype=RMODaily

7 Lessons I Learned From Failing At Real Estate Investing

A lot of people make money investing in real estate. But there’s the real version and and the TV version. I fell for the TV version.

Based on little more than a book from a self-proclaimed real estate superstar, I blazed forward and bought my first real estate investment property.

It was a complete failure. I learned seven lessons from that failure, and now I’ll share them with you.

1. If It Sounds Too Good to Be True, It Probably Is – And it Was!

Have you ever heard of a guy named Carlton Sheets? He was one of those how-to-get-rich-in-real-estate-without-really-doing-anything gurus from back in the 1980s and 90s. I wouldn’t be surprised if you don’t know anything about him – he hasn’t been around much lately.

He had a series of convincing TV infomercials, as well as paid real estate investment courses and books, and was quite successful for a number of years.

My father-in-law bought me one of his books, and after reading it I was hooked. I was going to be a real estate millionaire. Look out Donald Trump, Jeff Rose is on your tail, and will be passing you in the fast lane in just a couple of years!

2. Stick With What You Know and Love

Other than the book by Carlton Sheets, the sum total of my accumulated real estate investment knowledge was zero. I had never actually invested in real estate, at least not apart from my own home.

But if you’ve ever seen one of those glitzy TV infomercials about how to get rich, you have to admit they’re pretty convincing. I’m a positive, high-energy guy, and I figured that if anyone could make this plan work, it would be me.

But there was one problem with my thinking: real estate investing is not exactly my thing. And that means everything!

Financial planning is, and I’m all over it. That may be the biggest lesson I learned from failing at real estate investing. Always stick with what you know and love, and leave the other stuff to other people.

3. True Deals Are Harder to Find than You Ever Imagine

My father-in-law and I decided that we’d go into this real estate investment venture together. I was a seasoned money guy, and my father-in-law is an accomplished handyman. It was the perfect tandem for investing in real estate.

I studied Carlton’s book, and knew the “formula” for buying a winning investment property – buy a property from which you can reasonably expect to receive monthly rental income equal to at least 1% of the purchase price.

We found such a property. The asking price was $120,000, and market data indicated that it could be rented for $1,200 per month. Exactly 1%! We were on our way.

But TV infomercial formulas and reality don’t mix. We purchased the property with a $500 earnest money deposit. I then discussed the deal with my CPA, himself a real estate investor with more than a dozen properties. He quickly told me that we overpaid for the property.

That was a direct blow to the stomach – as well as to my ego. Since we just closed on the property, he recommended that we get out of it anyway that we can. With the cooperation of our real estate agent, we were in fact able to void the deal.

But I learned something else for my CPA friend. Finding bargain real estate for investment is not at all easy. Since every other real estate investor in is looking for bargains, you never find them in the usual places. More on that in Lesson #6 below.

4. Never Overpay for a Property

This one is huge. You need to pay much less for the property than it’s true market value.

Not only will that provide the profit on sale, but it will also afford you some protection in the event the property has costly and unexpected repairs.

5. Cash Flow is Everything – And You Better Calculate it Right the First Time

Forget about the 1% rule, the monthly rental should actually be a lot higher. My CPA friend informed me of this after we close on the property, which is when I bothered to actually ask him.

Cash flow is also critical to the success of any real estate investment. The rent has to be sufficient not only to cover the monthly cost of financing, property taxes, insurance, and landlord paid utilities, but it also has to provide a profit, as well as an allowance for some of those unexpected expenses. Expenses like a new roof or furnace.

But whoodda thought? Definitely not me while I was still in my “expert phase”.

6. Looking for Deals in All the Wrong Places

When you are looking to purchase investment real estate you will not find truly good deals in the newspaper classifieds (where I found my “deal”) or even on the local multiple listing service. It’s more likely that you will find a winning property through word-of-mouth and other backdoor channels. It’s often a matter of locating distressed property sales before they hit the market.

The problem is that real estate investment is very competitive. You’re never the only person out there looking for the next big deal. For that reason, all of the usual places you might find property are quickly picked over, few that there are.

Successful real estate investing requires a lot of patience and investment of time. You have to do a lot of digging and get to know a lot of people in order to find the deals that will make it work.

7. Never Let Greed Control Your Actions

So many people have gotten wealthy by investing in real estate that is hard to ignore the opportunity, even if you know nothing about it. It’s called greed, and the combination of big profits and slick TV infomercials can make it too good to be ignored.

But that’s never a decision that’s based on financial reality, or even a reasonable evaluation of your own skill set. It’s based purely on greed. You see big money being made, and you want in. But wanting in and being able to make it happen are two very different things.

From now on, I’ll stick with what I know, and leave the promise of instant riches to the people who write books about it.

That’s my story. Have you ever fell for what turned out to be a money making scheme? Share and make me feel better about my own crash-and-burn.

Souce: Forbes, Jeff Rose
http://www.forbes.com/sites/jrose/2016/02/07/7-lessons-i-learned-from-failing-at-real-estate-investing/3/#86ffd2a55dac

Some perspective on how real estate dwarfs the rest of the asset universe

I have always been bullish on real estate's long term investment value, and I always recommend to anyone to invest in real estate as opposed to other assets, and this great article from Market Watch just confirms this.



The total value of all developed real estate on the planet reached a whopping $217 trillion in 2015, according to a new report released on Monday by U.K.-based real estate adviser Savills.

For some perspective, that amounts to 2.7 times the world’s GDP and about 60% of all mainstream assets, the analysis shows. Furthermore, Yolanda Barnes, who leads Savills research team, said the total value eclipses all the gold ever mined ($6 trillion) by a factor of 36 to 1.

“The value of global real estate exceeds – by almost a third – the total value of all globally traded equities and securitised debt instruments put together and this highlights the important role that real estate plays in economies world-wide,” she said. “Real estate is the pre-eminent asset class which will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.”


The study pointed to quantitative easing and the resulting low interest rates for fueling a spike in real-estate prices. Residential real estate has been the biggest beneficiary with a value of $162 trillion.

China accounts for almost a quarter of the total value. Makes sense, considering the country contains about a fifth of the world’s population. The U.S., on the other hand, has only 5% of the population, but makes up 21% of global residential asset value.

On the commercial front, it’s even more pronounced. North America is home to almost half of the world’s commercial value, the study finds, while Europe makes up more than a quarter. South America, the Middle East and Africa combine for just 5%.

The study didn’t include the value of “informal neighborhood commercial properties,” like smaller shops and local workspaces. Savills explained that while they offer “huge potential for future investment as economies mature and real-estate markets develop within them,” they are almost impossible to value at a global level.

Source: Market Watch, Shawn Langlois
http://www.marketwatch.com/story/some-perspective-on-how-real-estate-dwarfs-the-rest-of-the-asset-universe-2016-01-25

U.S. Real Estate to Draw More Foreigners in 2016, Survey Says

Foreign investment is very important here in the Silicon Valley, but apparently it is very important for a number of other top real estate markets here in the U.S. Foreign buyers view American real estate a safe investment compared to other investments and the article cites San Francisco, a city just 50 miles north of the silicon valley as one of the top cities for outside investment.


Most foreign investors expect to put more money into U.S. property this year than they did in 2015, with New York remaining the top target market worldwide, according to a survey by the Association of Foreign Investors in Real Estate.

Sixty-four percent of respondents said they intend to make modest or major increases to investments in U.S. real estate this year, while 31 percent expect to maintain their holdings or reinvest sales proceeds into other U.S. assets, according to the 24th annual survey by the group, known as AFIRE. None of the respondents plans a major decrease. About half of the group’s roughly 200 members participated in the survey.

“This is a very strong response,” Jim Fetgatter, chief executive of Washington-based AFIRE, whose members hold about $2 trillion of real estate globally, said in a phone interview. China’s economic slowdown, Brazil’s recession and Europe’s immigration crisis underscored for international investors that “the U.S., at the moment, really is the safest place for them to go.”

Foreign purchases of U.S. real estate have soared since the financial crisis, jumping to $87.3 billion of completed deals last year, from less than $5 billion in 2009, according to Real Capital Analytics Inc. Investors from Canada, Asia, Europe and Australia bought stakes in office towers, warehouses, apartment buildings, shopping malls and hotels in search of relatively higher yields. Manhattan captured $23.5 billion, or 27 percent, of 2015 purchases, Real Capital data show.

The U.S. also ranked first for countries with the best opportunity for price appreciation in 2016, followed by Brazil, Spain, Ireland and the U.K., the AFIRE survey showed.

Top Cities

London and Los Angeles were the second- and third-most-popular cities for real estate investments in the survey. Berlin climbed three places to No. 4, the first year a German city reached the top five. Paris tied with San Francisco for fifth place, according to AFIRE.

Within the U.S., multifamily and industrial real estate were the favorite property types for a second year, while retail moved up to third place from fourth. Offices fell to fourth from third, and hotels stayed at No. 5, according to the survey.

The recent passage of legislation easing taxes for foreign pension funds that buy U.S. real estate probably will boost investment further, Fetgatter said. Many cross-border investors previously bought U.S. properties with domestic majority partners.

The new law “simplifies the investment process and opens up a lot of opportunities for structuring their deals in a different way,” he said.

Source: Bloomberg Business, Hui-Young Yu
http://www.bloomberg.com/news/articles/2016-01-04/u-s-real-estate-to-draw-more-foreigners-in-2016-survey-says

Investment Property ROI: Why going beyond your network of friends is critical

The recovering residential housing market continues to offer lucrative investment opportunities for first time and experienced investors looking to fix and flip a house. However, a new challenge is emerging out of the recovery: a shrinking tolerance for mistakes. The single largest mistake beginner real estate investors make today is trying to do it all themselves or relying too heavily on friends and family to execute on the real estate investment.

Sometimes a friend may have a knack for what color to refinish the hardwood floors, or who to use for repairing a roof, but rarely do these close acquaintances come to the table with the focus on return on investment (ROI) necessary to be successful today. First time investors often worry that going outside their circle of friends and family to find a vendor partner to run property rehabilitation might cut into profits. This wasn't as much of an issue when the fix and flip market exploded during the economic downturn and profit was nearly guaranteed. Investors who purchased properties in 2007 or 2008 were making money and gaining valuable experience -- the market was hot and purchase prices reasonable so novice investors could have made any number of mistakes and still realized great returns on their investments.

Assessing an Ever-Changing Market

Property values in many regions of the country have recovered and fewer distressed properties are making it to the market so the market is less forgiving. Those who were investing in the downturn learned their lesson and what mistakes not to repeat when the margins were far wider than they are today. Investors who are now counting their fix and flip successes in the double digits resoundingly say an investor must be able to make an accurate assessment of the property's value and calculate a realistic cost for the rehabilitation -- and execute to achieve the desired margin.  When it comes to investing, working with the right vendor partners -- from appraisers to contractors to suppliers -- was the hardest lesson learned.

There's no easy way; investors have to be ready to work and understand and mitigate risks across the investment lifecycle. They also need to know that their insulated network of family and friends may be free or ready to do a project at a discount -- but they may not be the best people to turn to. Many investors think the more work they can do themselves the more ROI they'll see. Evaluating new vendors takes time -- but it can be time well spent if it makes an investment much more profitable by avoiding lost time and revenue from the mistakes less experienced investors and their friends are likely to make.

Third party experts can provide immediate pay-off by utilizing proven best practices and proper planning which can go a long way towards avoiding big mistakes. Appraisers can help determine as-is and after repair values and a general contractor can ensure you are receiving a proper assessment of rehab costs.  Investors can use this information to determine whether the property has the potential to achieve the returns they are seeking before buying.

Once it is determined that the end product can achieve the desired ROI, a knowledgeable and reliable team of professional partners are critical for keeping a project on track to actually deliver those returns.  These include an array of service providers, such as valuation companies, real estate agents, materials suppliers and most important, a general contractor attuned to the local market.

General Contractors: The Key to Achieving ROI

The single greatest lesson successful real estate investors have learned is how to hire one of the most important vendors: the general contractor. To do this, an investor must look outside their network to evaluate contractors and find the right fit. The investor's cousin who is handy with a hammer may not be the right choice. Hiring an experienced, professional contractor at the outset ensures their experience in the market is going to help improve the bottom line when it comes time to sell or rent the property.

Choosing a contractor begins with a background check to identify if they have had a recent bankruptcy or foreclosure events, any fraudulent or criminal activity on record, and is financially solvent and capable of seeing your project through completion. The investor should ask for a minimum of 5 references and call each and every one of them. Let me repeat: yes, 5, and yes, call everyone one of them. Keep in mind that the references supplied by vendors are almost always likely to be positive, so as you narrow the list, be sure to go see some of their work in person.

When rehabbing a property the investor also needs to know they are hiring a renovator, not a builder. A novice investor should have someone running their project that has performed rehabs on similar properties. They want a contractor who knows the neighborhood. This is important as they will know the finishes that are consistent with the surrounding homes and won't recommend granite countertops when this would be the only house on the street with that expensive upgrade. Additionally, they should know the local climate enough to know there may be particular issues, such as mold. This may seem obvious, but investors moving from the Sun Belt to the Rust Belt -- following markets primed for fixing and flipping -- are not uncommon and unfortunately they are not aware of risks inherent in the new market as their knowledge doesn't always transfer seamlessly.

At the end of a project, when the property is sold, the lessons learned with a network of skilled vendors on the team will have  prepared the investor for their next project -- not sitting back reviewing the laundry list of mistakes and who to hire to fix them. By hiring the right experts, from appraisers to contractors to suppliers, investors can find success and then share it with friends and family as they choose -- a much better outcome.

Source: RealtyTimes, Thomas O'Sullivan
http://realtytimes.com/consumeradvice/buyersadvice1/item/39050-20151009-investment-property-roi-why-going-beyond-your-network-of-friends-is-critical

Mark Zuckerberg moves closer to trial over property dispute

Not sure what to make of this one. Mark Zuckerberg, Facebook's CEO is in another dispute over his private property in Palo Alto. I know in the past there was a little bit of a controversy when he first bought the land on which his property sits because he then started buying up neighboring properties for "privacy reasons." 

Now it it seems that a real estate developer who owned a property adjacent to Mark agreed to sell it at less than market value in exchange for Mark introducing him to his high powered Silicon Valley contacts (I guess for the referrals, future business for his real estate business, etc.). 

So what happened? Mark failed to introduce the developer his high powered contacts and now the developer is suing for fraud and breach of contract.



Mark Zuckerberg moved closer to a trial over a developer's lawsuit alleging the billionaire committed fraud by reneging on a promise to introduce him to Silicon Valley's elite as part of a land deal.

A state judge in San Jose, California, on Thursday denied Zuckerberg's request to throw out claims that he didn't keep his word in a $1.7 million deal that ended plans for a mansion with a view into the 31-year-old Facebook Inc. founder's bedroom. Superior Court Judge Patricia Lucas said at a hearing she'll consider Zuckerberg's arguments before making a final decision on a breach-of-contract claim.

Zuckerberg's backyard privacy showdown took another dramatic turn when the lawyer for the developer confirmed during the hearing that he's seeking to withdraw from the case. Attorney David Draper, who represents developer Mircea Voskerician, didn't disclose why he wants off the case just weeks before it's set for trial. He declined to comment on it outside of court.

Patrick Gunn, a lawyer for Zuckerberg, said Draper has a conflict with his client and made the request to withdraw in court filings that don't describe what the conflict is. It's "not clear" why Draper wants to withdraw, Gunn said in an interview, noting that the judge has scheduled a hearing on the matter next Thursday.

Gunn declined to comment on the judge's ruling.

Source: San Jose Mercury News, Joel Rosenblatt
http://www.mercurynews.com/business/ci_28907899/zuckerberg-must-face-fraud-claims-property-dispute-trial

How to Make Sure Your Dream Home Is a Good Investment, Too

You’ve probably heard real estate can be safer than the stock market, while still yielding decent returns. This can be true, but adding real estate to your portfolio is very different from investing in stocks, bonds, and certificates of deposit. Finding success in the housing market often requires being able to find good deals and ripe opportunities. Check out some tips below to help you launch your housing market investment career.

1. Assess your goals

It’s important to check your credit and have your finances in order before you get into the housing market. (You can get a free credit report summary from Credit.com to see where you stand.) If you are struggling to make your own mortgage payments, real estate investment might not be the right move. But if you are willing to put the time in to research a good location and deal, crunch numbers to test a property’s financial potential, and can manage the maintenance needed, then it might be a good fit for you. Just be sure you know what you are looking to gain from the experience and understand what it will take to get there.

2. Know the market

It’s a good idea to spend some time learning about the process of real estate investing. Real estate rules vary by state, so it’s important to know about the state you are looking at. You can read books or ask a local real estate expert.

3. Consider multiple buying sources

You can look beyond the local multiple listing service to find homes available for purchase. With your criteria set you can check the newspaper, Craigslist, and real estate auction sites for properties that match what you are looking for. You can also find good opportunities through word of mouth.

4. Find a good real estate agent

Not all real estate agents have experience or know how to help investors find the right type of properties. Before the real estate crash, only a small percentage of real estate professionals would even work with housing investors. As the market slowed, more became open to the idea and some have even taken courses to understand the ins and outs. It’s a good idea to choose a real estate agent who has sold several investment properties and understand your goals as well as the ideal return on investment.

5. Play by the numbers

If you are investing in real estate to increase your net worth, it’s a good idea to make sure it’s part of a balanced financial plan. Whether you are trying to build up a retirement fund or eventually replace income from a traditional job, it’s important to make sure the choices you’re making continue to fit into that plan.

You may find you need to hold on to a home you intended to flip, if repair or closing costs were more than expected. In this case, you can consider renting it out until you are able to sell it for the profit you are aiming for. Likewise, if you were planning to rent out the property, but someone offers you more than expected to buy it, you may want to sell and move onto the next property. It can be a good idea to let your goals and the numbers be your guide.

Source: Credit.com, AJ Smith
http://www.realtor.com/advice/finance/how-to-make-sure-your-dream-home-is-a-good-investment-too/

More Chinese investment in American real estate

It can be argued that the real estate market here in the silicon valley is being propped up by foreign buyers and investors. This also seems to be the case for many other major markets in the United States. U.S. real estate is seen as a very safe investment for many foreign investors, particularly Chinese.

The article talks about the purchase of the Waldorf-Astoria hotel, a very famous and world renowned hotel being purchase by a Chinese insurance company. Obama was supposed to stay in the hotel during his visit to New York for a UN meeting, but changed to another hotel citing security concerns.

How Chinese Investors Found a Safe Haven at the Waldorf-Astoria

NEW YORK (TheStreet) -- Macroeconomic turmoil is once again putting the U.S. real estate market in the spotlight, but this time it's part of the solution, not the problem.

American real estate is becoming a refuge for Chinese investors, particularly insurance companies that may amass $3.32 trillion in premiums by 2020, who are seeking reliable returns as the world's second-largest economy slows and its stock markets decline, according to both advisers and industry executives.

Developers, financial institutions and high net-worth individuals are seeking "safe investments in income-producing commercial and residential investments rather than luxurious real estate purchases for personal use," said international real estate attorney Edward Mermelstein, who has spent 20 years advising clients on such transactions.

It's a strategy not unlike the one players use to get ahead in Hasbro's (HAS - Get Report)  Monopoly, buying real estate and adding revenue-generating houses and hotels.

Especially since August, when China's devaluation of its currency combined with an 8% drop on the Shanghai Stock Exchange to drag down equity prices worldwide, Mermelstein has seen a "positive and consistent interest" by Chinese investors. "There's an argument that this is a flight to safety," he said. "This is very much a flight to safety."

That flight builds on already increasing interest in European and U.S. assets from Chinese investors, whose purchases outside their country grew 11% to an estimated $120 billion in 2014, according to global accounting firm KPMG. High-value real estate deals in that period included the $1.95 billion purchase of New York's Waldorf Astoria hotel by insurance provider Anbang.

"Chinese real estate developers are eager to capture potentially higher and more stable returns overseas,"  KPMG noted in its "China Outlook 2015" report. "The overseas real estate market has also generated interest from Chinese companies in other industries, particularly insurance companies."

Chinese insurers have been allowed to invest as much as 15% of their assets in overseas real estate since 2012, though as of last October, they had invested only about 1%, KPMG said. Individuals are poised to gain more flexibility, too, with China's cabinet releasing a plan earlier this year that would allow people with at least $160,000 (1 million yuan) of financial assets and businesses to directly invest in real estate, stocks, and bonds in foreign markets, the Wall Street Journal has reported. The option would be limited to designated free-trade zones.

"What's going on in China has not dissuaded them one bit from continuing to look at and pursue the transactions they're working on," said Bob Knakal, Cushman & Wakefield's chairman of New York investment sales, who's working on several transactions with Chinese investors, including a $300 million project in Manhattan. "We have seen more investors coming into the market that want to deploy capital here."

The Chinese government doesn't want too much capital to flow out of the country, however.

"The government has trade-offs," said Tailan Chi, an international business professor at the University of Kansas. "First, they want to open up the capital markets gradually, so they can say the Chinese currency is largely determined by the market. Secondly, they want to prevent very large inflows or outflows of capital that would push the value of the Chinese currency up or down too quickly."

Source: TheStreet.com, Valerie Young
http://www.thestreet.com/story/13280655/1/china-boosts-spending-on-u-s-real-estate-amid-turmoil-at-home.html