The Real Estate Market is Hot—Invest Intelligently and You Won’t Get Burned
The real estate market has been heating up nationwide, and it’s only getting hotter. On CNBC.com’s Realty Check, real estate reporter Diana Olick writes, “It’s no secret that investors have been inhaling foreclosed properties at a breakneck pace, trying to cash in on an increasingly hot rental market.”
Recently Bloomberg reported that Blackstone Group, the biggest buyer of U.S. commercial real estate, “is turning to residential real estate after a 34 percent plunge in prices since the 2006 peak. The New York-based company is the biggest investor seeking to enter the single-family leasing market as rents climb and the U.S. homeownership rate sits at a 15-year low.”
In some markets—Oakland, California, for example—rents are often higher than mortgage payments. SFGate.com reported, “In neighborhoods hit hard by the housing crisis, it would be cheaper for many families to buy a foreclosed home than rent an apartment. The average price of a house in those neighborhoods is less than $150,000. Monthly payments on most 30-year mortgages at that price are usually less than $1,000, while rents on many West Oakland properties are around $2,000.”
Real estate investors have the added advantage of record-low interest rates. According to Freddie Mac’s Weekly Primary Mortgage Market Survey, the 30-year fixed-rate mortgage for the first half of 2012 averaged 3.86%, while the 15-year fixed-rate mortgage averaged 3.12%! Even investors who have the cash are locking in these incredible rates.
So who are the buyers making up this heat wave of investing? Surprisingly, the typical real estate investor isn’t wealthy and middle-aged like you might imagine. The reality is that the median income of the real estate investor is $86,100. It’s not much higher than the median income of the primary residence buyer: $72,400. And nearly 40% of investors made less than $75,000 in 2011. Today’s real estate investor is really just the average American homebuyer.
When you consider today’s market conditions, it’s not surprising that investors are popping up everywhere. But not all discounted properties are good investments, no matter how low the price and interest rate may be. Several factors affect a property’s return on investment, and they all need to be carefully considered. For example, experienced investors know to invest for cash flow—a property’s return on investment in the form of monthly rent. It’s immediate, steady, and can build wealth over time. Many new investors tend to think in terms of appreciation, but intelligent investors know that investing for cash flow helps ensure a profitable investment regardless of appreciation.
It’s incredible how today’s low mortgage rates and prices have created an environment where investing in real estate is so affordable.
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Did you know you could use your nest egg to purchase an investment property and increase its value through cash flow? You can roll your traditional IRA or 401k into a self-directed IRA (SD IRA) and—as the name implies—have direct control over where your funds are invested, namely a cash flow-producing rental property.
Traditional IRAs, in most cases, are distributed among stocks, bonds, and mutual funds at the discretion of the bank or financial institution by which they’re managed. The financial institution acts as the trustee or custodian of the IRA; it distributes, receives, and holds the account funds for the investor. In most cases, the investor is out of touch with his or her investment activity and just hopes for the best.
While approximately 97% of all retirement account assets are invested with banks, brokerage firms, mutual fund companies, and insurance companies, many people don’t know there are other retirement investment options available and that many of these options have greater return capabilities.1 Real estate, limited liability companies, private companies, and joint ventures are just a handful of possibilities. These investments require that you first roll your IRA into a self-directed IRA to allow you to direct its activity. Because self-directed IRAs are less profitable for financial institutions than traditional IRAs, and because fewer institutions are proficient at handling them, they’re more reluctant to communicate this option to investors.2
There’s no penalty for rolling your retirement funds into an SD IRA, but like a traditional IRA, it requires an account custodian. The difference is your ability to tell your custodian where to invest your funds. For example, you can have your custodian purchase real estate with your SD IRA, then hold the property as a rental investment and have the cash flow go back into your SD IRA. As a bonus, the fees associated with SD IRA custodians can be lower than traditional IRA fees.3
It’s much simpler than most people think. The first step is to find an SD IRA custodian. Not all banks and brokerages handle this type of account, and you’ll want to find one that specializes in SD IRAs. And be aware, rolling your IRA into an SD IRA typically takes six to eight weeks.
Once you have your SD IRA all set up, you can make an offer on a selected investment property in the name of your SD IRA. After negotiating a deal, your custodian executes the contract. There’s extra paperwork involved when going this route, but your custodian can help guide you through the process.
If you’re interested in boosting your retirement and diversifying your investments, using an SD IRA to invest in real estate is a great strategy. You’ll want to consult with your accountant and find a custodian who is experienced with SD IRAs. This method is certainly more proactive and lucrative than leaving your retirement funds in the hands of someone else and simply hoping for the best.
For more information see my investors website @ http://www.marksold.com/investors-.asp
1Allen, Matthew M. Leverage Your IRA: Maximize Your Profits with Real Estate, Scottsdale: LIFESUCCESS PUBLISHING, 2010.
Virginia Beach- VA – October 2011 – Mark Rusnak of RE/MAX ® Allegiance in Virginia Beach has earned the prestigious Certified Investor Agent Specialist™ (CIAS) Designation, having completed extensive training to understand the different real estate investor types, and the investment opportunities, financing options and calculations needed to provide solutions for each. The five real estate investor types include: First-Time Investors, Move-Up Investors, Portfolio Investors, Performance Investors, and Rehab and Resell Investors.
“For decades, investing in real estate has proven to be a consistent and stable way for individuals to build wealth,” Rusnak said. “Real estate investment supports a number of industries, including construction, retail and professional services, and is a strong way to energize and increase investment in our local economy.”
Over the past 12 months, investment and second-home properties comprised more than $300 billion in sales, representing approximately 27 percent of all residential real estate transactions. In addition, in market conditions affected by mortgage industry challenges, 48 percent of investors made all-cash purchases.
“As markets face the challenges of distressed properties and a difficult economy, real estate investors have the opportunity to find productive deals while helping communities stabilize,” Rusnak said. “Investors provide much needed liquidity to the market, decrease vacancy rates, improve neighborhoods, and present solutions for homeowners who need to sell.”
With the CIAS Designation training, Rusnak will help Virginia Beach & area residents build wealth through real estate investment, and homeowners facing foreclosure find potential buyers for their properties.
Today, millions of homeowners are either delinquent on their mortgages or in the foreclosure process. One potential solution for homeowners in this situation is a short sale, in which the lien holder accepts a sale price of the home that is less than the mortgage amount owed. Increasingly, real estate investors are facilitating this solution.
“When it comes to properties that actually end up in foreclosure,” Rusnak added, “up to 30 percent of them can’t close conventionally. Investors are often the only ones who can buy them.”
The Distressed Property Institute provides live and online CIAS Courses to train real estate professionals how to address the needs of all real estate investors. For more information about the CIAS Designation, visit www.cias.com or Marks personal investor website @ http://invest.cias.com/marksold
Virginia Beach, VA – March 2012 – Mark Rusnak of RE/MAX ® Allegiance in Virginia Beach earns the OwnAmerica Investment Certification and joins the OwnAmerica Network.
OwnAmerica and the Investor Center were created by Greg Rand, a twenty-year real estate industry veteran and author of the book Crash Boom! It includes a 4 hour video based investment training course, news and information, and the Case Study Calculator, a tool for analyzing the potential of investment real estate.
Using the Investor Center on MarkSold.com, real estate investors can learn how to best capitalize on the struggling housing market by researching and acquiring quality real estate assets as a long term wealth creation strategy. The Investor Center guides new real estate investors down the right path and streamlines the process for more seasoned investors.
“The market is great for investors, but investing in real estate is quite different than traditional home buying and selling,” explains Mark Rusnak, “It’s a more complex process requiring additional levels of expertise. The Investor Center provides the resources to make investing in real estate simple, profitable and even fun.”
The OwnAmerica Network, is a national affiliation of real estate investment specialists. This move allows Mark Rusnak to offer analysis tools, tutorials and a FREE video training series to clients during one of the biggest real estate investment booms in history.
“We’ve seen too many people giving bad advice about ‘getting rich quick’ in real estate. It truth, real estate is a long term wealth building asset. It works when you do it right. We want to show our clients how to do it right,” says Rand, CEO of OwnAmerica and host of WABC’s Rand on Real Estate.
To learn more about the Investor Center, contact Mark Rusnak at 757-718-8865 or email firstname.lastname@example.org or visit the website at www.marksold.com/ownamerica.asp
To learn more about OwnAmerica, visit www.OwnAmerica.com
If you’ve been considering buying real estate as an investment, you’re in good company! Existing home sales are up in January for the third month in a row. One out of every four buyers were investors. The difference between them and you? They took action!
Still not convinced? Here’s what Warren Buffett recently had to say about residential real estate: “I think it’s about as attractive an investment you can make.”
Are you really going to let this incredible opportunity pass you by while others are building their wealth through real estate?
Just consider these four reasons to buy real estate now—before it’s too late!
Historically Low Interest Rates
Why are low mortgage rates (below 4% for 2012) so important? Low interest rates mean lower payments; lower payments mean more possible cash flow.
Cash flow for a real estate investor is what he or she earns after paying all the expenses related to the property. For example, if expenses are $1,000 per month (mortgage payment, insurance, taxes, repairs, etc.) and rent is $1,500, there’s cash flow of $500/month ($1,500-$1,000=$500).
For an investor, cash flow means more immediate return on the original investment, which means a greater return overall because these funds can be reinvested immediately or saved for future real estate purchases.
Low Prices and Rising Rents
Along with great challenges come great opportunities, and this couldn’t be truer in today’s housing market. Due to excess distressed inventory and more demand on rental housing, prices have plummeted and rents have soared 24% over the last four years, creating the perfect atmosphere for investing in real estate.
A Lower Risk Investment
A long-standing debate has raged over whether real estate or the stock market is the smartest investment strategy. Building a portfolio with a mix of different types of investments is always smart, but what if you have a finite amount of money to invest and still want a high return without a lot of risk?
To add more perspective, examine the real estate and stock markets side-to-side over the last decade. Real estate values increased by 19.2 percent between January 1, 2000 , and December 31, 2011. Over the same time period, stocks in the S&P 500 decreased by 14.4 percent.
Even during one of the worst performing real estate markets for appreciation, real estate is a more reliable, stable investment than the stock market. And that’s only half the story. Remember cash flow? Most stocks don’t pay a cash dividend at all. If purchased correctly, real estate always cash flows.
Appreciation should always be looked at as a bonus in a real estate investment. Over the last 40 years, real estate appreciation has averaged 5% per year (in addition to monthly cash flow)–one of the reasons Buffett called single-family homes a “very attractive” asset class. Buffett: “If anybody is thinking about buying a single-family home … it’s a very attractive asset class now.”
Investors in your market are cashing in on the opportunity now. Why aren’t you?
The value of your home or other real estate assets is viewed by many different people, and in different ways.
Hopefully this article will help you to understand the differences between them, and to help identify what’s the most important to you.
There is the tax assessors view, commonly known as the Tax Assessment, which may not be based on the sales price or current market value! This value starts out when the property is placed on the tax rolls, or sub divided from a larger parcel. The municipality has set this value of your land and any improvements that may be on it, based on the surrounding property, its current & potential uses. The municipalities typically adjust this basis when they need more revenue, or the property is improved and/or rezoned. Annual assessments are sometimes based on the tax zone or location, sometimes they may be done citywide to generate more revenues. They may or may not be a direct reflection of the property value, however based on the neighborhood or surrounding property’s recent sales history. A good example of this is two identical homes, on the same street, they are both 30 years old, one has never sold, and the other has sold every 7 years. The tax assessments will not be the same as they started. The one that has sold has be reevaluated or reassessed when it was sold, and the other may not have ever had an individual review of its assessment, and only experienced the area, or city with tax increases every couple of years, etc. So, even though every property owner gets the “Annual” assessment from there respected municipality, it’s not a re-evaluation of your property, merely a tax bill that has been sent to the mortgage company! Some properties & neighborhoods are over assessed, and a few are under assessed, and it can be challenging to get the municipality to give up, or reduce your tax bill without concrete evidence of its market value, i.e. a recent sale!
Most Real Estate Agents rely on a self-generated CMA or Competitive Market Analysis, or sometimes called a Comparative Market Analysis! Is there a difference? Some people and even some Real Estate Agents think they are synonymous! However in my opinion they are far from it! Yes, they may both have nearby properties that look like the subject, but are they truly comparable? Does one back up to the main road and the other on sit by the lake? Is one updated with new electrical panel and the other still have fuses? Is one a ranch and the other a two story home? I one being sold “As-Is” or recently flipper? Is one a short sale (Distressed Seller) and the others a true arm’s length transaction? Just because a house down the street sold, it doesn’t mean that it is a comparable property that should be used to determine your value! To help cut through this confusion, I now call my CMA a QMA = or Qualified Market Assessment. My QMA starts out as a typical CMA, and matures into a more Qualified Market Assessment, only using true sales comparable that are similar to my subject property, very much like that of the appraisal. As a Real Estate Broker, I have taken, and passed the Appraisers class, and understand the Uniform Appraisal Dataset that Freddie Mac & Fannie Mae use, and FHA will start to use in January 2012.
Another common source for value, however not known for its namesake is the “AVM” or Automated Valuation Models. They are just as they appear to be, a computer generated valuation based on limited criteria. Ever hear of Zestamites? It’s an AVM and collects the basic information from various sources, i.e. City & County tax records & sales history, then it generates a baseline to use as an average to calculate just that, an average value, based on average information. These models are handy; I even use one on my website to provide basic neighborhood values to my visitors. They serve a purpose, however are not very accurate, and I would not sell my home for the amount recommended by the AVM! Banks are a big user of AVM’s to help determine loan amounts on applications & refinancing, etc.
Then there is the “BPO” or Brokers Price Opinion. These are about the same as a CMA because they are typically done by a real estate agent. It is commonly requested by the lender once a mortgage goes into default, and to help justify a sales price on a short sale, or to help them determine if they want to proceed with a foreclosure. They are typically done on the lender provided form, and filled out by the beginner real estate agents. The lenders use to pay for these, but now they can find enough hungry real estate agents to do them for free, in hopes of getting the listing from the lender, if it does go to foreclosure
Most often, the most accurate way to determine the true value of real estate is the Appraisal = An Appraisal is just one person’s estimate of value, yet a licensed persons opinion, therefor it should be the most relies upon & accurate. As a licensed Real Estate Broker, I was also required to take the Real Estate Appraisers course, and have an opinion of value, just as the other appraisers in the class did. We will not always agree on the same value, or valuation process; however we were trained to use the same guidelines, and standards; however they are sometimes interpreted differently by the various lenders and underwriters. After all, an Appraisal is just one licensed person’s estimate of value, when in effect the true value is what a uninfluenced buyer and uninfluenced seller are willing to pay and accept for that Real Estate at a given time….. Yes, that is true value! So if a sale is negotiated between a buyer & seller, with no outside influence, or duress, i.e. Short sale, Foreclosure, Divorce, Bankruptcy, etc. that is its true value. However the mortgage companies insist on a written estimate of value based on the most recent sales of comparable properties. This is not as easy as you might think, given the roller coaster market we are experiencing today! Most appraisers are through in the initial inspection of the subject property, as they have always have been, however nowadays sometimes come up short on the selection of the comparable properties, and verifying that they are truly comparable. They typically just confirm that they are the same size and located in the same neighborhoods, and are just comparable, yet may not always be the most relevant or most comparable. I am seeing far too many distressed sales being used in a non-distressed Appraisal of Value today; hopefully the market will catch up soon, and relax the lenders purse strings, allowing all the valuation models to be a bit more reliable & accurate!
I hope this helps clear up the confusion on sources of value for you Real Estate.
Mark A Rusnak Associate Broker with RE/MAX ® Allegiance Licensed in Virginia for 20+ Years
www.MarkSold.com * MarkRusnak@REMAX.net * 757-718-8865
Recently I found myself victim again to a Scam listing of one of my legitimate Real Estate Listings on Craig™s List.
I decided to post this blog to help explain the Scam, and most importantly explain how to help remove these listings to other Agents who may have fallen victim to them.
The scam that has been online for over a year, and is picking up in our area. It is preying on people looking for a home to rent, and the victims are innocent people looking for a new place to live, and local real estate agents.
It starts with me listing a property for sale or rent on the internet, and then the information is re-posted on Craig™s List (without my knowledge or consent) for ½ of the price it really is. The most recent example in a home I have listed for $2,600 on my site www.MarkSold.com and was posted for rent for $1`,000 and $1,500 from a group operating out of West Africa, Nigeria. One of the ads was using my photos and my name in an email address, and the other ad was using just my photos.
They emailed several prospective tenants, explaining that (Using my name) I was a Pastor, and on a 5 year mission translating bibles in Nigeria¦ They want the prospective tenants œVictims to mail or make the security deposit in advance, and they tell them that they will mail them the keys or meet them at the house when they get to town, or when they want to move in!
The prospective tenants are driving by and getting my phone number from the sign, because none is listed in the ad, just an email address.
The Local Hampton Roads Real Estate Association has been looking into this, and the local Chapter of the National Association of Residential Property Managers office had told us that it has been reported, and they were looking into it as well.
Here is what I found out and wanted to share it with everyone to help reduce the success of this scam.
The Local œVirginia Beach Police Department can do little to reduce the scam, and it has already been on WAVY-10™s Ten On Your Side, however they advise on reporting this to the Internet Crime Complaint Center also known as the IC3 @ http://www.ic3.gov/default.aspx.
So, when find your Scam Ad on Craig™s List, then select the “Prohibited” tab to have the Craig’s list people investigate it. If there is more than one listing for the same property, which my house was listed for $1,000 and $1,500 you can select “spam/over post” and they removed the second listing with the same address the next day! You can also report the Scam listings numbers to email@example.com directly by sending them the Craig™s list listings number .
I Hope this helps¦. Mark Rusnak
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Mark Rusnak is an Associate Broker with RE/MAX Allegiance @ 4000 Virginia Beach Blvd #164 Virginia Beach, VA. He can be reached at 757-718-8865 or www.marksold.com
Marketing Fine Homes “ There is a difference “ See my latest Video on why you should choose a Certified Luxury Homes Marketing Specialist to represent you in the sale of your home @ http://www.marksold.com
Mark Rusnak is Certified Luxury Homes Marketing Specialist with RE/MAX Allegiance @ 4000 Virginia Beach Blvd # 164 Virginia Beach, VA. He can be reached at 757-718-8865 or www.marksold.com.