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C 21 New Millennium Spring 2012 Newsletter
SPRING 2012

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https://c21nm.com

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   MARKET TRENDS
POLICY CONTINUES TO DRIVE HOUSING PERFORMANCE

IN THIS ISSUE

ASSESSING RISK; REWARDING ACTION
Strategic Shift
The Dollars and Cents of Real Estate Investing
So What Does an Investor Sale Look Like? Subject Property
Cost of Acquisition
Rental Income, Debt Service, Operating Expense

Cash Flow

Principal Reduction and Equity Build
Summary

It is clear that "policy" will remain a driving influence over the housing sector. More traditional measurements of supply and demand remain useful indicators when forecasting the direction and velocity of values. However, it is public policy that determines how many homes are for sale and how many ready, willing and able buyers exist.
Some Examples:
Our last issue discussed the potential for bulk sales of Bank Owned Property to private investor groups; with strings attached. This strategy limits the amount of inventory available at a given time by requiring the investor groups to hold this inventory as rentals until such time as the market may absorb the inventory without deflating values. FHFA has since announced the program with the first investor bulk sale to occur in the near term.
Read More…

STRATEGIC SHIFT
When values fall below the long term trend line, we always see the return of the real estate investor. From 2007 through the early portion of 2011, the
common strategy was "The Flip." This model is featured prominently on Cable shows like "Flipping Out", "Flip This House", "Flip That House" and "Flip Men."
There are even plans at Bravo Network to air a Houston based show hosted by a former Survivor star. While it may look simple on TV, this is no business for the first time investor.
A distressed property, typically a foreclosure, is acquired on the Courthouse steps. The acquirer has very limited information about the home; usually what they are able to learn from viewing the exterior of the home and peeking in the windows. While they are likely able to buy the property at a discount, there could be tens of thousands of dollars in needed repair before they can resell.
Read More…
Xhart-Payment

ASSESSING RISK; REWARDING ACTION
There remains some undercurrent of skepticism relating to trending of property values. The programs discussed above are targeted to increase the number of ready, willing, and able buyers while limiting the amount of inventory available at any given time.
Read More…

The Capital region is unique - chart

Chart


THE DOLLARS AND CENTS OF REAL ESTATE INVESTING

The property records above reflect the terms of the sale of a foreclosed property to an investor and the subsequent rental of the property by the
investor. This transaction settled on November 18th, 2011 and the new tenant moved in during January, 2012. Immediately following foreclosure, the bank
brought this property back to market ready condition with a fresh coat of paint, new carpet and appliances. When the investor took possession, the home was in "move in" condition. The prior owner, Bank of New York, acquired the property from the trustee on the courthouse steps for the defaulted loan amount, $242,159.
The property was listed for $164,900 on October 6th and went under contract fourteen days later on October 24th. Twenty five days later, on November 18th, the investor settled on the property at a purchase price of $141,000; about eighty five percent of list price. The property was listed for rent that day offering a move in date of December 1st. Shortly thereafter, the home was rented for $1,650 per month. The entire process from foreclosure date to move in date took less than ninety days. Townhomes like this are particularly well suited for ownership by investors. There are hundreds of similar communities throughout the region.
Developers locate these subdivisions within close proximity to public transportation, shopping, restaurants and entertainment. Typically, the communities offer amenities to include swimming pools, fitness centers, community clubhouse and security to appeal to young professionals and families. Exterior maintenance, to include lawn care, are usually covered within the monthly Association fee; in this case, $240 per month.
Read More…

SUMMARY
If you are considering a real estate transaction, thorough analysis and competent representation are essential. We are in a transitioning market. There is potential for profit, as there is risk of loss. If we understand the underlying facts, we can continue to make good business decisions logically and without emotion. I am a real estate professional and accept responsibility for keeping my friends, neighbors, and business community informed as to all aspects of things affecting the real estate portion of their holdings.
If your home is currently listed for sale, this is not a solicitation. If you have a real estate question, I will be happy to answer it, or find the answer. If you have a real estate need, I will appreciate an opportunity to compete for your business. Our team is very good at what we do…our results demonstrate that. Don’t settle for less.
Read More…

SO WHAT DOES AN INVESTOR SALE LOOK LIKE? SUBJECT PROPERTY

ML#: PW7729720
Status: RENTED
Adv Sub: Jackson Ridge Condo
Ownership: Condo, Rent
Date Avail: 01-Dec-2011
Type: Townhouse
Style: Colonial
BR/FB/HB: 3/2/1
Lot AC/SF: /
SQFT-Tot Fin: 1,642
Lvls/Fpl: 3/1
Vacation Y/N: No
Construction: Brick
Basement: No,
Parking: Garage, Other
# Gar/Cpt/Assgn: 1//
Heat/Cool: Natural Gas/Forced
Air/Electric/Central A/C
Water/Swr: Public/Public Sewer
List Date: 18-Nov-2011
Update Date: 20-Jan-2012
LP: $1,650
DOMM/DOMP: 40/40
Total Taxes
Ground Rent:
Area:
ADC Map Coord: 0000
Yr Blt: 1995
HOA/CC Fee: /0.0
Tax Living Area: 1,642

Read More…

ML#: PW7703491
Status: SOLD
Adv Sub: Jackson Ridge Condo
Ownership: Condo, Sale
Contract Date: 24-Oct-2011
Close Price: $141,000
Date Avail:
Type: Townhouse
Style: Contemporary
BR/FB/HB: 3/2/1
Lot AC/SF: /
SQFT-Tot Fin: 1,642
Lvls/Fpl: 3/1
Construction: Brick and Siding
Basement: No,
Parking: Garage
# Gar/Cpt/Assgn: 1//
Heat/Cool: Natural Gas/Forced Air/
Electric/Central A/C
Water/Swr: Public/Public Sewer
List Date: 06-Oct-2011
Update Date: 25-Nov-2011
LP: $164,900
DOMM/DOMP: 18/18
Total Taxes: $1,619
Close Date: 18-Nov-2011
Seller Subsidy: $
Ground Rent:
Area:
ADC Map Coord: 8F3
Yr Blt: 1995
HOA/CC Fee: /240.0
Tax Living Area: 1,642
Vacation Y/N: No
property property

COST OF ACQUISITION
We will make the assumption this investor purchased this property on the day their first child was born with the
intent to fund their child’s college education by selling the property when the child turns eighteen. Read More…

Purchase Price: $141,000
Down Payment: $28,000
Closing Costs: $4,230
Mortgage Amount: $112,800
Mortgage Rate: 4.75%
Appreciation Rate: 5%

 

RENTAL INCOME, DEBT SERVICE, OPERATING EXPENSE
The current rental rate of $1,650 per month will generate $19,800 annually in income. After factoring in a five percent vacancy rate, our investor plans for $18,810 in rental income in 2012.
Read More…

Annual Gross Income: $19,000
Vacancy Rate: 5%
Effective Gross Income: $18,810
Operating Expenses: $4,459
Net Operating Income: $14.351
Cap Rate: 10.17%
Annual Rent Increase: 5%
Annual Expense Increase: 5%
Mortgage Term: 30
Annual Mortgage Payment: $7,056
Cash Flow: $7,295
Cash On Cash Return: 22%

CASH FLOW
The investor made a down payment of $30,430 (including closing costs) and obtained a mortgage for the balance of the purchase price. The rental income covers all expenses and pays the investor an additional $7,296 per year. Read More…

Chart-cash flow

PRINCIPAL REDUCTION AND EQUITY BUILD
Each month, a portion of the mortgage payment goes toward principal reduction. By 2021, the loan has been paid down by $21,475 so there is remaining principal balance of approximately $91,054. Read More…

Chart-cash flow

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